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CA Intermediate · Corporate and Other Laws · Audit and Auditors

Himalaya Foods Ltd, an unlisted public company, removes its auditor, CA Dinesh, before the expiry of his term. Which of the following is the correct procedure under the Companies Act, 2013?

An auditor may be removed before the term ends only by a special resolution of the company passed in a general meeting, after obtaining previous approval of the Central Government and giving the auditor a reasonable opportunity of being heard. Board action or Registrar approval alone is insufficient.

  1. AAn ordinary resolution of the Board after giving Dinesh a hearing
  2. BA special resolution at a general meeting after previous approval of the Central Government, and after giving Dinesh a reasonable opportunity of being heardCorrect
  3. CA special resolution at a general meeting only, with no Government approval needed
  4. DApproval of the Registrar of Companies alone

Explanation

An auditor can be removed before expiry of the term only by a special resolution of the company after obtaining previous approval of the Central Government, and after giving the auditor a reasonable opportunity of being heard. A Board resolution or Registrar approval is not sufficient. Skipping Central Government approval makes the removal invalid.

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