New company: who appoints the first auditor, and by when?

Your company was registered a few days or weeks ago. The certificate of incorporation is in hand. Someone has asked, "Have you appointed the auditor yet?" and you are not sure whose job that is.

It is the Board's job, and it comes with a short clock. This article explains who appoints the first auditor, by when, what happens if the Board misses the date, and which filing follows. It covers an ordinary private company. A Government company works differently, and a short note on that is near the end.

Your situation: a new company and no auditor yet

Every company needs an auditor. For a company that is just born, the law does not wait for the first annual general meeting (AGM, the yearly meeting of shareholders) to choose one. The first AGM is far away. It must be held within nine months from the closing of the first financial year (s.96(1), Companies Act 2013). The first auditor is needed well before that.

So the Act gives the first appointment to the Board of Directors, with a deadline. The words are these: "the first auditor of a company, other than a Government company, shall be appointed by the Board of Directors within thirty days from the date of registration of the company" (s.139(6), Companies Act 2013).

Two things to notice.

• The appointer is the Board, not the shareholders and not the promoters in their personal capacity.
• The clock runs from "the date of registration of the company". That is the date of incorporation mentioned in the certificate of incorporation. The company exists from that date (s.9, Companies Act 2013).

What you can still do today

If you are inside the 30 days, you have a simple path. The Board appoints the first auditor.

If you have already missed the 30 days, the Act has a fallback. It says that where the Board fails to appoint, "it shall inform the members of the company, who shall within ninety days at an extraordinary general meeting appoint such auditor" (s.139(6), Companies Act 2013). An extraordinary general meeting (EGM) is a shareholders' meeting called for a specific purpose, outside the yearly AGM.

So a missed Board deadline does not leave the company stuck. The members step in. But the section is not a licence to be late. A breach of the section brings a penalty, described below.

The Act does not say from which day the 90 days are counted. It also does not say in so many words that a Board which has slipped past 30 days can no longer appoint. Do not rely on a reading of either point. Take the cautious course: appoint at the earliest date possible, and have a CA review your facts before you act or file.

The deadline clock

Step by step

1. Pick the person or firm

Only a chartered accountant can be an auditor. A firm may be appointed by its firm name if the majority of its partners practising in India are chartered accountants (s.141(1), Companies Act 2013). A limited liability partnership of chartered accountants can also be appointed. In that case only the partners who are chartered accountants act and sign for the firm (s.141(2), Companies Act 2013).

Check the disqualifications before you offer the role (s.141(3), Companies Act 2013). The ones founders most often trip on:

• An officer or employee of the company cannot be its auditor (s.141(3)(b)).
• A person whose relative is a director or key managerial personnel, or is employed by the company as one, cannot be its auditor (s.141(3)(f)).
• A person who, or whose relative or partner, holds any security of or interest in the company is disqualified. There is a limited allowance for a relative's holding of up to one thousand rupees or such sum as is prescribed (s.141(3)(d)(i)).
• A person who is already auditor of more than twenty companies, at the date of appointment, is disqualified (s.141(3)(g)).
• A person who provides the services listed in s.144 to the company, directly or indirectly, is disqualified (s.141(3)(i)).

If a person incurs a disqualification after appointment, the person must vacate the office. That vacancy is treated as a casual vacancy (s.141(4), Companies Act 2013).

2. Ask for written consent and an eligibility certificate

The Act requires that "before such appointment is made, the written consent of the auditor to such appointment, and a certificate from him or it that the appointment, if made, shall be in accordance with the conditions as may be prescribed, shall be obtained" (second proviso to s.139(1), Companies Act 2013). The certificate must also say whether the auditor meets the criteria in section 141 (third proviso to s.139(1), Companies Act 2013).

That proviso sits in sub-section (1), which deals with the AGM appointment. The first-auditor rule is in sub-section (6). The sound practice, and the one we recommend, is to collect the consent and certificate for the first auditor too. It costs one email and it protects the Board.

The prescribed certificate says that the auditor (rule 4(1), Companies (Audit and Auditors) Rules 2014):

• is eligible and not disqualified under the Companies Act, the Chartered Accountants Act 1949 and the rules or regulations under them;
• is proposed as per the term provided under the Act;
• is within the limits laid down by or under the authority of the Act; and
• has truthfully listed any pending professional-conduct proceedings against the auditor, the firm, or any partner.

3. Hold the Board meeting and pass the resolution

The Board appoints by a resolution. Record the name of the individual or firm, the firm registration or membership number, and the fact that the appointment is under s.139(6). Record that the auditor holds office until the conclusion of the first AGM. Attach the consent and the certificate to the minutes.

The Board may also fix the first auditor's remuneration. The Act says so directly: "the Board may fix remuneration of the first auditor appointed by it" (proviso to s.142(1), Companies Act 2013). For later auditors, the general meeting fixes the fee.

4. Inform the auditor and file Form ADT-1

The company must "inform the auditor concerned of his or its appointment, and also file a notice of such appointment with the Registrar within fifteen days of the meeting in which the auditor is appointed" (fourth proviso to s.139(1), Companies Act 2013). The notice is Form ADT-1 (rule 4(2), Companies (Audit and Auditors) Rules 2014).

One caution. That proviso is written in sub-section (1), the same sub-section as the consent proviso discussed above, and the Act does not repeat it in sub-section (6). The cautious course, and the one we recommend, is to file Form ADT-1 for the first auditor as well, within fifteen days of the Board meeting. Ask your CA to confirm the position on your facts.

The form asks for these details:

• the company's CIN, Global Location Number (where the company has one), name, registered office address and email ID;
• the date of the meeting at which the auditor was appointed;
• the category of auditor, individual or firm; and
• the auditor's PAN, name, membership or registration number, address and email ID.

It is verified by a person authorised by the Board, whose DIN is given on the form and who signs it digitally. The fee payable on the form is not something we can confirm from the rules; check the current figure on the MCA portal before you file.

5. If the Board missed its 30 days

Do these in order.

• The Board informs the members that it has not made the appointment (s.139(6), Companies Act 2013).
• The company calls an EGM. The members appoint the auditor there, within ninety days (s.139(6), Companies Act 2013).
• File Form ADT-1 within fifteen days of the meeting in which the auditor is appointed (fourth proviso to s.139(1), Companies Act 2013).

The appointed auditor holds office until the conclusion of the first AGM (s.139(6), Companies Act 2013).

6. At the first AGM

At the first AGM, the company appoints an auditor, who holds office "from the conclusion of that meeting till the conclusion of its sixth annual general meeting" (s.139(1), Companies Act 2013). The first auditor can be proposed again at that AGM; "appointment" includes re-appointment (Explanation to s.139(1), Companies Act 2013).

What the penalty looks like

Sections 139 to 146 are covered by one penalty section. If any of them is contravened, the company is "punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees". Every officer of the company who is in default is punishable with a fine of not less than ten thousand rupees and up to one lakh rupees (s.147(1), Companies Act 2013).

An auditor who contravenes section 139 faces a separate fine under s.147(2), Companies Act 2013. That is the auditor's exposure and not the company's.

What not to do

• Do not let the auditor be a friend who is also a shareholder or a director's relative. The disqualifications in s.141(3)(d) and (f) bite. A later vacancy is awkward and the first accounts are at risk.
• Do not assume the first AGM can wait for the appointment. The Act gives a separate, earlier route for the first auditor in s.139(6). Using the AGM for this purpose is not what the section says.
• Do not skip ADT-1. The appointment and the filing are two steps, and the filing has its own 15 days.
• Do not back-date the Board minutes. The date of the meeting goes into Form ADT-1 and is verified under a declaration. Section 448 of the Act, which deals with false statements, is cited on the form itself.
• Do not treat an informal engagement as appointment. An email saying "please audit us" is not a Board resolution.
• Do not assume a Government company works like yours. For a Government company or a company owned or controlled by the Central or a State Government, the first auditor is appointed by the Comptroller and Auditor-General within sixty days of registration. If the CAG does not, the Board appoints within the next thirty days, and then the members within sixty days (s.139(7), Companies Act 2013).

What to do now

• Next step: Hold a Board meeting. Pass the resolution appointing the first auditor under s.139(6) after taking the auditor's written consent and eligibility certificate (s.139(6) and second and third provisos to s.139(1), Companies Act 2013; rule 4(1), Companies (Audit and Auditors) Rules 2014).
• Deadline: Within thirty days from the date of registration of the company for the Board (s.139(6), Companies Act 2013). File Form ADT-1 within fifteen days of the meeting in which the auditor is appointed (fourth proviso to s.139(1), Companies Act 2013; rule 4(2), Companies (Audit and Auditors) Rules 2014).
• Consequence of missing: The Board must inform the members, who appoint at an EGM within ninety days (s.139(6), Companies Act 2013). The company is liable to a fine of ₹25,000 up to ₹5 lakh, and each officer in default to ₹10,000 up to ₹1 lakh (s.147(1), Companies Act 2013).

Have a CA review your facts before you act or file.

FAQs

1. Who appoints the first auditor of a private limited company?
The Board of Directors, within thirty days from the date of registration of the company (s.139(6), Companies Act 2013).

2. What if the Board does not appoint within 30 days?
The Board must inform the members. The members then appoint the auditor at an extraordinary general meeting within ninety days (s.139(6), Companies Act 2013). The failure can also attract the fine under s.147(1), Companies Act 2013.

3. How long does the first auditor serve?
Until the conclusion of the first annual general meeting (s.139(6), Companies Act 2013). The company then appoints an auditor at that meeting for the term in s.139(1), Companies Act 2013.

4. Which form do we file, and by when?
Form ADT-1, a notice of appointment of auditor to the Registrar. We recommend filing it for the first auditor too (see step 4). The time limit is fifteen days of the meeting in which the auditor is appointed (fourth proviso to s.139(1), Companies Act 2013; rule 4(2), Companies (Audit and Auditors) Rules 2014).

5. Can a director's relative be our first auditor?
No. A person whose relative is a director or is in the employment of the company as a director or key managerial personnel is not eligible (s.141(3)(f), Companies Act 2013). A person who, or whose relative or partner, holds securities of or interest in the company is also not eligible, subject to the small relative-holding allowance in s.141(3)(d)(i).

6. Who fixes the first auditor's fee?
The Board may fix the remuneration of the first auditor appointed by it (proviso to s.142(1), Companies Act 2013).

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See Also

• What must our first board meeting do within 30 days of incorporation?
• Calling an EGM on member requisition (s.100): the 10% route, the 21/45-day clock, and the Tribunal backstop
• Finance Act 2026: changes that touch a private company's directors