Section 139 of CA 2013 : Section 139: Appointment Of Auditors

Explanation using Example

Imagine a scenario where "Tech Innovations Private Limited" is holding its first Annual General Meeting (AGM). According to Section 139(1) of the Companies Act, 2013, the company needs to appoint an auditor. The board proposes the appointment of "Audit & Co.," an audit firm, and obtains their written consent and a certificate confirming that the appointment complies with the prescribed conditions and that "Audit & Co." meets the criteria laid out in Section 141.

After "Audit & Co." is appointed at the AGM, "Tech Innovations Private Limited" must inform the auditor of their appointment and file a notice with the Registrar within fifteen days, as per the law.

Five years later, "Tech Innovations Private Limited" has grown and is now a listed company. It must adhere to Section 139(2), which means it cannot re-appoint "Audit & Co." for another term immediately, as an audit firm can only serve for two consecutive five-year terms. The company must appoint a new auditor and cannot choose any firm with a common partner to "Audit & Co." for the next five years.

The company's members, through a resolution, decide to rotate the auditing partner within "Audit & Co." every three years to maintain audit quality and independence, as suggested by Section 139(3).

If "Tech Innovations Private Limited" fails to appoint a new auditor in the future, the existing auditor, as per Section 139(10), will continue until a new auditor is appointed.

As "Tech Innovations Private Limited" has an Audit Committee due to its size, any new appointment of an auditor will be made after considering the committee's recommendations, in line with Section 139(11).