Removal of Auditor

Introduction

Lawful Termination. Regulatory Compliances. Strategic Advisory.

The removal of an auditor before the completion of their term is a regulated and sensitive corporate action under the Companies Act, 2013. This can only be done with prior approval from the Central Government, and only under genuine, justified circumstances.

Whether due to loss of confidence, misconduct, or misalignment of professional expectations, our firm assists in navigating the removal process legally, strategically, and ethically.

Removal of Auditor

Legal Framework

Section: 140(1) of the Companies Act, 2013

Rule: 7 of Companies (Audit and Auditors) Rules, 2014

Authority Involved:

Board of Directors

Shareholders

Central Government (via Regional Director, MCA)

Registrar of Companies (ROC)

Documents Required

  • Certified true copy of Board Resolution
  • Detailed reason for removal
  • Auditor’s appointment letter or ADT-1
  • NOC or written response from auditor (if available)
  • Copy of proposed special resolution
  • Declaration of compliance
  • Any supporting documents (e.g., proof of misconduct, disputes)

Important Considerations

  • Misuse or unjustified removal may lead to regulatory scrutiny
  • The removal must be genuine, in good faith, and supported by proper reasoning
  • Auditor’s right to be heard is a legal obligation
  • Professional assistance is crucial to avoid technical rejection or legal backlash

  • Auditor must be appointed for a term of 5 years (Section 139)
  • Removal can only be initiated before completion of the term
  • Application for removal must be made to the Central Government (RD)
  • Auditor must be given a reasonable opportunity to be heard
  • Approval of shareholders by special resolution is mandatory

Step 1: Hold Board Meeting

Discuss and approve the proposal to remove the auditor

Authorize filing of application to Central Government

Call an Extraordinary General Meeting (EGM) for shareholder approval (after CG’s approval)

Step 2: File Application with Central Government

File Form ADT-2 with the Regional Director (via MCA portal)

Time limit: Within 30 days of Board resolution

Attachments:

Board resolution

Detailed reason for removal

Copy of appointment order

Supporting documents

Auditor's response (if available)

Declaration that the auditor has been given a chance to be heard

Step 3: Regional Director's Approval

RD may call for hearing or request additional information

Auditor will be given an opportunity to respond

If satisfied, RD grants approval order for removal

Timeline: Typically 30–60 days depending on RD office

Step 4: Hold EGM – Special Resolution

After RD approval, call and hold EGM

Pass a Special Resolution (≥75% approval) for auditor's removal

File Form MGT-14 with ROC within 30 days of passing the resolution

Step 5: Appointment of New Auditor (Optional)

If desired, appoint a new auditor in the same EGM

File Form ADT-1 for new appointment

Key Forms Involved

Form Purpose

ADT-2 Application to RD for removal of auditor

MGT-14 Filing of special resolution with ROC

ADT-1 Appointment of new auditor (if applicable)