Section 139: Appointment and Reappointment of Auditors Under the Companies Act, 2013

Introduction

According to Section 139 of the Companies Act of 2013, each company must designate a person or business as its auditor at the annual general meeting (AGM). 

The individual thus designated will serve in that capacity from the end of the AGM in which they were appointed until the end of the sixth AGM. 

Even though the auditor will serve in this capacity for a period of five years, the topic pertaining to this appointment will be brought up for member ratification at each AGM.

The Appointment of Auditors Section 139

At its inaugural annual general meeting, the corporation is to nominate an auditor. Each year, the firm holds its annual general meeting, to which all of its shareholders are invited. 

The annual performance report of the corporation is presented to the shareholders by the directors. An individual or a firm may be designated as the auditor. 

The auditor in question will stay in this capacity until the end of the sixth annual general meeting. As a result, the auditors chosen in accordance with Section 139(1) have a five-year term. 

An auditor cannot be reappointed after serving five years in one position. An audit company may, nevertheless, be reappointed for an additional five years.

Prior to making the appointment, you must get the auditor’s written consent. The Registrar of Companies must receive notice of the appointment. 

A written consent and certificate from the auditor must be sought prior to his appointment, according to Rule 4 of the Companies (Audit and Auditors) Rules, 2014. The following information ought to be on the certificate:

1. That the individual or business is eligible to be appointed as an auditor
2. A summary of any legal actions taken against the individual or business

The appointment falls within the parameters set forth in the Act. This kind of notification needs to be sent out no later than 15 days following the appointment. 

The current auditor will remain in the position if no one is appointed or reappointed as an auditor at the company’s annual general meeting. 

Then, at a later meeting, the business will name an auditor. This clause makes sure that the company’s inability to choose a new auditor won’t result in the auditor’s position being vacant.

Auditor Reappointment Section 139(9)

An auditor who is retiring may be reappointed at an annual general meeting, subject to the rules established under sub-section (1),

 if —

(a) He is eligible for a new appointment;

(b) He hasn’t provided written notice to the employer indicating that he won’t be accepting a promotion; and

(c) There was no specific resolution presented at that meeting designating a different auditor or clearly stating that he would not be reappointed.

Sec 139(10) According to this clause, the current auditor will remain the company’s auditor if no one is selected or reappointed at any AGM.

Section 139(11) states that in the event that a firm is mandated to establish an audit committee, the audit committee’s recommendations would be considered for all appointment of internal auditor, including the filling of casual vacancies.

FAQ

1. What does auditing’s section 139 mean?

Within thirty days of the company’s incorporation, the Board of Directors (BOD) shall designate the first auditor, who will serve in that capacity until the end of the first annual general meeting (AGM). 

If the Board is unable to select an auditor, it will notify the members, who will then hold an EGM within 90 days.

2. What clauses in Sec. 139 deal with the appointment of auditors?

Section 139. This provision aims to establish that a company shall designate a person or a firm as an auditor at the annual general meeting, subject to his written permission, and that person or firm shall hold office until the end of the sixth annual general meeting.  It is a counterpart to section 224 of the Companies Act, 1956.

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