[aaykarbhavan] CL: MANY CA FIRMS INCLUDING BIG FIRMS MAY BE DISQUALIFIED TO BE AUDITOR WITHOUT HIS KNOWLEDGE: BY CA NITESH MORE

MANY CA FIRMS INCLUDING BIG FIRMS MAY BE DISQUALIFIED TO BE AUDITOR WITHOUT HIS KNOWLEDGE: BY CA NITESH MORE

 

Many CA firms including big Firms may lose audit of Companies due to the certain new impractical disqualifications inserted in the new Companies Act.  Sec 141(3) of the Companies Act, 2013 states that the following persons shall not be eligible for appointment as an auditor of a company, namely:—

Ø  is holding any "security" of or interest (beneficial owner)  in the company or its subsidiary, or of its holding or associate company or a subsidiary of such holding company.
However, the "relative" may hold security or interest in the company of face value not exceeding  one thousand rupees or "such sum" as may be prescribed ;

COMMENTS: Draft Rules on the New Company Law, prescribes Rs 1 Lakh as "such sum". The expression, relative has been defined in the New Companies Act. The expression ''relative'' has been defined under Sec 2(77). "Relative" with reference to any person, means anyone who is related to another, if—

(i) they are members of a Hindu Undivided Family;

(ii) they are husband and wife; or

(iii) one person is related to the other in such manner as may be prescribed;

  

Brothers are the members of a HUF and hence covered u/s 2(77) as relative.

 

EXAMPLE:  E &Y is an auditor of  Tata tele services Ltd. Brother of one of the partner of E& Y who is staying in the USA purchased the security of Tata Tele exceeding the prescribed amount . E& Y will be disqualified to be the auditors of Tata Tele.

 

ISSUES:

1.       How E& Y will come to know that the brother of a partner has purchased such security?

2.       Is it practically possible to implement such provision?

SUGGESTIONS: IT IS SUGGESTION TO DEFINE RELATIVE FOR THE PURPOSE OF THIS SECTION. SUCH DENITION MAY BE AS FOLLOWS:

"Relative" with reference to any person, means anyone who is related to another, if—

(i) they are husband and wife; or

(ii) they are dependent relatives; or

(iii) one person is related to the other in such manner as may be prescribed;

Warm Regards 

CA.Nitesh Kumar More |  FCA, |

Mobile: - +91 9883157484 | +91 9674974186 | Tel: - +91 33 32562967 |

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