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Appointment of first auditor/director/partners

About of Service

Purpose and Importance

  • Financial Compliance: Ensures that the company’s financial records are audited from the beginning.
  • Trust and Transparency: Builds trust among stakeholders by having an independent review of financial statements.
  • Legal Requirement: Mandatory under various company laws to have an auditor appointed within a specified timeframe.

Process

  1. Private Companies:

    • Board of Directors: Appoint the first auditor within 30 days of incorporation.
    • Shareholders: If the Board fails to appoint, shareholders must do so within 90 days in an Extraordinary General Meeting (EGM).

  2. Public Companies:

    • The Board of Directors must appoint the first auditor within 30 days of incorporation. If not done, shareholders appoint in an EGM within 90 days.

  3. Tenure:

    • The first auditor holds office until the conclusion of the first Annual General Meeting (AGM).

  4. Documentation:

    • Board Resolution: Documenting the decision.
    • Consent Letter: From the auditor agreeing to the appointment.
    • Intimation to Auditor: Within 15 days of appointment.
    • Filing with Registrar of Companies (RoC): Form ADT-1 within 15 days of appointment.

Appointment of First Director

Purpose and Importance

  • Leadership and Governance: Provides the company with its initial leadership and governance structure.
  • Compliance: Ensures the company complies with statutory requirements for the number of directors.
  • Operational Readiness: Enables the company to begin operations and make strategic decisions.

Process

  1. Articles of Association (AoA):

    • First directors are usually named in the Articles of Association at incorporation. If not named, the subscribers to the Memorandum of Association (MoA) who are individuals become the first directors.

  2. Number of Directors:

    • Private Company: Minimum of 2 directors.
    • Public Company: Minimum of 3 directors.
    • One Person Company: Minimum of 1 director.

  3. Tenure:

    • The first directors hold office until the directors are duly appointed in the first AGM.

  4. Documentation:

    • Consent Form DIR-2: From each director agreeing to act as director.
    • Disclosure of Interest Form MBP-1: Directors disclose their interest in other entities.
    • Filing with RoC: Details of the first directors are filed with the incorporation documents.

Appointment of Partners

Purpose and Importance

  • Formation of Partnership: Legally establishes the partnership firm or LLP.
  • Defined Roles and Responsibilities: Outlines the roles, responsibilities, and contributions of each partner.
  • Legal Compliance: Ensures the partnership complies with relevant laws and regulations.

Process

  1. Partnership Firm:

    • Partnership Deed: The first partners are named in the partnership deed, outlining the rights, duties, and responsibilities of each partner.
    • Registration: While not mandatory, registering the partnership deed with the Registrar of Firms is advisable for legal recognition.

  2. Limited Liability Partnership (LLP):

    • LLP Agreement: The first partners and designated partners are named in the LLP agreement.
    • Filing with Registrar: The LLP agreement must be filed with the Registrar of LLPs within 30 days of incorporation.

  3. Number of Partners:

    • Partnership Firm: Minimum of 2 partners.
    • LLP: Minimum of 2 designated partners, with at least one being a resident of India.

  4. Documentation:

    • Partnership Deed/LLP Agreement: Legally binding documents detailing the partnership.
    • Consent Letters: From partners agreeing to their roles.
    • Filing Requirements: For LLPs, Form 3 (LLP agreement) and Form 4 (details of partners/designated partners) are filed with the Registrar.

Conclusion

The appointment of the first auditor, directors, and partners is essential for establishing a company's or partnership firm’s governance and compliance framework. It ensures that the entity operates within legal parameters, maintains financial transparency, and is ready to make strategic decisions from the outset. Proper documentation and timely filings are crucial to avoid legal issues and ensure smooth operations

Uses and Benefits
  • Legal Framework Companies Act, 2013 (India): Section 139 and 140. Applicable for: Private companies, public companies, and one-person companies.
  • Scope and Process Private Companies: Board of Directors: Must appoint the first auditor within 30 days from the date of incorporation. Shareholders: If the Board fails to appoint, the shareholders must appoint the auditor within 90 days in an Extraordinary General Meeting (EGM).
  • Legal Framework Companies Act, 2013 (India): Section 152 and 153. Applicable for: All companies at the time of incorporation.
  • Scope and Process Articles of Association (AoA): The first directors are usually named in the Articles of Association at the time of incorporation. If not named, the subscribers to the Memorandum of Association (MoA) who are individuals become the first directors. Number of Directors: Private Company: Minimum of 2 directors. Public Company: Minimum of 3 directors. One Person Company: Minimum of 1 director.
  • Documentation: Consent Form DIR-2: From each director agreeing to act as director. Disclosure of Interest Form MBP-1: Directors disclose their interest in other entities. Filing with RoC: Details of the first directors are filed with the incorporation documents.

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Charges Structure & Our Scope of Work

Additional Disclosure

  1. Appointment Details:

    • Provide the full name, date of appointment, and position held (auditor, director, or partner) for each appointee.

  2. Qualifications and Experience:

    • Outline the qualifications, relevant experience, and expertise of each appointee that make them suitable for their respective roles.

  3. Board Resolution or Partnership Deed:

    • Document the board resolution or partnership deed authorizing the appointment, specifying the meeting date and resolution number.

  4. Term of Appointment:

    • Specify the term of appointment, whether it is temporary or permanent, and any conditions or limitations attached to the appointment.

  5. Remuneration and Compensation:

    • Disclose any remuneration, fees, or compensation agreed upon with the appointees for their services, if applicable.

  6. Declaration of Independence (if applicable):

    • If any appointee is an independent director, provide a declaration confirming their independence as per regulatory requirements.

  7. Disclosure in Legal Documents:

    • Ensure proper documentation in the company's Articles of Association (AOA), Memorandum of Association (MOA), or Partnership Deed regarding the appointment.

  8. Communication to Regulatory Authorities:

    • Notify relevant regulatory authorities, such as the Registrar of Companies (RoC), about the appointment of the first auditor, director, or partners.

  9. Conflict of Interest Disclosure:

    • Disclose any potential conflicts of interest arising from the appointment and measures taken to mitigate such conflicts.

  10. Internal Controls and Assurance:

    • Describe internal controls and assurance processes in place to ensure the integrity and effectiveness of governance practices related to the appointment.

  11. Legal and Regulatory Compliance:

    • Ensure compliance with all applicable laws, regulations, and guidelines governing the appointment of auditors, directors, or partners.

Terms & Conditions

Documents & Detail Required

Board Resolution:

A board resolution authorizing the appointment of the first auditor.
Specifies the name of the auditor and their qualifications.
Specifies the term of appointment and any remuneration agreed upon.

Consent Letter:

Consent letter from the auditor accepting the appointment.
Includes details of the auditor’s qualifications, membership number (if applicable), and terms of engagement.

Form ADT-1:

Form ADT-1 is required to be filed with the Registrar of Companies (RoC) within 15 days of the auditor's appointment.
Includes details such as the name of the company, auditor's details, terms of appointment, etc.
Appointment of First Director

Consent Letter:

Consent letter from the individual agreeing to act as a director.
Includes details of the director's qualifications, previous directorship (if any), and other relevant information.

Declaration of Director:

Declaration of directorship in Form DIR-2, providing consent to act as director.
Includes personal details, address, educational qualifications, and previous directorship details.

Board Resolution:

Board resolution for the appointment of the director.
Specifies the director's name, designation, terms of appointment, and any remuneration.

Form DIR-12:

Form DIR-12 is required to be filed with the RoC within 30 days of the director's appointment.
Includes details such as director’s personal information, consent, and appointment details.
Appointment of First Partners (for LLP)

Consent Form:

Consent form from each partner agreeing to act as partners in the LLP.
Includes details of partners' contributions, profit-sharing ratios, and rights and responsibilities.

LLP Agreement:

LLP Agreement outlining the terms and conditions of partnership.
Specifies profit-sharing ratios, capital contributions, management responsibilities, etc.

Filing with RoC:

LLP Form 3 is required to be filed with the RoC within 30 days of the LLP's incorporation.
Includes details of partners, capital contribution, profit-sharing ratio, and other relevant information.
Additional Requirements

Identity and Address Proof:

Copies of identity proof (Aadhar card, passport, etc.) and address proof (utility bill, bank statement, etc.) of auditors, directors, or partners.

Company Seal:

In some cases, company seal may be required on board resolutions or consent letters for authenticity.

Compliance:

  • Ensure compliance with relevant provisions of the Companies Act or LLP Act, as applicable, and any specific requirements of the Registrar of Companies (RoC).

Please Note Down Your Querie

OUR REVIEW

FAQ'S

: Who appoints the first auditor of a company

: The Board of Directors appoints the first auditor within 30 days of incorporation. If the Board fails to do so, the shareholders appoint the auditor within 90 days in an Extraordinary General Meeting (EGM).

Q2: What is the tenure of the first auditor?

The first auditor holds office until the conclusion of the first Annual General Meeting (AGM).

: What documents are required for the appointment of the first auditor?

A: Board resolution approving the appointment. Consent letter from the auditor agreeing to the appointment. Intimation to the auditor within 15 days of appointment. Filing of Form ADT-1 with the Registrar of Companies (RoC) within 15 days of appointment.

What happens if the first auditor is not appointed within the stipulated time?

If the Board does not appoint the auditor within 30 days, the shareholders must appoint the auditor within 90 days in an EGM.

5: Can the first auditor be reappointed?

Yes, the first auditor can be reappointed at the first AGM if the shareholders approve it. Appointment of First Director