The Ministry of Corporate Affairs has vide its order dated 30th June, 2016 issued clarification with respect to rotation of auditors. Section 139 of the Companies Act, 2013 provides that certain class of companies are required to rotate their auditors every five years if it is an individual auditor and every ten years if it is an audit firm. But there was a moratorium for a period of three years from the commencement of the Act, when the rotation of auditors would not apply. Therefore since the Act commenced on 1st April, 2014, the rotation would not apply upto 31st March, 2017. But apparently there was some confusion that when should the appointment of the new auditors take place. To solve the confusion the MCA has issued an order amending the 3rd provisio to section 139(2) as follows:
“Provided also that every company, existing on or before the commencement of this Act which is required to comply with the provisions of this sub-section, shall comply with requirements of this sub-section within a period which shall not be later than the date of the first annual general meeting of the company held, within the period specified under sub-section (1) of section 96, after three years from the date of commencement of this Act.”.
Therefore the auditors will hold office upto the annual general meeting of the financial year 31st March, 2017 and at that AGM, a new auditor would be required to be appointed. This is of course applicable only to those companies to whom rotation of auditors apply as provided in the Rules.