Shareholder's Resolution for Appointment of Statutory Auditor in the Annual General Meeting (AGM) – Format, Compliance & Filing Guide

The appointment of a Statutory Auditor is a crucial corporate action that ensures a company’s financial statements are audited in compliance with the Companies Act, 2013. As per Section 139(1) of the Act, every company must appoint an auditor at the First Annual General Meeting (AGM) for a term of five years. The resolution for appointing an auditor is passed in the AGM, followed by filing with the Registrar of Companies (ROC).

This detailed guide provides a legally compliant AGM resolution format, the legal framework, filing requirements, and best practices for appointing an auditor in a private limited company.

When is an AGM Resolution for the Appointment of a Statutory Auditor Required?

An Annual General Meeting (AGM) Resolution is required for the appointment of the first statutory auditor for a term of five years, ensuring compliance with the Companies Act, 2013. The appointment is necessary when:

• A company is incorporated and needs its first statutory auditor.
• The tenure of the existing auditor has expired, and the company is appointing a new auditor.
• The company has grown in scale and needs to appoint a new auditor for statutory compliance.
• Regulatory compliance under Section 139(1) mandates that all companies must appoint an auditor at their first AGM.
• In case the existing auditor resigns or is removed before the completion of their term, a new auditor must be appointed.

Passing this resolution ensures transparency, legal compliance, and seamless financial reporting.

Legal Framework & Compliance Under the Companies Act, 2013

The appointment of a Statutory Auditor in an AGM is governed by:

• Section 139(1): Mandates the appointment of an auditor for a five-year term at the first AGM.
• Section 141: Prescribes eligibility criteria for auditors, ensuring they meet professional and legal requirements.
• Section 142: Specifies that the remuneration of the auditor is determined by the Board, in accordance with shareholder approval.
• Companies (Audit and Auditors) Rules, 2014: Defines procedural aspects, documentation, and filing requirements for auditor appointments.

Further the appointment of Statutory Auditors in an Annual General Meeting (AGM) is governed by Section 139(1) of the Companies Act, 2013, which mandates:

• Every company must appoint an auditor at its First AGM for a term of five consecutive years.
• The company must obtain written consent and eligibility confirmation from the proposed auditor under Section 141 of the Companies Act, 2013.
• The appointment must be approved by shareholders through an ordinary resolution in the AGM.
• The company must file Form ADT-1 with the Registrar of Companies (ROC) within 15 days of the AGM to validate the appointment.
• Non-compliance with these provisions can result in penalties and may invalidate the auditor’s appointment.

Key Elements of a Well-Drafted AGM Resolution for Auditor Appointment

A well-structured AGM resolution must include:

1. Preamble: Reason for the appointment of the statutory auditor.
2. Legal Provisions: Reference to Section 139(1) and eligibility under Section 141 of the Companies Act, 2013.
3. Appointment Statement: Name of the audit firm/individual, effective date, and tenure of appointment.
4. Consent & Eligibility Confirmation: Declaration that the auditor has given their consent and meets eligibility criteria.
5. Filing Requirements: Authorization to the Company Secretary or any officer for filing Form ADT-1 with ROC.
6. Stakeholder Communication: Updates to be made in the company records and disclosures in the financial statements.
7. Acknowledgment & Welcome: Appreciation of the outgoing auditor (if applicable) and formal introduction of the new auditor.
8. Stakeholder Communication: Ensures the appointment is updated in company records and financial statements.

By following these elements, the company ensures compliance and a legally valid resolution.

Sample AGM Resolution for the Appointment of a Statutory Auditor

The AGM resolution for the appointment of a statutory auditor is available for download at the top of this page. Click on the Download Button to access a ready-to-use, legally compliant template that can be directly incorporated into company records.

How to File Form ADT-1 for Auditor Appointment?

After the AGM resolution is passed, the company must:

1. Obtain a consent letter and eligibility certificate from the appointed auditor.
2. Pass the AGM resolution and record the decision in the minutes.
3. File Form ADT-1 with the ROC within 15 days of the AGM (along with the auditor’s consent letter and resolution copy).
4. Update the company’s statutory records and financial reports to reflect the appointment.
5. Disclose the appointment in the Director’s Report and Financial Statements.

Failure to file Form ADT-1 on time can lead to penalties and regulatory issues.

Common Mistakes to Avoid in Auditor Appointment Resolutions

Companies often make the following errors:

• Failure to obtain written consent from the auditor before passing the resolution.
• Not filing Form ADT-1 within the prescribed 15-day period.
• Incorrect details or no details in the appointment resolution (e.g., not mentioning of Firm Registration Number in the resolution and/or wrong firm registration number).
• Not updating statutory records (financial statements, registers, and ROC filings).
• Failure to mention auditor’s remuneration and terms in the resolution or AGM minutes.

By ensuring compliance with documentation requirements and legal provisions, companies can prevent future disputes and regulatory challenges.

FAQs on AGM Resolution for Appointment of Statutory Auditors

1. Is it mandatory to appoint an auditor for five years?

Yes, as per Section 139(1) of the Companies Act, 2013, an auditor must be appointed for five consecutive years, subject to ratification requirements.

2. Can a private limited company appoint an auditor for a shorter period?

No, the initial appointment under Section 139(1) is for five years, but the company can change the auditor earlier if needed.

3. What if Form ADT-1 is not filed within 15 days?

Non-filing of Form ADT-1 within 15 days may result in penalties and non-compliance under the Companies Act, 2013.

4. Can the Board of Directors appoint an auditor?

The Board can only appoint the first auditor within 30 days of incorporation. Any further appointments require shareholder approval at the AGM.

5. How is the remuneration of an auditor decided?

The Board of Directors determines the remuneration in consultation with the auditor, subject to AGM approval.

Key Compliance Steps After Passing the Resolution

Ensuring compliance after the approval of the Statutory Auditor’s appointment is crucial for maintaining corporate governance and fulfilling regulatory requirements. The following steps must be taken to meet the obligations under the Companies Act, 2013, the Companies (Audit and Auditors) Rules, 2014, and the Secretarial Standards (SS-2) on General Meetings:

• File Form ADT-1 with the Registrar of Companies (ROC) within 15 days of passing the resolution to formally notify the appointment of the Statutory Auditor. This filing is mandatory under Section 139(1) of the Companies Act, 2013, and failure to do so may lead to penalties.
• Update the Statutory Register of Auditors by recording the details of the newly appointed auditor, in accordance with Section 140(2) of the Companies Act, 2013, ensuring all company records reflect the change.
• Ensure proper disclosure in the Director’s Report and Financial Statements, clearly mentioning the appointment of the auditor and confirming their eligibility under Section 141 of the Companies Act, 2013. This disclosure is a key requirement to maintain transparency in financial reporting.
• Record the resolution accurately in the minutes of the Annual General Meeting (AGM), following the guidelines of Secretarial Standard-2 (SS-2) on General Meetings, issued by the Institute of Company Secretaries of India (ICSI). Proper recording of discussions, shareholder queries, voting results, and the Chairman’s confirmation ensures that the company adheres to best governance practices.
• Maintain proper documentation of the AGM minutes and supporting documents (such as the auditor’s consent, eligibility confirmation, and appointment resolution) for statutory compliance and future reference. Well-maintained records are essential for ensuring legal defensibility and smooth audits.

💡 Why Our Format Stands Out:

To simplify compliance, we provide a professionally drafted, legally sound, and easy-to-use format that aligns with the Companies Act, 2013, applicable Rules, and Secretarial Standards. The resolution format available for download at the top of this page ensures:

• Legally compliant wording, avoiding common pitfalls in recording resolutions.
• Ready-to-use structure that can be directly copied, customized, and incorporated into company records.
• Comprehensive coverage of statutory requirements, including voting records, discussions, and confirmations.
• Alignment with Secretarial Standards (SS-2) to ensure best practices in corporate governance.

By following our format, companies can avoid compliance errors, simplify regulatory filings, and maintain a robust governance framework.

Final Thoughts: Ensuring Compliance & Strong Corporate Governance

The appointment of a Statutory Auditor at the AGM is a mandatory legal requirement under the Companies Act, 2013. Ensuring compliance with the correct procedures, addressing shareholder concerns, and meeting regulatory filing obligations not only fulfills legal requirements but also strengthens financial integrity and corporate governance.

By adhering to the Companies Act, 2013, Secretarial Standards (SS-2) on General Meetings, and ROC filing requirements, companies can ensure a smooth audit process, maintain transparency, and avoid regulatory penalties. Proper documentation, timely filings, and adherence to governance best practices are essential for seamless compliance.

💡 Make Compliance Effortless!

To streamline the process, download our professionally drafted AGM Resolution Template and follow our step-by-step filing guide for an error-free auditor appointment.

For any assistance with drafting resolutions, maintaining company records, or filing ROC forms, feel free to contact us today! 🚀