Category Company Law

Any company registered under the Company Act needs to appoint an Auditor to comply with the provisions of the said Act. The company, whether registered as private limited, or one person company, or limited, or any other firm, are required to conduct the Audit. The purpose of Audit is to ensure financial compliance is being followed by all.

The section 139 states

“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 prescribed”

Who can be Auditor?

A Chartered Accountant or a firm of qualified Chartered Accountant including LLP, can be appointed as the Auditor, If he satisfies the conditions for the same.

Tenure for the Auditor

The tenure for the Auditor is from the conclusion of the meeting in which appointment is proceeded till the 6th AGM. But, there is need for ratification of the said appointment in every Annual General Meeting held before.

Cooling Period

There are provisions of cooling period, in case of Listed company or companies as prescribed. The period for which appointment can be made:

• An Individual as auditor for more than one term of 5 consecutive years; and
• An audit firm as an auditor for more than two terms of 5 consecutive years.

It is to be noted that the break in the term for a continuous period of 5 years will be considered as fulfillment of the above said condition of cooling period.

Appointment of 1st Auditor

The first auditor shall be appointed by the Board within 30 days from the date of Incorporation. In case of failure of Board to appoint, the EGM needs to be called for appointment within 90 days from the expiry of 30 days given to the Board. The tenure is till the first AGM.

Remuneration for Auditor

As per section 142(1), remuneration shall be fixed in its general meeting. But in the case of 1st Auditor appointed by the Board itself, the Board will decide the remuneration.

Form ADT-01

Once the appointment is done, the form ADT-01 is needed to file file with ROC within 15 days from the appointment date. There is no requirement for filing the said form, in case of first auditor.

Procedure mentioned below is required for appointment of auditor

1. Intimate the proposed auditor regarding the intention of the company for appointing him as auditor.

2. Obtain consent & certificate about the eligibility for appointment.

3. In case, the audit committee is required to be constituted under section 177, then obtain its recommendation. Otherwise, the Board can proceed.

4. The Board can only recommend in the Board Meeting, unless, the appointment is for 1st Auditor.

5. On the basis of recommendation of the Board, the shareholders will appoint the Auditor in the Annual General Meeting.

6. Now, the company needs to intimate the auditor about the appointment and file the form ADT-1 with MCA within 15 days.

For the professional advice, one can reach to us: 

WhatsApp : +91-9267970588

Email I’d   : taxacumen.consultancy@gmail.com

Follow our Whatsapp Channel 

https://www.whatsapp.com/channel/0029VaXqUTnL2AU3Z1yxXD3S

Follow our Instagram Channel 

https://www.instagram.com/taxacumen.20/?next=%2Fthelegalarena%2F

About Author – Deepa Kaintura

I am a lawyer by profession. I am a legal consultant in TaxAcumen providing services to corporates about GST, Income Tax, ROC Compliances, etc. My love for finance and law encouraged me to write and share the knowledge with the readers here.  

The companies registered under the Companies Act, 2013, have a separate legal entity. The operations are managed by the Board of Directors, and not the owners, subject to the provisions of said Act. Along with the powers of management, directors have been assigned with some duties and responsibilities, provided in the said Act.

Section 166 of the Act, deals with the duties of the directors, towards the company. Here, duties specified under the law are as mentioned below :

1. Act according to Articles of Association

Every director of the company shall act, according to the terms decided under Article of Association. The powers given in the Articles cannot exceed, unless the provisions permitted.

2. Act in the interest of the company

All the directors shall act in good faith in order to promote the objects of the company, for the benefits of its members, as a whole, and in the best interests of the company, employees, the shareholders, the community, and for the protection of the environment.

3. Don’t make secret profits

A director shall not achieve, or attempt to achieve any undue gain or advantage, either to himself or to his relatives, partners, or his associates, and if found guilty, he shall be liable to pay an amount equal to that gain.

4. Due care and skill

Every director needs to ensure that the due care, skills and diligence is in exercise, while taking the decisions for the company. Also, independent judgement should be exercised.

5. Confidentiality

The directors are the core management personnel of the company. They come to know various sensitive, confidential information, while exercising their duties. This information can damage the company, in case of disclosure. Hence, there is a need to maintain confidentiality for the sensitive information of the company.

6. Attend meetings

As required by law, directors need to attend the meeting conducted for the operations of the company. He must provide valuable ideas, inputs for the smooth functioning and betterment of the company, whenever required.

7. Conflict of Interest

Directors must know that the company interests are more important than his personal interests. He should not be involved in such a situation, in which he may have any direct or indirect interest that conflicts, or possibly may conflict, to the interest of the company.

8. Assignment of his office

Director can not assign his office to any person. Such assignment, if done, shall be void. Directors must fulfil his/her duties towards the Company, otherwise he/she will be liable to be punished according to the provisions of law.

Also read the Article on Appointment of Director 

Appointment of Directors – Provisions and Procedure for Private Limited

For the professional advice, one can reach to us: 

WhatsApp : +91-9267970588

Email I’d   : taxacumen.consultancy@gmail.com

Follow our Whatsapp Channel 

https://www.whatsapp.com/channel/0029VaXqUTnL2AU3Z1yxXD3S

Follow our Instagram Channel 

https://www.instagram.com/taxacumen.20/?next=%2Fthelegalarena%2F

About Author – Deepa Kaintura

I am a lawyer by profession. I am a legal consultant in TaxAcumen providing services to corporates about GST, Income Tax, ROC Compliances, etc. My love for finance and law encouraged me to write and share the knowledge with the readers here.  

A company registered under Company Act, 2013 with MCA needs to ensure proper compliances as per the relevant said law. A company is a legal entity which needs a board of directors to operate its functions. A board of directors implies a group of individuals who are entrusted with the management of the company.

At the time of incorporation, a Private Limited is required to appointment a minimum of two directors. In case of no appointment made, all the subscribers to memorandum will be considered as first directors. After Incorporation, in case there is a need to appoint a director, the proper procedure needs to be followed.

Prerequisite for the appointment of a director 

1. A person proposed to be appointed as director, must have a Director Identification Number (known as DIN) and a valid DSC to sign the MCA Forms;

2. The person proposed to be appointed as Director must submit the form DIR 2 to give the consent for appointment and declare that he is not disqualified to be appointed as director in the company;

The eligibility to become a director in the company is as follows:

1. The proposed person must be above 21 of age;
2. The individual must be of sound mind;
3. An undischarged bankrupt or adjudged insolvent should not be appointed;
4. A person sentenced and convicted by court for more than six months is not eligible to become a director.

Documents required for appointment:

1. A copy of valid PAN copy 
2. A copy of Identity proof, such as Aadhaar, Voter Id, Passport, etc.
3. Passport Size Photo
4. Digital Signature Certificate (DSC)

During Incorporation process, the person to be appointed must have obtained DSC for sign the Form to subscribe and mention PAN for the process. A DIN will be allotted directly and no diferent form is required to sign or to apply.

And in case of Appointment after the incorporation, the procedure is required to be followed, which is as follows:

1. Firstly,check the AOA of the company to ensure that the appointment must be within the limit of Articles. If required, alter the Articles of Association for the same.

2. The proposed person must obtain a valid DSC.

3. The person proposed, if they don’t have a valid DIN, must apply the same with the Form DIR 3. Also refer the article on Allotment of DIN here https://taxacumen.in/?p=349

4. The proposed person must intimate the Company about his/her active DIN for further process.

5. Also, Submit the consent to act as a director and declare that there is no disqualification to him/her to appointment in DIR 2. No person can be appointed as director unless he/she submits the consent to act as director.

6. The proposed person must intimate the company about his/her interest in other entities. 

7. The appointment of directors takes place in a General Meeting by the shareholders. In case an appointment is being made in between the AGMs, the company can call an Extra General Meeting(EGM) for the purpose. Also, the additional director can be appointed by the directors in the Board Meeting only, if empowered in the AOA. The additional director can be appointed till the next AGM to be held.

8. The company must provide an appointment letter to the person appointed.

9. The company must file the FORM DIR 12 with ROC within 30 days from the event.

The article here is based on the provisions and procedure provided under the Company Act, 2013 in general language. 

For the professional advice, one can reach to us: 

WhatsApp : +91-9267970588

Email I’d   : taxacumen.consultancy@gmail.com

Follow our Whatsapp Channel 

https://www.whatsapp.com/channel/0029VaXqUTnL2AU3Z1yxXD3S

Follow our Instagram Channel 

https://www.instagram.com/taxacumen.20/?next=%2Fthelegalarena%2F

About Author – Deepa Kaintura

I am a lawyer by profession. I am a legal consultant in TaxAcumen providing services to corporates about GST, Income Tax, ROC Compliances, etc. My love for finance and law encouraged me to write and share the knowledge with the readers here.  

Under the company Act, 2013, Section 153 to 159 are in relation to the allotment of Director Identification Number (commonly known as DIN) to Director and conditions to be satisfied for the same and penalty for Non-compliance.

Section 153 states that

“Every individual who is intended to become a director needs to apply for DIN. Application to be made in the form DIR-3 to the Central Government (CG) along with the prescribed fees (presently fees is 500 for each application)

Procedure to Apply for DIN

The following documents need to be uploaded while applying DIN:

1. Photograph
2. Proof of Identity
3. Proof of residence
4. Verification of Signature specimen (Optional)

The form DIR-03 is to be digitally signed along with the applicant by 

A Chartered Accountant in practice; or

Company Secretary in practice; or

CMA in practice; or 

Managing Director or Director of the company in which applicant intended to be appointed; or

CS of the company in full time employment.

Section 154 states that the CG shall allot DIN within one month from the receipt of the application after due verification.

Conditions to be complied for Director Identification Number

There are also some conditions mentioned in relation to DIN under the above said Act which are as follows:

A Person can have only one DIN;

Every existing Director shall within one month of receiving the DIN, intimate to all the companies wherein he is a director;

Every company shall, within fifteen days of the receipt of DIN from the directors, furnish all the details to the Registrar;

Every company or directors, while furnishing any returns, information or particulars required under the Act, shall mention the DIN in the return, information or particulars relating to the said director.

Change in Particulars of the Directors – DIR-6 Form:

In case of any change in the particulars of the directors, the Form DIR-06 is to be submitted to intimate the changes such as change in address, or any other details.

Penalty/Punishment for Non-compliance

If any individual/ Director of a company, contravenes any provision, shall be punishable with the imprisonment for a term upto six months or with fine upto the limit of Fifty Thousands.

And it is also stated that in case of continuing Non-compliance, punishment can be extended with a further fine upto Five hundered for every day after the first contravention.

Also if any company contravenes the requirement of furnishing DIN of the directors or other officers under section 157, the company shall be punishable with the fine which is not less than Twenty thousands, but may extend upto one lakh rupees, and 

Every officer-in default of the company shall also be punishable with fine which shall not be less than twenty five thousands, but may extend upto one lakh rupees.

For the professional advice, one can reach to us: 

WhatsApp : +91-9267970588

Email I’d   : taxacumen.consultancy@gmail.com

Follow our Whatsapp Channel 

https://www.whatsapp.com/channel/0029VaXqUTnL2AU3Z1yxXD3S

Follow our Instagram Channel

https://www.instagram.com/taxacumen.20/?next=%2Fthelegalarena%2F 

About Author – Deepa Kaintura

I am a lawyer by profession. I am a legal consultant in TaxAcumen providing services to corporates about GST, Income Tax, ROC Compliances, etc. My love for finance and law encouraged me to write and share the knowledge with the readers here.