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Section 139
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Important Information
The unimportant ones we shall be leaving and when we say unimportant ones, they shall be around 5-10% of the overall act
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Term Explainer for Future Sections
Term Explainer: General Meeting, Annual General Meeting and Extraordinary General Meeting
A general meeting is a meeting of a company's shareholders (unlike a board meeting, which is a meeting of the directors)
There are 2 types of General Meetings: AGM and EGM
1. Annual General Meeting (AGM): The AGM of a company or organization is a meeting which it holds once a year in order
to discuss the previous year's activities and accounts
2. Extraordinary General Meeting (EGM):An Extraordinary General Meeting (an EGM) can be defined as a meeting of
shareholders which is not an Annual General Meeting(an AGM). It is held when some urgent issue becomes about the
company arises or any situation of crisis
Term Explainer
Auditors : An auditor is a person authorized to review and verify the accuracy of financial records and ensure that
companies comply with tax laws
Acts and Rule : An act is a law or the statute which has been passed by the legislature and approved by the President of
India whereas Rules provide the details which have not been provided for in the Act
Paid up Share Capital: Paid-up capital is the amount of money a company has received from shareholders in exchange
for shares of stock. Paid-up capital is created when a company sells its shares on the primary market, directly to investors
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Companies Act 2013 -> Section 139 (1) – Appointment of Auditors
Appointment of Auditors
The procedure for appointment of auditors is different in both. Let's discuss them one by
one
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Companies Act 2013 -> Section 139 (1) – Appointment of Auditors
Appointment of Auditors - Non-Government Companies
The Auditor appointed shall hold office from the conclusion of that
There is a proper Manner and Procedure meeting till the conclusion of its sixth annual general meeting and
for selection of Auditors thereafter till the conclusion of every sixth meeting with the meeting
wherein such appointment has been made being counted as the first
meeting
Companies Act 2013 -> Section 139 (1) – Appointment of Auditors
Appointment of Auditors - Non-Government Companies
The Auditor appointed shall hold office from the conclusion of that
There is a proper Manner and Procedure meeting till the conclusion of its sixth annual general meeting and
for selection of Auditors thereafter till the conclusion of every sixth meeting with the meeting
wherein such appointment has been made being counted as the first
meeting
Companies Act 2013 -> Section 139 (1) – Appointment of Auditors
The Companies (Audit and Auditors) Rules, 2014 – Rule 3 – Manner and procedure of selection and appointment of auditors:
If a company has Audit Committee then Audit the committee shall recommend the name of an individual or a firm as
auditor to the Board for consideration otherwise the Board shall consider and recommend an individual or a firm as
auditor to the members in the annual general meeting for appointment.
If the Initial recommendation was made by audit Committee to the Board then Board can send back or approve that
recommendation
I. if the Board agrees with the recommendations of the Audit Committee, it shall place the matter for
consideration by members in the annual general meeting.
II. In case of rejection, Audit committee will reconsider the firm or Individual whose name was proposed earlier and
may withdraw its recommendation. In such a case the board send its own recommendation for consideration of
the members in the annual general meeting
Question: What will happen if the recommendation send back by Board to auditor is not withdrawn by audit Committee?
Answer: There is no mention of this scenario in the act/rules, so it means ultimately will of Board shall prevail
Companies Act 2013 -> Section 139 (1) – Appointment of Auditors
The Companies (Audit and Auditors) Rules, 2014 – Rule 3 – Manner and procedure of selection and appointment of auditors:
The Audit Committee or the Board (as the case will be ) shall take into consideration the qualifications and experience of
the individual or the firm proposed to be considered for appointment as auditor to decide whether the qualification and
experience of the firm are good enough to act as an auditor
While considering the firm or Individual to act as an Auditor the Audit Committee or the board shall take into
consideration any disciplinary order against the firm or individual by any court or Institute of Chartered Accountants
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Companies Act 2013 -> Section 139 (1) – Appointment of Auditors
The Companies (Audit and Auditors) Rules, 2014 – Rule 4 – Conditions for appointment and notice to Registrar:
The auditor to be appointed before the appointment must give a written consent and a certificate be obtained from him
Once the certificate is obtained and Auditor is appointed, the company shall inform the auditor concerned of his or its
appointment and file a notice of such appointment with the Registrar within fifteen days of the meeting in which the
auditor is appointed.
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Companies Act 2013 -> Section 139 (1) – Appointment of Auditors
The Companies (Audit and Auditors) Rules, 2014 – Rule 4 – Conditions for appointment and notice to Registrar:
Once the certificate is obtained and Auditor is appointed, the company shall inform the auditor concerned of his or its
appointment and file a notice of such appointment with the Registrar within fifteen days of the meeting in which the
auditor is appointed.
Exceptions:
For any IFSC Public or IFSC Private Company the notice of appointment of auditor to Registrar should be sent with in
30 Days of the meeting in which the auditor is appointed.
Term Explainer
International Financial Services Center (IFSC) is not defined in companies act but as per notification of government of
India it is an unlisted “public company” or “private company” which is licensed to operate by the Reserve Bank of India
or the Securities and Exchange Board of India or the IRDAI
As per Companies Act, Public companies are those which have at least 7 members and no restriction on maximum
members and they can issue shares to public where a Private companies are those which have minimum of 2 members
and maximum of 200 members, but they cannot issue shares to Public
Companies Act 2013 -> Section 139 (6) – Appointment of Auditors
If a company calls an emergency meeting to discuss some urgent issues, then what kind of meeting it would be?
(Ans: EGM)
The first auditor of a non-government company needs to appointed by the Board in how many days from the date of
registration of the company?
(Ans: 30 Days)
In the case of failure of the Board to appoint first auditor with 30 Days of registration of non-government company, it shall
inform the members of the company, who shall with in __________ days at an ________ appoint such auditor and such
auditor shall hold office till the conclusion of the first annual general meeting
1. 30, AGM
2. 30, EGM
3. 90, AGM
4. 90, EGM
Ans: Option 4
Concept Check
The non-government company except for IFSC Company shall file a notice of appointment of auditor in the annual general
meeting with the Registrar within ____ days of the meeting in which the auditor is appointed
1. 10
2. 15
3. 20
4. 30
Ans: Option 2
The appointment of auditor other than the first auditor by a non-government company needs to placed for consideration by
members in _______
1. AGM
2. EGM
3. AGM if AGM is available in next 30 days of appointment of auditor
4. EGM is no AGM is available in next 30 days of appointment of auditor
Ans: Option 1
General Definitions to understand future Sections
Term Explainer : Public Company, Private Company, Listed and Unlisted Company
Small Company
Unlisted Company
Listed Company 1. Paid-up share capital of which does
It is that company
It is that company whose not exceed fifty lakh rupees, or
whose securities are One Person Company
securities are listed on such higher amount as may be
not listed on A special case of
recognized stock prescribed which shall not be more
recognized stock Private company is
exchange than ten crore rupees
exchange One-person company
2. Turnover in immediately preceding
financial year does not exceed two which will have just
crore rupees or such higher one member
amount as may be prescribed
which shall not be more than one
hundred crore rupees
Companies Act 2013 -> Section 139 (2) – Appointment of Auditors
The Companies (Audit and Auditors) Rules, 2014 – Rule 5 – Classes of Companies
Appointment of Auditors – Non-Government Companies - Rotation Rules are prescribed for rotation of auditors
Appointment of Auditors – Non-Government Companies - Rotation Rules are prescribed for rotation of auditors
What is the minimum number of people with which company can be formed?
1. 2
2. 1
3. 3
4. 4
Ans: Option 2
The minimum number of members in public company are ______ where as maximum number of members in private
company are __________-
1. 6,100
2. 7,200
3. 2,200
4. 7, no limit
Ans: Option 2
Concept Check
Which of the following are exempted from appointing individual auditors for not more than one term of five consecutive
years
1. One Person Company
2. Listed Companies
3. All unlisted public companies having paid up share capital of rupees ten crore or more
4. All private limited companies having paid up share capital of rupees fifty crore or more
Ans: Option 1
The Individual can be appointed as auditor for one term of ___ consecutive years and after that can be re-appointed as an
auditor after a cooling off period of ________years
1. 10,5
2. 5,10
3. 5,5
4. 10,10
Ans: Option 3
Concept Check
There is a condition for certain firms that individual auditor shall not be appointed for more than one term of 5 consecutive
years. Which of the following firms will note come under this condition?
1. unlisted public companies having paid up share capital of rupees 15 crore
2. private limited companies having paid up share capital of rupees 125 crore
3. A company having paid up share capital of < 10 crore but having borrowings from banks of 25 crores
4. Listed Company having paid up share capital of 25 crores
Ans: Option 3
Companies Act 2013 -> Section 139 (5) – Appointment of Auditors
Appointment of Auditors – Government Companies Despite what is mentioned in 139 (1), In the case of a
1. Government company or
The auditor shall hold office till the conclusion of the annual
general meeting
Companies Act 2013 -> Section 139 (7) – Appointment of Auditors
In case of government company the _________of India shall appoint an auditor within a period of _____ days from the
commencement of the financial year and he shall hold office till the conclusion of next ______
Ans: Option 4
Companies Act 2013 -> Section 139 (8) – Appointment of Auditors
In case of casual vacancy of auditor for non-government companies, the board shall fill the vacancy with in ____days from
date of vacancy. If such vacancy is due to resignation of an auditor then such appointment by board shall also be approved by
the company at a ___________convened within ______months of the recommendation
1. 30,AGM,6
2. 30,General Meeting, 3
3. 60,AGM,3
4. 60, EGM, 6
Ans: Option 2
Thanks