What does section 139 require for auditor appointment?

What does section 139 require?

Section 139 of the Companies Act, 2013 requires every company to appoint an auditor and sets how long that auditor holds office. The auditor appointed at the first annual general meeting holds office until the conclusion of the sixth AGM, a five-year term. Section 139 also fixes who appoints the first auditor, when rotation applies, and how a mid-term vacancy is filled.

The section covers three distinct appointments: the first auditor after incorporation, the auditor at the first AGM for the five-year term, and a replacement on a casual vacancy. Each has its own timeline, and mixing them up is the usual source of error.

Who appoints the first auditor?

The first auditor of a company other than a government company is appointed by the board of directors within 30 days of the date of registration under section 139(6). The first auditor holds office until the conclusion of the first annual general meeting. If the board does not appoint within 30 days, the members appoint the first auditor within 90 days at an extraordinary general meeting.

This first appointment is separate from the five-year term. It bridges the gap between incorporation and the first AGM, at which the company makes the regular appointment.

Who appoints the first auditor of a government company?

The Comptroller and Auditor General of India appoints the first auditor of a government company within 60 days of registration under section 139(7) of the Companies Act, 2013. If the CAG does not appoint within those 60 days, the board appoints within the next 30 days, and if the board also fails, the members appoint within 60 days at an extraordinary general meeting.

How long is an auditor's term?

Five years. At the first AGM the company appoints an auditor to hold office from the conclusion of that meeting until the conclusion of the sixth AGM under section 139(1) of the Companies Act, 2013. The appointment is made once for the whole term rather than renewed every year.

The five-year term runs across five annual general meetings. It ends at the sixth AGM, at which the company makes a fresh appointment, subject to the rotation limits where they apply.

Does the auditor need annual ratification at each AGM?

No. The proviso to section 139(1) that required members to ratify the auditor's appointment at every annual general meeting was omitted by the Companies (Amendment) Act, 2017. A company that still passes a ratification resolution each year is doing work the Act no longer asks for, and the habit hides the real question of when the five-year term actually expires.

When does auditor rotation apply?

Rotation applies to every listed company and to the classes set in rule 5 of the Companies (Audit and Auditors) Rules, 2014 under section 139(2). For those companies an individual auditor can serve one five-year term and an audit firm two consecutive five-year terms, followed by a five-year cooling-off period.

Which companies does rule 5 bring inside rotation?

Rule 5 of the Companies (Audit and Auditors) Rules, 2014 adds three classes to the listed companies already covered by section 139(2): unlisted public companies with paid-up share capital of ₹10 crore or more, private companies with paid-up share capital of ₹50 crore or more, and companies of any type with public borrowings from banks or financial institutions, or public deposits, of ₹50 crore or more.

A small private company below all three figures still appoints an auditor for the five-year term but is not subject to mandatory rotation. Crossing a figure mid-term is what catches a growing company out, so test the numbers at each balance sheet date rather than once at incorporation.

How is a casual vacancy filled?

A casual vacancy in the office of auditor arises from death, resignation, disqualification, or removal, and section 139(8) governs how it is filled. A casual vacancy other than one caused by resignation is filled by the board within 30 days. A vacancy caused by resignation is filled by the board and then approved by the members at a general meeting within three months.

The auditor appointed to a casual vacancy holds office until the conclusion of the next annual general meeting, at which the company makes the regular appointment. A resigning auditor separately files Form ADT-3 with the Registrar within 30 days under section 140(2) of the Companies Act, 2013.

How is a section 139 appointment recorded?

A section 139 appointment is recorded with the Registrar of Companies in Form ADT-1, filed within 15 days of the meeting at which the appointment was made under rule 4(2) of the Companies (Audit and Auditors) Rules, 2014. The resolution makes the appointment; the form makes it public.

File ADT-1 for the appointment at the first AGM and for any reappointment at the sixth AGM. The mechanics of that filing, the additional fee for late notice, and the disputed first-auditor case are covered in our guide on when Form ADT-1 is due after appointing an auditor.

Why do auditor appointments go wrong?

• Confusing the first-auditor 30-day board appointment under section 139(6) with the five-year appointment made at the first AGM.
• Reappointing the auditor every year out of habit when the appointment under section 139(1) runs to the sixth AGM.
• Ignoring rotation once paid-up capital crosses ₹10 crore for an unlisted public company or ₹50 crore for a private company under rule 5.
• Filling a resignation vacancy without taking member approval within three months as section 139(8) requires.
• Treating the AGM resolution as the end of the job and missing the 15-day ADT-1 notice under rule 4(2).

Where do section 139 changes appear?

Section 139 sits in the Companies Act, 2013, and the rule 5 rotation thresholds and audit forms around it move through MCA notifications and rule amendments. Complied AI keeps MCA updates in one feed so you can open the notification behind a rule or form change, then read section 139 next to it when you need the exact term and rotation wording.