Section 140 of Companies Act 2013
What Happens When the Auditor Resigns? If the Auditor has resigned from his position in the company, mentioning the reasons and other statements relevant to his resignation. The resigned auditor of the company should file such a statement with the company and the Registrar within 30 days from the date of resignation in Form No. ADT-3 (Attached in Form GNL-2 for submission of documents with the Registrar). However, the auditor should file such a statement with the Comptroller and Auditor-General (CAG) of India along with the company and the the Registrar in case of Government Companies or Company controlled by Central Government or State Government. In case the auditor does not follow aforesaid provisions during his resignation, he is punishable with fine between ₹50,000 and ₹5,00,000.
Section 140 of the Companies Act, 2013 primarily deals with the removal, resignation, and related provisions of auditors in a company. It ensures transparency and protects the rights of the company and the auditor by clearly outlining the processes that must be followed. Here’s a detailed look at its key provisions:
1. Removal of Auditor [Section 140(1)]
- The company can remove an auditor before the expiry of their term, but it requires prior approval from the Central Government.
- A special resolution must be passed by the company at a general meeting for this purpose.
- The application for such approval must be made to the Central Government in Form ADT-2 and should be submitted within 30 days of the resolution passed by the Board of Directors.
- After receiving Central Government approval, the company must pass a special resolution within 60 days.
2. Resignation of Auditor [Section 140(2)]
- If an auditor chooses to resign, they must file a statement of resignation with the company and the Registrar of Companies (ROC) within 30 days of the resignation.
- This statement is filed in Form ADT-3, specifying reasons for resignation and other relevant details.
3. Obligations of the Auditor [Section 140(3)]
- In the event of an auditor's resignation, they are responsible for forwarding a copy of the resignation to the company and the ROC.
- Non-compliance with the filing requirements can result in a penalty for the auditor. This penalty can range between ₹50,000 and ₹5 lakh.
4. Special Notice for Appointing a New Auditor [Section 140(4)]
- When an auditor is being removed or replaced, the company must issue a special notice for the appointment of a new auditor in the general meeting.
- The outgoing auditor has the right to make a representation and, if they choose, have their representation circulated to the members before the meeting where the new auditor is appointed.
5. Tribunal's Role in Case of Professional Misconduct [Section 140(5)]
- If the tribunal believes that the auditor has engaged in any fraud or professional misconduct, it can pass an order to change or remove the auditor.
- The tribunal can take action on its own or on an application made by the Central Government or by any concerned person.
Penalties Under Section 140
- If the auditor fails to comply with the provisions regarding resignation (filing Form ADT-3), the penalty for non-compliance includes a fine that can range from ₹50,000 to ₹5 lakh depending on the severity.
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