Appointment by shareholders
Sub-section (1) of section 224 of the Act empowers the shareholders to appoint auditor at each annual general meeting. In fact, this sub-section makes it obligatory that every company irrespective of its nature, i.e., whether a public or private or a company with unlimited liability, limited company; non-profit
company or profit oriented company; or irrespective of its size shall appoint auditors. The usage of word “each” is also quite significant since it amounts to passing a resolution at each AGM to appoint an auditor meaning thereby that a retiring auditor would not be reappointed automatically. Appointment in a general meeting of the company means appointment by the shareholders of the company. Upon an auditor being appointed in the annual general meeting, the company is to give intimation thereof to the concerned auditor within seven days of the appointment. The auditor, in his turn, on receipt of the intimation from the company about his appointment, is required to send a written communication to the concerned Registrar of Companies within 30 days of the receipt of the intimation stating whether he has accepted or declined the appointment. The auditor has to communicate his acceptance or refusal in writing and must be in Form No.23B prescribed under the Act. It may be noted that this requirement of intimation and communication in writing about acceptance or refusal to accept is restricted to appointment made in the annual general meeting only. It may also be noted that sub-section (1) makes it amply clear that an auditor shall hold appointment from the conclusion of one annual general meeting to the conclusion of the next annual general meeting. Therefore, an auditor’s tenure of appointment has been clearly spelt out in this section.