Appointment of Auditor in Casual Vacancy in an OPC

The concept of One Person Company (OPC) is well understood by all of us and does not require an introduction. We all know the rights enjoyed by OPC compared to other types of companies, such as not having to hold a general meeting, not having to hold a board meeting (in the case of only one director),  and not necessarily preparing cash flow statements and more. This article provides an insight into the appointment of an auditor for a casual vacancy in an OPC.

Situations for a casual vacancy of auditors 

The term casual vacancy (Not Specified in the Companies Act) means any vacancy created as a result of the death, disqualification, and resignation of the Auditor. 

Different circumstances of auditor’s vacancies can be divided into two categories: 

• Auditor’s resignation 
• Other casual Vacancies in case of death, disqualification, etc.

Casual Vacancy in the auditor’s office 

The provisions for the filling of vacancies in the audit office are as follows: 

• The company board shall have the capacity to fill the vacancy in the office within 30 days unless 
  • a vacancy arises as a result of the auditor’s resignation, or 
  • the company’s accounts are subject to audit by the auditor appointed by the Director and Auditor General of India. 
• In the event of a vacancy resulting from the resignation of the auditor, the appointment must be approved by the company at a general meeting within 3 months after the recommendation of the Board and shall hold office until the end of the next general meeting. 
• if the company’s accounts are being audited by an auditor appointed by the Director and Auditor General of India, the vacancy must be filed within 30 days by the Director and Auditor General of India. 
• in the event of failure of the preceding provision, the Board of Directors shall fill that vacancy within the next 30 days. 
• The appointment of auditors to fill temporary vacancies will be made after considering the recommendations of the audit committee.

How to fill a casual vacancy arising from Auditors’ Resignation?

• If the Auditor is appointed a CAG 
  • Resignation letter stating the reasons for the resignation is to be given to the CAG 
  • CAG will appoint a new Auditor within 30 days
  • If within 30 days, the CAG does not appoint a new auditor, the Board of Directors will appoint the same within the next 30 days. 
•  If the Auditor-General is not appointed by the CAG

The following steps need to be taken:- 

• In the opinion of the resigning auditor:  Applicable Provisions: Section 140 (2) & (3) of the Companies Act, 2013
  • The resigned auditor must complete within 30 days from the date of resignation of the ADT-3 cancellation form with the Company and Registrar. 
  • The auditor must disclose the reasons and any facts that may be relevant to his or her resignation. 
  • If the auditor does not comply with the provisions of Section 140 (2), he or she shall be liable for a fine of Rs. 50,000 / – which may exceed Rs. 5,00,000 / -. 

Procedure: The auditor who resigned must do the following: 

• Write a letter of resignation stating the reasons for the cancellation and the date of cancellation. 
• Notification of resignation from the Company within 30 days of resignation. 
• Submit the ADT-3 e-form with the Registrar of Companies within 30 days of resignation.
• From a Company Perspective : Applicable Provisions – Section 139 (8) of the Companies Act, 2013.
  • In terms of Section 139 (8) (i) of the Companies Act, 2013, any vacancy in the audit office shall be filled by a company other than the company whose accounts are being processed by CAG. Board of Directors within 30 days, 
  • but if the reason for casual vacancy is the auditor’s resignation, the appointment will be approved by the company at a general meeting within three months of the Board’s resolution and will take over the office until the next year’s AGM.

Procedure: If the Auditor’s Office is vacant due to resignation, the following steps must be followed. 

Step 1: Obtain the ADT-3 Form submitted to the Registrar by resigning auditor. 

Step 2: Obtain a letter of consent from the auditor confirming his or her eligibility for an appointment.

Step 3: The Company will issue a letter of intent to add a new Auditor to the company.

Step 4: The proposed auditor will receive the NOC from the resigning auditor. 

Step 5: The Company shall convene a board meeting within 30 days of the vacancy occurring after giving notice to all directors and issuing a decision on the appointment of a new auditor. 

Step 6: Inform the appointed auditor of the copy of the board’s decision.  

Step 8: Hold the EOGM (Extra-Ordinary General Meeting) and issue a general decision to confirm the appointment of the proposed auditor. 

Step 9: File Form ADT-1 and ROC within 15 days from the date of appointment to EOGM.

•  From the Auditor’s Perspective :Applicable Provisions: Section 139 (1), 141 of the Companies Act read with Act 3 and Act 4.

Procedure: 

• Obtain a letter of intimation from the Company. 
• Obtain a NOC from the resigning Auditor. 
• Submit consent and Certificate of Appointment in terms of the Companies Act, 2013 to the Company. 
• Ensure that the Company has submitted Form ADT-1 within the time limit.

Final words

One Person Company (OPC) is a one-person company incorporated under the Companies Act, 2013, and is wholly owned and controlled by a single person. OPC is included under the definition of “Company” as defined under the Companies Act, 2013; therefore the OPC needs to appoint the first auditor of the Company like any other company in India.