Question

State the circumstances that may compel a Company to remove an Auditor and discuss the procedures to be followed under the Companies Act, 1963, (Act I79) to remove an appointed auditor.

Answer 1

There are good and substantial grounds for the removal related to the conduct of the auditor with regard to the performance of his or her duties as auditor of the company.

Section 135-Removal of Auditors

(1) A resolution to remove any auditor or to appoint any other person in his place shall not be effective unless,

(a) it is passed at an annual general meeting of the company

(b) written notice shall have been given to the company of the intention to move it not

less than thirty-five days before the annual general meeting at which it is to be moved and on its receipt the company shall have forthwith sent a copy thereof to the auditor concerned and

(c) the company shall have given its members notice of such resolution at the same time and in the same manner as it gives notice of the meeting or, if that is not practicable, shall have given them notice thereof in the same manner as notices of meetings are required to be given not less than twenty-one days before the meeting:

Provided that,

(a) if, after notice of the intention to move the resolution is given to the company, an annual general meeting is called for a date thirty-five days or less after the notice has been given to the company, the notice shall be deemed to have been properly given for the purposes of this subsection

(b) in the case of a resolution to remove any auditor appointed by the directors in accordance with subsection (4) of section 134 of this Code, or to appoint any other person in place of an auditor so appointed, this subsection shall have effect with the substitution of fourteen days for thirty-five days in paragraph (b) and seven days for

twenty-one days in paragraph (c).

(2) The auditor concerned shall be entitled,

(a) to be heard on the resolution at the meeting and

(b) to send to the company a written statement, copies of which the company shall send with every notice of the annual general meeting or, if the statement is received too late, shall forthwith circulate to every person entitled under section 154 of this Code to notice of the meeting in the same manner as notices of meetings are required to be given Provided that the company need not send or circulate such statement,

(a) if it is received by the company less than seven days before the meeting; or

(b) if the Court, on application being made by the company or any other person who claims to be aggrieved, so orders upon being satisfied that the statement is unreasonably long or that the rights conferred by this section are being abused to secure needless publicity for defamatory matter; and the Court may order the costs of the applicant to be paid in whole or in part by the auditor notwithstanding that he is not a party to the application.

(3) Without prejudice to the auditor's right to be heard orally on such resolution he may, unless the Court shall have made an order under the immediately preceding subsection, also require that the written statement by him be read to the meeting.

(4) If the resolution is passed it shall not take effect until the conclusion of the annual general meeting.