DEF Ltd. has to appoint the internal auditor for the financial year 2022-23. The company called a board meeting on 28th April, 2022 to appoint the internal auditor, but due to non-finalisation of audit firm, the Board of

CS Professional · Secretarial Audit, Compliance Management and Due Diligence · PYQS · June 2022
DEF Ltd. has to appoint the internal auditor for the financial year 2022-23. The company called a board meeting on 28th April, 2022 to appoint the internal auditor, but due to non-finalisation of audit firm, the Board of directors deferred the matter of appointment of internal auditor for next board meeting. Subsequently, the company has finalized the proposal of a practising Chartered Accountants firm for appointment as internal auditor. Now, in view of urgency, the directors of the company want to appoint the internal auditor by passing a resolution by circulation. Examine whether the appointment of internal auditor in this manner is permissible under the Companies Act, 2013.

Answer & Explanation:

Section 179(3)(k) of the Companies Act, 2013 read with Rule 8(4) of the Companies (Meeting of Board and its Powers) Rules, 2014 requires that the Internal Auditor of the Company shall be appointed by passing a resolution at a duly convened meeting of the Board. Therefore, the appointment of Internal Auditor cannot be made by passing a resolution by circulation. Also, the resolution for appointment of the Internal Auditor shall be filed with the Registrar of Companies within 30 days from the passing of the said resolution pursuant to the provisions of Section 117 & 179 of the Companies Act, 2013. Hence, DEF Ltd. should call a Board Meeting and appoint the Internal Auditor.

Topics: Company Law

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