Section 139: Appointment of auditors
This section is for the appointment of auditors in companies, including the procedure, tenure, and restrictions on appointment and re-appointment.
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(1)Subject to the provisions of this Chapter, every company shall, at the first annual general meeting, appoint an individual or a firm as an auditor who shall hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting and thereafter till the conclusion of every sixth meeting and the manner and procedure of selection of auditors by the members of the company at such meeting shall be such as may be prescribed: *
Every company must appoint an auditor at its first annual general meeting, who will hold office for 5 years, and the company must obtain the auditor's written consent and a certificate that the appointment meets prescribed conditions before making the appointment, and inform the auditor and file a notice with the Registrar within 15 days.
(1)9* Provided further that before such appointment is made, the written consent of the auditor to such appointment, and a certificate from him or it that the appointment, if made, shall be in accordance with the conditions as may be prescribed, shall be obtained from the auditor: *
(1)* Provided also that the certificate shall also indicate whether the auditor satisfies the criteria provided in section 141:
provisoProvided also that the company shall inform the auditor concerned of his or its appointment, and also file a notice of such appointment with the Registrar within fifteen days of the meeting in which the auditor is appointed.
explanationExplanation.—For the purposes of this Chapter, “appointment” includes re-appointment.
(2)No listed company or a company belonging to such class or classes of companies as may be prescribed, shall appoint or re-appoint—
A listed company or certain prescribed companies cannot appoint an individual auditor for more than 5 consecutive years or an audit firm for more than 2 terms of 5 consecutive years, and there are restrictions on re-appointment after completion of the term.
(2)(a)an individual as auditor for more than one term of five consecutive years; and
(2)(b)an audit firm as auditor for more than two terms of five consecutive years:
provisoProvided that—
(2)(b)(i)an individual auditor who has completed his term under clause (a) shall not be eligible for re-appointment as auditor in the same company for five years from the completion of his term;
(2)(b)(ii)an audit firm which has completed its term under clause (b), shall not be eligible for re-appointment as auditor in the same company for five years from the completion of such term:
provisoProvided further that as on the date of appointment no audit firm having a common partner or partners to the other audit firm, whose tenure has expired in a company immediately preceding the financial year, shall be appointed as auditor of the same company for a period of five years:
proviso1[Provided also that every company, existing on or before the commencement of this Act which is required to comply with the provisions of this sub-section, shall comply with requirement of this sub-section within a period which shall not be later than the date of the first annual general meeting of the company held, within the period specified under sub-section (1) of section 96, after three years from the date of commencement of this Act:]
provisoProvided also that, nothing contained in this sub-section shall prejudice the right of the company to remove an auditor or the right of the auditor to resign from such office of the company.
(3)Subject to the provisions of this Act, members of a company may resolve to provide that—
Company members may resolve to rotate the auditing partner and team at specified intervals or have the audit conducted by more than one auditor.
(3)(a)in the audit firm appointed by it, the auditing partner and his team shall be rotated at such intervals as may be resolved by members; or
(3)(b)the audit shall be conducted by more than one auditor.
(4)The Central Government may, by rules, prescribe the manner in which the companies shall rotate their auditors in pursuance of sub-section (2).
The Central Government may prescribe rules for rotating auditors.
explanationExplanation.—For the purposes of this Chapter, the word “firm” shall include a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009).
(5)Notwithstanding anything contained in sub-section (1), in the case of a Government company or any other company owned or controlled, directly or indirectly, by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, the Comptroller and Auditor-General of India shall, in respect of a financial year, appoint an auditor duly qualified to be appointed as an auditor of companies under this Act, within a period of one hundred and eighty days from the commencement of the financial year, who shall hold office till the conclusion of the annual general meeting.
For Government companies or companies owned or controlled by the Government, the Comptroller and Auditor-General of India will appoint an auditor within 180 days of the financial year commencement.
(6)Notwithstanding anything contained in sub-section (1), the first auditor of a company, other than a Government company, shall be appointed by the Board of Directors within thirty days from the date of registration of the company and in the case of failure of the Board to appoint such auditor, it shall inform the members of the company, who shall within ninety days at an extraordinary general meeting appoint such auditor and such auditor shall hold office till the conclusion of the first annual general meeting.
The first auditor of a non-Government company must be appointed by the Board of Directors within 30 days of registration, or by the members at an extraordinary general meeting within 90 days.
(7)Notwithstanding anything contained in sub-section (1) or sub-section (5), in the case of a Government company or any other company owned or controlled, directly or indirectly, by the Central Government, or by any State Government, or Governments, or partly by the Central Government and partly by one or more State Governments, the first auditor shall be appointed by the Comptroller and Auditor- General of India within sixty days from the date of registration of the company and in case the Comptroller and Auditor-General of India does not appoint such auditor within the said period, the Board of Directors of the company shall appoint such auditor within the next thirty days; and in the case of failure of the Board to appoint such auditor within the next thirty days, it shall inform the members of the company who shall appoint such auditor within the sixty days at an extraordinary general meeting, who shall hold office till the conclusion of the first annual general meeting.
For Government companies, the first auditor will be appointed by the Comptroller and Auditor-General of India within 60 days of registration, or by the Board of Directors within the next 30 days, or by the members at an extraordinary general meeting within 60 days.
(8)Any casual vacancy in the office of an auditor shall—
Any casual vacancy in the office of an auditor must be filled by the Board of Directors within 30 days, or by the Comptroller and Auditor-General of India within 30 days for companies whose accounts are subject to audit by them.
(8)(i)in the case of a company other than a company whose accounts are subject to audit by an auditor appointed by the Comptroller and Auditor-General of India, be filled by the Board of Directors within thirty days, but if such casual vacancy is as a result of the resignation of an auditor, such appointment shall also be approved by the company at a general meeting convened within three months of the recommendation of the Board and he shall hold the office till the conclusion of the next annual general meeting;
(8)(ii)in the case of a company whose accounts are subject to audit by an auditor appointed by the Comptroller and Auditor-General of India, be filled by the Comptroller and Auditor-General of India within thirty days:
provisoProvided that in case the Comptroller and Auditor-General of India does not fill the vacancy within the said period, the Board of Directors shall fill the vacancy within next thirty days.
(9)Subject to the provisions of sub-section (1) and the rules made thereunder, are tiring auditor may be re-appointed at an annual general meeting, if—
A retiring auditor may be re-appointed at an annual general meeting if they are not disqualified, have not expressed unwillingness, and no special resolution has been passed appointing another auditor.
(9)(a)he is not disqualified for re-appointment;
(9)(b)he has not given the company a notice in writing of his unwillingness to be re-appointed; and
(9)(c)a special resolution has not been passed at that meeting appointing some other auditor or providing expressly that he shall not be re-appointed.
(10)Where at any annual general meeting, no auditor is appointed or re-appointed, the existing auditor shall continue to be the auditor of the company.
If no auditor is appointed or re-appointed at an annual general meeting, the existing auditor will continue to be the auditor.
(11)Where a company is required to constitute an Audit Committee under section 177, all appointments, including the filling of a casual vacancy of an auditor under this section shall be made after taking into account the recommendations of such committee.
For companies required to constitute an Audit Committee, all auditor appointments, including filling casual vacancies, must be made after considering the committee's recommendations.
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
- 1. The proviso ins. by Act 1 of 2018, s. 39 (w.e.f. 7-5-2018).
- 2. The words and figures “within the time specified, under section 403” omitted by s. 39, ibid. (w.e.f. 7-5-2018).
- 3. Subs. by s. 39, ibid., for “in section 403” (w.e.f. 7-5-2018).
- 4. Subs. by Act 22 of 2019, s. 22, for “punishable with fine” (w.e.f. 2-11-2018).
- 5. Subs. by Act 29 of 2020, s. 28, for “one thousand rupees for every day during which the failure continues but which shall not be more than ten lakh rupees” (w.e.f. 21-12-2020).
- 6. Subs. by Act 22 of 2019, s. 22, for “punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both” (w.e.f. 2-11-2018).
- 7. Subs. by Act 29 of 2020, s. 28, for “one lakh rupees” (w.e.f. 21-12-2020).
- 8. Subs. by s. 28, ibid., for “five lakh rupees” (w.e.f. 21-12-2020).
- 9. The first proviso omitted by Act 1 of 2018, s. 40 (w.e.f. 7-5-2018).
- 1. Subs. by notification No. S.O. 2264(E), dated 30th June, 2016, for the proviso (w.e.f.1-4-2014).
- 1. Subs. by Act 22 of 2019, s. 23, for sub-section (3) (w.e.f. 2-11-2018).
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Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.