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Casual vacancy of auditor caused by death

Postby j.aman1983 » Wed Aug 26, 2009 5:27 pm

Dear professionals,

i have an query and its urgent.

In a listed company a casual vacancy of an auditor has been occurred on 22nd august and company has got this information on 25th august.

Agm of this listed company will be due on 28th august.

Company has a problem that they don't have time and the co. will not afford of attraction of the sec. 224(3) as in this CG approval will be required.

Plz let me know what action has to take by company in this situation. It’s urgent and plz keep in mind that co. is listed entity and what will be the compliances of stock exchange in this regard.
regards

Aman Jain

AMAN JAIN & ASSOCIATES,
COMPANY SECRETARIES
B-15, "B" BLOCK,
LAJPAT NAGAR-I
NEW DELHI-110024

Mob. No. +91-97174.900.58
+91-93137.82.760
Email: j.aman1983@gmail.com
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Re: Casual vacancy of auditor caused by death

Postby rupenkp » Wed Aug 26, 2009 5:48 pm

Situation seems to be out of control in captioned case, but following alternate could be promptly adopted to get through with supporting opinion from learned & experienced company secretary in practice.
- Consent from another auditor
- Circular board resolution for appointment of new auditors
- Intimation to SEs
- Notice in newspapers
- Special Notice to all the shareholders

Re could also be made to 224(2)(d).
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Re: Casual vacancy of auditor caused by death

Postby j.aman1983 » Wed Aug 26, 2009 6:01 pm

Thnks rupenkp,

but dear how can company give shorter notice to shareholders in such short span of time.
regards

Aman Jain

AMAN JAIN & ASSOCIATES,
COMPANY SECRETARIES
B-15, "B" BLOCK,
LAJPAT NAGAR-I
NEW DELHI-110024

Mob. No. +91-97174.900.58
+91-93137.82.760
Email: j.aman1983@gmail.com
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Re: Casual vacancy of auditor caused by death

Postby rupenkp » Wed Aug 26, 2009 6:16 pm

I think case itself is an exceptional whereas notice by shorter consent required to be convinced and considered to avoid appointment of Auditors by CG. Think through.

Learned members may also share their views on this exceptional issue.
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Re: Casual vacancy of auditor caused by death

Postby srinivasaraghavan » Thu Aug 27, 2009 8:48 am

If the casual vacancy is due to death of auditor, the Board can fill the casual vacancy u/s 224(6). In this case the notice of his death was received before the ensuing AGM. The following alternatives can be considered.

1)Board can call an emergency meeting if possible, to appoint the auditor. An auditor appointed by the Board in the casual vacancy becomes the retiring auditor in the ensuing AGM. The resolution can be passed in the AGM reappointing the retiring auditor, amending the name in the notice as amendments in the Agenda is possible if the shareholders agree.

2)If there is no possibility of so doing in view of the short period, the next alternative, in my opinion is to inform the shareholders of the inability to put through the resolution reappointing the retiring auditor due to the death of the auditor and the intention to fill the casual vacancy at the earliest, by the Board and then conclude the AGM. The company can appoint the auditor let us say in the Board meeting to be held within seven days of the AGM and give notice to Central Government u/s 224(4)dsclosing the full facts including the appointment of the auditor by the Board filling the casual vacancy.
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Re: Casual vacancy of auditor caused by death

Postby raman018 » Thu Aug 27, 2009 11:24 am

Dear sir:
Request your views on the following:

If the Board fills in the casual vacancy, what will happen to the audited accounts and report signed by the deceased auditor, as these would have been circulated for laying before the AGM? Will the new auditor have to re-certify the accounts or not.

Alternatively can the company adjourn the AGM for considering the appointment of auditors to a later date and take up the same at the adjourned AGM. The adjourned AGM is continuation of the AGM and so can we say that S. 224(3) & (4) will not apply.

Thanks and regards

Raman
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Re: Casual vacancy of auditor caused by death

Postby srinivasaraghavan » Thu Aug 27, 2009 11:43 am

Dear Sri.Raman,

The audited accounts and report signed by the deceased auditor, as circulated for laying before the AGM are not affected. The new auditor need not re-certify the accounts, as the certification of accounts and adoption by Board are already over. It is only the approval of certified accounts by the shareholders in the AGM.

What is the purpose of your suggestion for the company to adjourn the AGM, when in the same AGM the auditor can be appointed by amending the name of the auditor, if the agenda spells out with or without modification. Of course the name of the auditor itself gets amended, but it is with a vald reason. The question of adjournment will arise only if there is objection from the shareholders and they demand adjournment for time. Even then the purpose will not be served as the adjournment in any case can not consider a new business. Nor can it be considered as a notice. Therefore, how you are saying 224(3) & (4) will not apply, is not clear to me can you please clarify this?
S.Srinivasaraghavan
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Re: Casual vacancy of auditor caused by death

Postby suracs » Thu Aug 27, 2009 11:51 am

Dear Sir,

Thanks for sharing your experience.

SKS
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Re: Casual vacancy of auditor caused by death

Postby raman018 » Thu Aug 27, 2009 1:00 pm

Sir:

Thanks for your clarification.

My views are:

1. Usually for special business we include the words 'with or without modification' . Some companies provide the draft resolution for re-appointment of auditors and some do not. If the draft resolution is not given or if the words ' with or without modification' are given, it may be possible to consider the re-appointment of new auditor, otherwise will it be permissible?. If not it would mean the auditors are not appointed and hence S. 224(3) & (4) would apply.

2. If the Board cannot meet before the AGM and fill in the casual vacancy or if it is not possible to amend the resolution, to avoid applicability of S. 224(3) & (4) the AGM may be adjourned.There will be no new business to be considered at adjourned AGM and it will be only appointment of auditors. A fresh notice can be given, (if so requried depending on the method of adjournment), explaining the reasons and with the name of the new auditor.

3. Since the AGM is not concluded and the adjourned AGM being only continuation of the original meeting where the appopintment of auditors will be made, provisions of S. 224(3) & (4) would not come into play.

Please correct me if I am wrong.

thanks and regards

Raman
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Re: Casual vacancy of auditor caused by death

Postby srinivasaraghavan » Thu Aug 27, 2009 2:54 pm

Dear Sri.Raman,

1.I have already stated that amendment of auditors' name is possible only if the notice contains the words 'with or without modification' in cases where the names are specified in agenda. But it is usual for companies to merely state re-appointment of auditors in the notice. In such a case it is easy. If the notice mentions the draft resolution with name of auditors and without the words ' with or without modification' only then it could lead to the non-appointment of auditors and hence applicability of S. 224(3) & (4).

2. Yes, if the Board cannot meet before the AGM and fill in the casual vacancy or if it is not possible to amend the resolution, if the AGM may is adjourned. it will have to consider the same business, based on the defective draft containing name of original auditor without the words "with or without modification". In such a case same difficulty will continue unless there is a method available to issue a fresh notice without disturbing the continuity of the AGM. I would be happy to hear from you that method.

3. I agree that in the case of adjournment the AGM is not concluded and the adjourned AGM being only continuation of the original meeting, but applicability or otherwise of provisions of S. 224(3) & (4) would depend upon your response to my request to Sl. No.2.
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Re: Casual vacancy of auditor caused by death

Postby kksingh » Thu Aug 27, 2009 4:03 pm

Firstly I suppose there is no other partner in the auditors firm, otherwise, there was no problem, as firm is appointed not the partner. One has to also check situation in case firm is in the name of partner who had died as there cud be dissolution/change in name of the firm. Further, apart from other alternatives/views suggested by the friends/colleagues, the fact has to be bring to the notice of the members and may take CG (regional director) approval as there exists exceptional circumstanes and sufficient ground, only to take care that it has to be intimated to CG (regional director) in Form 24A, within 7 days.

Regards,
krishna
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Re: Casual vacancy of auditor caused by death

Postby srinivasaraghavan » Fri Aug 28, 2009 11:46 am

Mr. singh, in the case of appointment of a partnership firm as auditor, where does the question of death of 'auditor' arise? Only death of partner can arise, which I think is not the subject contemplated.
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Re: Casual vacancy of auditor caused by death

Postby kksingh » Fri Aug 28, 2009 12:09 pm

Srinivasaraghavan wrote:Mr. singh, in the case of appointment of a partnership firm as auditor, where does the question of death of 'auditor' arise? Only death of partner can arise, which I think is not the subject contemplated.


Dear Mr. Srinivasaraghavan,

I agree with you, but what was written regarding this was simple check and balance, nothing else(though i understand that it may not be so warranted). I have also written my views thereafter taking into consideration the views of other members.

Warm Regards,
Krishna
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Re: Casual vacancy of auditor caused by death

Postby triloki11 » Fri Aug 28, 2009 1:59 pm

Dear All,

As per Section224(2)(a) :

Subject to the provisions of sub-section (1B) and section 224A, at any annual general meeting], a retiring auditor, by whatsoever authority appointed, shall be re-appointed, unless he is not qualified for re-appointment.

Now if a Auditors is not alive, then how can be he qualified for appointment. It means that he is disqualified. So members can appoint any other person as auditor.


Further by virtue of reading of Section 224(2)(C), I reached to the conclusion that memebers present at the AGM can appoint another Auditors by amending the Agenda if person is not qualified to be appointed as auditors.

Since that Section authorises the members of the Company to appoint any other person instead of retiring Auditors, There seems no further compliance in this regard.

Simply appoint another person instaed of Deseased Auditors.

But before that take the certificate form the Proposed Auditor that their appointement under Section 224(1).

Hope I am able to convey my ideas. Views of Others also solocited.
Regards
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Re: Casual vacancy of auditor caused by death

Postby raman018 » Tue Sep 01, 2009 5:36 pm

Srinivasaraghavan wrote:Dear Sri.Raman,

1.I have already stated that amendment of auditors' name is possible only if the notice contains the words 'with or without modification' in cases where the names are specified in agenda. But it is usual for companies to merely state re-appointment of auditors in the notice. In such a case it is easy. If the notice mentions the draft resolution with name of auditors and without the words ' with or without modification' only then it could lead to the non-appointment of auditors and hence applicability of S. 224(3) & (4).

2. Yes, if the Board cannot meet before the AGM and fill in the casual vacancy or if it is not possible to amend the resolution, if the AGM may is adjourned. it will have to consider the same business, based on the defective draft containing name of original auditor without the words "with or without modification". In such a case same difficulty will continue unless there is a method available to issue a fresh notice without disturbing the continuity of the AGM. I would be happy to hear from you that method.

3. I agree that in the case of adjournment the AGM is not concluded and the adjourned AGM being only continuation of the original meeting, but applicability or otherwise of provisions of S. 224(3) & (4) would depend upon your response to my request to Sl. No.2.


Sir
Since I was pre-occupied I could not reply early and my apologies.

Meetings can be adjourned - fixing the date in the meeting itself or without such a date, in which case a fresh notice is to be given.

In this connection the clarifications issued by DCA are relevant:
To the query - is it necessary that the notice of the adjourned aGM is to be given the DCA has replied that ' not necessary, unless the date of the adjourned AGM is not decided at the original meeting itself".

I invite your attention to the decision in R. Vs. Grimshaw, referred to in Ramaiya under 'Notice after adjournments' It is stated that "If the meeting is adjourned sine die, a fresh notice must be given. No new business can be introduced unless notice of such meeting is given."

Based on the above, the AGM can be adjourned sine die and a fresh notice could be given. Since the business is same, I think there is no bar on proposing a different resolution.

Anyway it would be interesting to know what has been done in the case under discussion as the AGM would have been over on 28-08-2009.

Thanks and regards
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