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TMI BlogAPPOINTMENT OF AUDITORS TO DEEMED GOVERNMENT COMPANIESX X X X Extracts X X X X X X X X Extracts X X X X ..... APPOINTMENT OF AUDITORS TO DEEMED GOVERNMENT COMPANIES - By: - Mr. M. GOVINDARAJAN - Corporate Laws / IBC / SEBI - Dated:- 8-8-2014 - - Section 139 of Companies Act, 2013 ( Act for short) deals with the appointment of auditors. Section 139(5) provides that notwithstanding anything contained in sub-section (1), the case of a Government Company or any other company owned or controlled, dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly or indirectly, by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, the Comptroller and Auditor-General of India shall, in respect of a financial year, appoint an auditor duly qualified to be appointed as an auditor of companies under the Act, within a period 180 days from the commencement of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial year, who shall hold office till the conclusion of the annual general meeting. Section 139 (7) provides that notwithstanding anything contained in sub-section (1) or sub-section (5), in the case of a Government company or any other company owned or controlled directly or indirectly, by the Central Government, or by any State Government or Governments, or partly by the Central Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment and partly by one ore more State Governments, the first audit shall be appointed by the Comptroller and Auditor-General of India within 60 days from the date of registration of the company and in the case the Comptroller and Auditor-General of India does not appoint such auditor within the said period, the Board of Directors of the company shall appoint such auditor within the next 30 days a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the case of failure of the Board to appoint such auditor within the next 30 days it shall inform the members of the company who shall appoint such auditor within 60 days at an extraordinary General meeting, who shall hold office till the conclusion of the first annual general meeting. The stakeholders raised doubts about the applicability of Sections 139(5) and 139(7) for the appointm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of auditor to deemed government companies as referred in Section 619B of the Companies Act, 1956 . Section 619B of the Companies Act, 1956 provides that the provisions of Section 619 shall apply to a company in which not less than 51% of the paid up share capital by one or more of the following or any combination thereof, as if it were a Government company, namely,- The Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Government and one or more Government companies; Any State Government or Governments and one or more Government companies; The Central Government, one or more State Governments and one or more Government companies; The Central Government and one or more corporations owned or controlled by the Central Government; The Central Government, one or more State Governments and one or more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corporations owned or controlled by the Central Government; One or more corporations owned or controlled by the Central Government or the State Government; More than one Government company. The stakeholders have pointed out that the new Act does not contain specific provisions above deemed Government Companies on lines of Section 619B of Companies Act, 1956 . The stakeholders furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her sought for clarifications whether under the new Act, such deemed Government companies would be subject to audit by C AG in the same manner as Government companies. The said issues have been examined and considered by the Ministry of Corporate Affairs and come with clarification under No. F.No.1/33/13-CL-V, dated 31.07.2014 In para 3 of the circular it has been indicated the words any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other company owned or controlled, directly or indirectly ..by the Central Government and partly by one or more State Governments appearing in sub sections (5) and (7) of Section 139 are to be read with the definition of control in Section 2(27) of the Act . Section 2(27) of the Act defines the term control which shall include the right to appoint majority of the directors or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner. It has been clarified that the documents like articles of association and shareholders agreements etc., envisaging control ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 2(27) are to be taken into account while deciding whether an individual company is covered under Section 139(5) or 139 (7) of the Act . The stakeholders also sought for clarification about the manner in which the information about the incorporation of a company subject to audit by an auditor to be appointed by C AG is to be communicated to the C AG for the purpose of appoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntment of first auditors under Section 139 (7) of the Act. For this query the Ministry clarified that such responsibility rests with both the Government concerned and the relevant company. It will be the primary responsibility of the company concerned to intimate to the C AG about its incorporation along with the name, location of registered office, capital structure of such a company immedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ately on its incorporation. The company is also to share the information to the relevant Government so that such Government may also send a suitable request to C AG. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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