Appointment of Auditor in Casual Vacancy in an OPC

A One Person Company (OPC) is a one-person company that is formed under the Companies Act of 2013 and is fully managed and controlled by a single person. Because OPC falls under the definition of “Company” as defined by the Companies Act, 2013, it is required for OPC to appoint the first auditor of the Company, just like other companies in India. Once the OPC is registered, the first meeting of the Board of Directors is held by a single director to implement various legal provisions such as the appointment of an auditor, the completion of various forms with the Ministry of Corporate Affairs (MCA), and so on.

If the OPC fails to assign an auditor in a meeting of the board within 30 days, the shareholders might very well assign the Company’s first auditor within 90 days of its incorporation. Section 139 of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014 specify the layout of a board resolution for the appointment of an auditor.

Casual Vacancy- Defined

Casual Vacancy of the Auditor refers to an available position generated by the auditor’s death, early retirement, ineligibility, or other events after acknowledging a viable appointment, as a result of which the auditor ceases to act as the company’s auditor.

Filling of a Casual Vacancy caused by the Auditor’s resignation (s)

• In the case of a company that has its account audited by an auditor designated by the Comptroller and Auditor General of India, any casual vacancy of the auditor in the office shall be filled within thirty days by the Comptroller and Auditor General of India.
• In the case of a company other than one which has its accounts audited by an auditor appointed by the Comptroller and Auditor General of India, If a Casual Vacancy arises as a result of the resignation of an auditor, it shall be filed within 30 days by the Board of Directors, and the Board’s recommendation shall be approved in a general meeting (Extraordinary General Meeting or Annual General Meeting) convened within 3 months from the date of the Board’s recommendation. 
• Any auditor appointed to fill a Casual Vacancy will serve until the end of the next Annual General Meeting. 
• There is no requirement for the authorization of members if the casual vacancy occurs due to reasons other than resignation. The reason could be death or something else, but it does not include the removal of the auditor.

How does an auditor file his or her resignation with the company? 

The auditor must file a resignation letter with the company stating the reason for resigning, as well as Form ADT-3 with the registrar within 30 days of the date of resignation. According to section 140(2) of the Companies (Audit and Auditors) Rules, 2014, an auditor who resigns from the company must file a statement in Form ADT-3 with the company and the Registrar within 30 days of the date of resignation. The auditor is responsible for submitting form ADT-3. Form ADT – 3 can only be filed with the registrar if the relevant auditor’s ADT-1 was filed at the time of his appointment.

In the event of a failure to file Form ADT-3, the auditor shall be punished with a minimum fine of Rs. 50,000 or the auditor’s remuneration, whichever is less, and a maximum fine of Rs. 5 lakh. [Section 140(3) of the Companies (Amendment) Act of 2017]

Procedure for filling a Casual Vacancy caused by a resignation

• Obtain Form – ADT-3 filed with the registrar from the resigning auditor.
• The Company will issue a Letter of Intent to a new auditor for his appointment as an auditor in the company.
• The new auditor must obtain the resigning auditor’s NOC before issuing the consent letter and eligibility certificate to the company.
• The Company must obtain a written certificate from the proposed auditor confirming his eligibility to be appointed as well as his consent to the appointment.
• Call a Board meeting within 30 days of the Casual Vacancy, after giving all directors notice, and pass a resolution appointing the new auditor to replace the old auditor.
• Provide the auditor with a certified copy of the resolution.
• Give notice of a general meeting within three months of the Board’s recommendation to the company’s members.
• Call a general meeting to approve the Board of Directors’ appointment of an auditor.

Form ADT 1 must be filed with the Registrar within 15 days of the date of appointment (i.e., 15 days from the date of appointment in a general meeting), along with the necessary filing fees and annexures.

Casual Auditor Vacancy for Reasons Other Than Resignation

If a casual vacancy arises due to something other than resignation, the Board must fill it within 30 days. The following steps are required to fill a Casual Vacancy of the Auditor due to reasons other than Resignation:

• Obtain a written certificate from the proposed auditor confirming his eligibility for appointment.
• Convene a Board meeting within 30 days of a casual vacancy arising, after providing notice to all directors, and pass a resolution appointing the new auditor in place of the old auditor.
• Provide the auditor with a certified copy of the resolution.
• Notify the Registrar in form ADT-1, along with the required filing fee and annexures.

Conclusion

The idea of a One Person Company (OPC) is well-known. All of the advantages that an OPC has over other types of companies, such as the lack of a requirement to hold a general meeting, the lack of a requirement to hold a board meeting (if there is only one director), the lack of a requirement to prepare cash flow statements, and so on. Disregarding the privileges enjoyed by an OPC, it is now mandatory to appoint an auditor to fill a casual vacancy in an OPC.