Ministry of Corporate Affairs (MCA) vide notification [F. No. 1/33/2013-CL-V (Vol.I)] & G.S.R. 621(E) dated 22nd June 2017 has notified Companies (Audit and Auditors) Second Amendment Rules, 2017.
The Central Government in exercise of powers conferred by Section 139 read with Sub-section (1) and (2) of section 469 of Companies Act, 2013 (18 of 2013) has made the Amendments in furtherance of Companies (Audit and Auditors) Rules, 2014.
Section 139 sub section (2) of the Companies Act, 2013 read with Rule 5 of Companies (Audit & Auditors) Rules, 2014 provides that No listed company or a company belonging to such class or classes of companies as may be prescribed, shall appoint or re-appoint –
i. An individual as auditor for more than one term of five consecutive years; and
ii. An audit firm as auditor for more than two terms of five consecutive years
Rule 5 of Companies (Audit & Auditors) Rules, 2014 provided that for the purposes of sub-section (2) of section 139, the class of companies shall mean the following classes of companies excluding one person companies and small companies:-
(a) all unlisted public companies having paid up share capital of Rupees ten crores or more;
(b) all private limited companies having paid up share capital of Rupees twenty crores or more;
(c) all companies having paid up share capital below the threshold limit mentioned in (a) and
(b) above, but having public borrowings from financial institutions, banks or public deposits of Rupees fifty crores or more.
Now vide the notification [F. No. 1/33/2013-CL-V (Vol.I)] dated 22.06.2017 the central government has made following changes in clause (b) of Rule 5 of Companies (Audit and Auditors) Rules, 2014: –
a) all unlisted public companies having paid up share capital of Rupees ten crores or more
b) all private limited companies having paid up share capital of Rupees fifty crores or more.
c) all companies having paid up share capital below the threshold limit mentioned in (a) and
(b) above, but having public borrowings from financial institutions, banks or public deposits of Rupees fifty crores or more.
Conclusion:-
Meaning thereby after, the notification has exempted all private limited companies having paid up share capital of less than Rupees fifty crores from the above rule and the companies with capital of less than Rupees fifty crores can appoint an individual as auditor for more than one term of five consecutive years and an audit firm as auditor for more than two terms of five consecutive years.
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