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Step Wise Process for Auditor Resignation
Although the Companies Act doesn't outline a strict procedure for auditor resignation, it's essential to follow the guidelines under Section 140.
Step 1 - Resignation Letter
The auditor formally submits a resignation letter to the company, providing clear reasons for stepping down. This letter must be drafted in compliance with legal requirements and should outline any significant issues or concerns, if applicable. The resignation must be submitted to the Board of Directors as well as any relevant regulatory authorities.
Step 2 - Board Meeting
Once the resignation letter is received, the Board of Directors holds a meeting to formally acknowledge the auditor’s resignation. The Board discusses the reasons for the resignation (if disclosed) and passes a resolution to accept the resignation. This meeting is essential to ensure that all company directors are informed and that the resignation process is documented.
Step 3 - ADT 3
After the resignation is accepted, the company must file Form ADT-3 with the Registrar of Companies (ROC) within 30 days. This form is a legal requirement that provides the ROC with details of the auditor's resignation. The form must be signed by both the company and the resigning auditor. Failure to file within the specified time can lead to penalties.
Step 4 - Appointment
The company must appoint a new auditor to fill the vacancy created by the resignation. The new auditor should be approved by the Board of Directors and, if necessary, by the shareholders. The appointment must be made within 30 days to ensure the company remains compliant with statutory audit requirements. The new auditor’s consent must also be obtained and documented
Step 5 - Notifying Shareholders
In some cases, shareholders must be notified about the resignation and the new appointment. This is typically done at the next Annual General Meeting (AGM) or through a special resolution. The resignation and new appointment must be communicated in a formal manner, ensuring transparency and compliance with shareholder rights.
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