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CA Intermediate · Corporate and Other Laws · Audit and Auditors

Mehta Pharma Ltd, a public company, wants to remove its statutory auditor, M/s Kulkarni & Associates, before the end of the term. Which statement correctly states the procedure under the Companies Act, 2013?

An auditor can be removed before the term ends only by a special resolution of the company passed after obtaining previous approval of the Central Government. The Board's resolution or an ordinary resolution is not enough, so the other procedures are wrong.

  1. AThe Board may remove the auditor by a simple resolution at a Board meeting, with no further approval needed
  2. BThe company may remove the auditor by an ordinary resolution at a general meeting, with no Central Government approval
  3. CThe auditor can be removed only by the Tribunal on an application by the Board
  4. DThe company must first obtain previous approval of the Central Government by application in the prescribed form, and then pass a special resolution at a general meetingCorrect

Explanation

Removal of an auditor before expiry of the term requires a special resolution of the company after obtaining the previous approval of the Central Government. The Board alone cannot remove the auditor, and an ordinary resolution is insufficient. The Tribunal route applies to a different situation, such as fraudulent conduct of the auditor.

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