A company is incorporated, the founders are heads-down on the product, and nobody appoints the statutory auditor. Day 31 arrives and a compliance default is already live — the annual filing cycle cannot complete without a valid auditor, and the clock has started. None of this is difficult. It is just easy to forget under launch pressure, and the 15-day ADT-1 window is the shortest deadline on the whole MCA calendar.
The board appoints the first auditor within 30 days of incorporation, ADT-1 is filed within 15 days of any appointment, the regular term runs five years, and removing an auditor mid-term needs Central Government approval.
The bottom line
First auditor: appointed by the board within 30 days of incorporation, holding office until the first AGM. ADT-1 has been mandatory for first auditors since 14 July 2025.
Regular term: appointed at the AGM for 5 years, with ADT-1 within 15 days.
Rotation for listed and larger companies: an individual for one term of 5 years, a firm for two terms of 10, then a 5-year cooling-off.
Removal before term: a special resolution and Central Government approval through ADT-2.
The first auditor, and the 15-day clock
Under Section 139(6) and Rule 4 of the Companies (Audit and Auditors) Rules, 2014, the board must appoint the first statutory auditor within 30 days of incorporation. If the board fails, the members do it at an EGM within 90 days. The first auditor holds office until the conclusion of the first AGM.
Two things are worth flagging because older guides get them wrong. Since 14 July 2025, ADT-1 is mandatory even for the first auditor, where it used to be skipped. And ADT-1 is due within 15 days of the appointment, not 30 — running from the appointment date rather than the AGM date. That combination makes it the most-missed deadline here.
Before the board resolution, collect the auditor's written consent and the eligibility certificate under Section 141. They are preconditions to a valid appointment, not paperwork to catch up on.
The five-year term, and the ratification that no longer exists
Section 139(1) has members appoint an auditor at the first AGM for five consecutive years, until the conclusion of the sixth AGM, by ordinary resolution.
Older guidance still says the appointment must be ratified at each AGM. That requirement was removed by the Companies (Amendment) Act, 2017. If your AGM agenda still carries a ratification item, it is a leftover — the auditor simply continues through the five-year term unless removed or disqualified.
When rotation applies
Rotation under Section 139(2) and Rule 5 is not universal. It applies to listed companies, unlisted public companies with paid-up capital of ₹10 crore or more, private companies with paid-up capital of ₹50 crore or more, and any company other than an OPC or small company with public borrowings or deposits of ₹50 crore or more.
| Auditor type | Maximum tenure | Then |
|---|---|---|
| Individual | 1 term — 5 years | 5-year cooling-off |
| Audit firm | 2 terms — 10 years | 5-year cooling-off |
During the cooling-off the outgoing auditor cannot be reappointed, and the incoming firm must not share common partners with the outgoing one — which narrows the field more than companies expect.
Most private limited companies are exempt from rotation. They should still check they do not trip the ₹50 crore capital or borrowings tests, because growth crosses those lines quietly.
A casual vacancy, and why the route forks
A mid-term vacancy is filled by the board within 30 days under Section 139(8), but what else you must do depends on why the seat is empty.
On resignation: the outgoing auditor files ADT-3 within 30 days stating the reasons, under Section 140(2). The board's replacement also needs member approval at a general meeting within 3 months.
On death or disqualification: the board fills the vacancy within 30 days, with no separate member-approval step.
Either way, the casual-vacancy auditor holds office only until the next AGM, where a fresh five-year appointment is made.
Removing an auditor before the term ends
This path is deliberately hard, because an auditor who can be dismissed easily is not much of an auditor.
Section 140(1), with Rule 7, requires a board resolution, then an application to the Central Government through the Regional Director in Form ADT-2 within 30 days, and after approval a special resolution of members within 60 days. The auditor must be given a reasonable opportunity to be heard.
Do not confuse removal with non-reappointment. Choosing a different auditor at the AGM, with special notice, is an ordinary and low-friction process. Removing one before the term ends needs government approval. Mislabel one as the other and the appointment can be challenged.
What non-compliance costs
Under Section 147, default in the appointment provisions makes the company liable to a fine of ₹25,000 to ₹5 lakh, and every officer in default can face imprisonment of up to 1 year, a fine of ₹10,000 to ₹1 lakh, or both. Late ADT-1 carries a per-day additional fee on top.
The practical consequence is larger than either. Without a valid auditor the entire annual filing cycle is blocked, and persistent failure brings strike-off risk.
Common mistakes
- Missing the 15-day ADT-1 window. It is shorter than almost every other MCA deadline and runs from the appointment date.
- Forgetting ADT-1 for the first auditor, mandatory since 14 July 2025.
- Still ratifying the appointment annually, six years after that requirement was abolished.
- Confusing removal with non-reappointment. Only removal needs Central Government approval through ADT-2.
- Reaching the 5 or 10-year rotation wall with no succession plan, when the cooling-off rules limit who you can appoint next.
A working routine
- New company: appoint the first auditor within 30 days, file ADT-1 within 15.
- Collect written consent and the Section 141 eligibility certificate before the board meeting.
- At the AGM, appoint for 5 years by ordinary resolution and file ADT-1 within 15 days.
- Where rotation applies, track the tenure and plan the cooling-off succession in advance.
- On a resignation, check ADT-3 is filed and the vacancy is filled within 30 days.
- For a removal, follow ADT-2, then Central Government approval, then the special resolution — in that order.
Frequently asked questions
When is ADT-1 due? Within 15 days of the auditor's appointment or reappointment, running from the appointment date rather than the AGM date. It is now required for first auditors too.
Does auditor rotation apply to private companies? Only where paid-up capital is ₹50 crore or more, or public borrowings or deposits are ₹50 crore or more. Most small private companies are exempt.
Can we just remove our auditor at the AGM? Removal before the term ends needs a special resolution and Central Government approval through ADT-2. Simply not reappointing at the AGM is a different and lighter process.
What happens when an auditor resigns? They file ADT-3 within 30 days. The board fills the casual vacancy within 30 days, and members approve within 3 months.
Is ratification still required every year? No. The Companies (Amendment) Act, 2017 removed it.
What if the board misses the 30-day window for the first auditor? The members appoint the auditor at an extraordinary general meeting within 90 days.
Primary sources
- Sections 139, 140, 141, 142 and 147, Companies Act, 2013
- Companies (Audit and Auditors) Rules, 2014, as amended in 2025
- Forms ADT-1, ADT-2 and ADT-3; Section 196 and MGT-14 where applicable