Requirement of passing special resolution for appointment of auditor by company in which shareholding, exceeding 25 per cent of subscribed capital, held by public institutions, etc. - Companies Law - Circular : No. 2/76

Circular : No. 2/76 [1/1/76 ‑ CL-V], dated 5 ‑ 6 ‑ 1976. Subject:- Requirement of passing special resolution for appointment of auditor by company in which shareholding, exceeding 25 per cent of subscribed capital, held by public institutions, etc. ‑ Whether material date is the date of annual general meeting at which special resolution is required to be passed Section 224A, inter alia, requires a special resolution to be passed for the appointment/reappointment of an auditor by a company in which not less than 25 per cent of the subscribed share capital is held by public financial institutions, etc. A doubt has been expressed as to the material date, i.e., whether the date of the notice of the meeting, or the date of passing the special resolution, shall be taken into consideration. The matter has since been examined in the Department, and it is to be clarified that the material date is the date of the annual general meeting at which the special resolution is required to be passed. Moreover, since generally, articles of association of companies provide for closure of the register of members before general meeting during a period not exceeding thirty days at any one time, it is unlikely that the position regarding shareholding in the company will be different between the date of issue of notice and the date of the general meeting. In exceptional cases, however, where a change in the shareholding pattern in the company has taken place, between the date of issue of notice of the general meeting and the date of actual passing of this resolution regarding appointment of auditor, the company may either i. adjourn the meeting to another date, and later issue the required notice in accordance with law and thereafter pass the special resolution required to be passed under section 224A, or ii. omit or pass over the item on the agenda regarding appointment of auditor. In the event of the company adopting the procedure at (ii) above, the situation would be then covered by sub‑section (2) of section 224A.