What is this resolution for?
The board resolution provided in the below paragraphs is for the first auditor’s appointment in a company. Auditors are to be appointed by every company to ensure that its financial statements for the relevant fiscal year accurately and fairly reflect the company’s state of affairs. It also serves as a moral check on individuals entrusted with the responsibility of operating a business and of preserving and maintaining the company’s books of account. The Companies Act 2013 provides the regulations for the appointment of the first auditor via Sections 139(6) and 139(7) read with the Companies (Audit and Auditors) Rules, 2014.
- The first auditor in a company (except a government company) gets appointed by its Board members within 30 days from the date the company is registered. If the Board of Directors fails to appoint the first auditor within the given period, it shall inform the members who shall appoint the auditor within 90 days of receiving such information from the Board. This appointment by members shall be made at an extraordinary general meeting (EGM). The obligation of the members of the company to appoint first auditors arises on the date when the Board of Directors informs them of such non-appointment.
- Moreover, after his appointment, the first auditor has to hold office until the conclusion of the first annual general meeting of the company.
- For a government company, its first auditor gets appointed by the Comptroller and Auditor General of India within 60 days of the company’s incorporation. In the case of failure by C & AG, the appointment shall be made by Board within the next 30 days, and if the Board also fails to make the appointment within the given period, it shall inform the members who shall then appoint the auditor at an EGM within 60 days of receipt of information from the Board.
- The first auditor of a government company also has to hold office until the conclusion of the first annual general meeting.
- The appointment of the first auditor once made has to be intimated by the company to the ROC within 15 days vide Form ADT – 1.
- The Board may decide the remuneration of the first auditor appointed by it.
Draft Board Resolution for Appointment of First Auditor
A draft board resolution for the appointment of the first auditor in a company is given below:
On Company Letterhead
CERTIFIED TRUE COPY OF THE RESOLUTION PASSED AT THE MEETING OF THE BOARD OF DIRECTORS OF (COMPANY’s NAME) HELD AT THE REGISTERED OFFICE OF THE COMPANY AT (ADDRS.) ON (DATE) AT (TIME)
“Resolved that on consideration of the qualification, experience, and merit of the following and in pursuance of Section 139(6), 139(7) and other applicable provisions, if any, of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, Mr./M/s._______________, Chartered Accountant(s), ______________, (Firm Reg. No._________) be and (is) are hereby appointed as the First Auditors of the Company and he/they shall hold office until the conclusion of the first AGM of the Company on a remuneration of Rs. __________ decided by the Board of Directors. The remuneration will be in addition to any out-of-pocket expenses incurred by the auditor in connection with the company’s audit and any remuneration paid to him for any other service rendered at the company’s request.
Resolved further that the said auditors are eligible for appointment, have consented to the same, and have issued a certificate in this regard in pursuance of Section 139(1) of the Companies Act, 2013 and rules made thereunder.
Resolved further that the Board of Directors be and are hereby authorized severally to notify the said auditor(s) about his/their appointment and file the necessary e-forms with the Registrar of Companies (ROC), ______________ and to perform all such acts, deeds, and things that may be necessary to give effect to the above resolution.”
For (COMPANY’s NAME)
(Name of Director)
Note: The resolution given above is only for reference purposes and it should be used only after adhering to the provisions of the relevant Acts and rules (if any) that may be applicable for the time being in force.
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