ADT-2 Form : Removal Of Auditor

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Laxmi Navlani

ADT-2 Form
Compliances
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Last updated on May 6th, 2021

As per section 140 of Companies Act, 2013, the company can remove an auditor before the expiry of his or her term by passing a special resolution. Moreover, Company can be pass special resolution after obtaining prior approval from the central government by filing an application along with Form ADT-2 as an attachment.

However, before initiating the procedure u/s 140 for removal, the company has to give the auditor opportunity of being heard.

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Form ADT-2 should specify the following things

SRN number of filing ADT-1 is a requirement for getting approval of central government,

So, companies have to file ADT- 1 before uploading ADT- 2.

Form ADT-2 Template

Form ADT-2 Template
Template from MCA Portal

Process of Removal of Auditors using Form ADT-2

  1. Pass a resolution for the removal of auditors

    Board has to Conduct a board meeting to pass a resolution for the removal of auditors

  2. Give a reasonable opportunity to Auditor.

    Company has to give a reasonable opportunity of being heard to Auditor. This provision was not there in old companies act 1956. But now it’s mandatory to give a reasonable opportunity of being heard to the auditor.

  3. Apply for Central government approval

    Apply for Central government approval within 30 days from date of passing board resolutions in Form ADT-2 as an attachment to Form RD1.

  4. Pass a special resolution

    After getting approval, the company has to conduct a general meeting within 60 days from the date of approval to pass a special resolution approving central government’s approval.

For getting approval, the company has to file Form ADT-2 as attachment to Form RD-1 for approval of Central Government.

Removal Of Auditor By Tribunal Or On an Application made by Central Government

Where the present auditor of a company has directly or indirectly acted in a fraudulent manner or abetted or colluded in any fraud by or in relation to the company or its directors or officers than the Tribunal may direct the company to change its auditors.

In this case, the central government makes an application. Therefore, the Tribunal should also agree with the requirement of change of auditor. Thus, the tribunal should within, 15 days of receipt of the application pass an order that the auditor shall not function, and the central government may appoint another auditor in his place.

Auditor against whom Tribunal passes an order for removal shall not be eligible for appointment in any company for 5 years. Moreover, 5 years shall initiate from the date of the final order. Further, In such cases, both the audit firm and partner concerned will be jointly and severally liable.

FAQs

How to remove the auditor?

Section 140 of the Act clearly stipulates that the company can remove an auditor after passing special resolution also after obtaining prior approval of the Central Government.

How long are auditors normally appointed for?

After incorporation of a company in the first annual general meeting, the Board of Directors must appoint an Auditor.
The Auditor will typically hold term till the conclusion of 6th AGM or 5 years.
The appointment of an Auditor can also be made for a period of 1 year, renewable at each annual general meeting.

 

Got Questions? Ask Away!

  1. Hi @Dixita

    ADT-2 is to be filed for removal of auditor(s) from their office before expiry of term while ADT-3 is the notice of resignation by the Auditor.

    A Company will need to hold a Board Meeting and pass a resolution in such cases. You can read more about that here:

    Hope this helps!