How the first Auditor is appointed in a Joint Stock Company

The first auditors of a company are to be appointed at the Board Meeting held after incorporation of the company.

Procedure of appointment:

• A Board meeting is to be conveyed within one month of the incorporation of the company and pass a resolution appointing and fixing the remuneration of first auditors of the company.
• If the Board fails to do so, then auditors are to be appointed in General Meeting. In this regard, notices are to be issued for convening meeting at least twenty – one days before the date of general meeting to be held.
• In case of listed Public Limited Company, if auditors are to be appointed in General Meeting, three copies of the notice and copy of the proceedings of the General Meeting should be forwarded promptly to the Stock Exchange where such shares of the Company are listed.
• The auditor should be intimated immediately about his appointment. The auditor is required to fill e-form 23B with Registrar of Companies stating in detail of his appointment.*

Removal of an auditor before the expiry of his term:

• Board of Directors, should convene a meeting after giving notice to all the Directors, to approve the draft of the application for the removal of the Auditor.
• The application is to be made to the Regional Director of the concerned Region. Such application should be made on the letterhead of the Company alongwith the details and reasons.
• The company may at his general meeting remove such auditor, even if appointed by the board.
• Necessary formalities of enclosing documents, payment of fees, etc. are to be complied with.
• Notice should be issued in writing at least 21 days before the date of A.G.M. and ordinary resolution should be passed appointing new Auditor in the place of previous Auditor at the A.G.M.

*Appointment by special resolution u/s 224(A)


This Section provides for appointment or reappointment of auditors at an annual general meeting by aspecial resolution when 25% or more of the subscribed share capital of the company is held jointly or singly by a public financial institution, a Government company, Central Government, any State Government, any institution established by a State Act in which the State Government holds not less than 51% of the subscribed share capital, a nationalised bank or an insurance company.

Certified copy of the special resolution so passed shall be filed with the Registrar within 30 days of passing, in Form No. 23.

It is also to be noted that, if, after notice of the annual general meeting is issued in the usual course and before the holding of meeting, it happens that the holdings of the public financial institutions have reached 25% of the total subscribed share capital, then the meeting has to be adjourned and after issuing notice under this section, necessary special resolution is to be passed for appointing the auditor(s).