Removal of an auditor of a company

This information sheet (INFO 62) sets out the essential seven steps to be followed when removing an auditor of a company under the Corporations Act 2001 (Corporations Act):

It also includes instructions for single member companies.

The directors or members of a company can initiate a process to remove an auditor, which allows members to vote on the change of auditor. Unlike the resignation of an auditor, ASIC’s consent is not required unless the company is a proprietary company which holds an Australian financial services (AFS) licence.

Often a company will remove its auditor because it is impractical to wait until the next annual general meeting (AGM) for ASIC to consent to a resignation. In these circumstances, the removal of an auditor does not necessarily suggest that there has been a dispute between the auditor and company management.

To comply with the requirements of the Corporations Act, you must take the following steps to remove an auditor.

Step 1. Service of notice of intention and resolution to convene a general meeting

An auditor of a company may be removed by resolution of the company at a general meeting only if a notice of intention under section 329(1A) has been given to the company.

While the form of the notice of intention is not prescribed by the Corporations Act, an example is:

To The Secretary, ABC Limited

I, …………., intend to (or request the company to) convene a general meeting of the company on …………. (at least two months after the service of this notice) to consider and, if thought fit, pass the resolution that …………. (name of existing auditor) be removed as auditor of the company.

Signed and dated ………….

The purpose of the notice of intention is to advise the company – not its members – of the intention to propose a resolution to remove the company’s auditor.

The notice is given to the secretary by a director or a person who is normally authorised to request that a meeting be convened (e.g. members holding 5% of the votes or at least 100 members entitled to vote at the meeting).

If the members of the company wish to seek the removal of the auditor, they should include a request for the company to convene a general meeting in the notice of intention. Alternatively, in certain circumstances, the members may be able to convene the meeting themselves; however, they may have to pay the expenses of calling and holding the meeting: sections 249D–249F.

The notice of intention must be served on the company secretary at least two months before the meeting is to be held.

However, if the company calls the meeting after the notice of intention is given, the meeting can be held less than two months after the notice of intention is received – provided the members and others are given the required amount of notice that the meeting will be held: see Step 4.

Step 2. Advice to the auditor and ASIC

On receipt of the notice of intention, the company must send a copy of the notice to the auditor and lodge a copy with ASIC as soon as possible: section 329(2). (It is a copy of the notice of intention that is required, not the notice of meeting or notice of resolution sent to members by the company.)

The ASIC copy should be posted to:

Australian Securities and Investments Commission
PO Box 4000
Gippsland Mail Centre
VIC 3841

Step 3. Representations by the auditor to the company

Within seven days of receiving a copy of the notice of intention, the auditor may make representations in writing to the company and request that a copy of the representations be sent by the company (at its expense) to every member to whom notice of the meeting is sent: section 329(3). The auditor can also require that the representations be read out at the meeting.

The company must comply with the auditor’s request; however, it can apply to ASIC for this requirement to be waived: section 329(4).

Step 4. Notice of the meeting and notice of nomination of a new auditor

The company must give a notice of meeting to persons entitled to receive such notice. These persons include the company’s directors, members and auditor(s): sections 249J and 249K.

The notice period for the meeting is 28 days for a listed company (section 249HA) and 21 days for an unlisted company: section 249H. Short notice of the meeting cannot be given: section 249H(4).

Before the meeting is held, either a director or a member of the company can nominate an auditor whose appointment can be considered at the meeting. If a new auditor has been nominated, the company must give a notice of that nomination to persons entitled to notice of the meeting and the nominated auditor(s) at the time notice of the meeting is given or not less than seven days before the meeting: section 328B(3)(4).

Step 5. Advice to ASIC if the resolution is carried

The resolution to remove an auditor is an ordinary resolution that must be passed by a simple majority of those voting in person at the meeting, or by proxy if allowed.

If the resolution is carried, the company must lodge notice of the removal of the auditor (Form 315 Notification of resignation, removal or cessation of auditor – there is no fee) with ASIC within 14 days of removing the auditor.

The company is not required to lodge the minutes of the meeting.

Where there is a trustee for holders of debentures of the company, the company must give the trustee a copy of the Form 315: section 329(11).

Step 6. Appointment of a new auditor and notification to ASIC

When an auditor is removed from a company, the company must appoint a new auditor at a general meeting: section 327D. Section 327D(2) provides that at a general meeting (without adjournment) the company may pass a special resolution to ‘immediately appoint an individual, firm or company as auditor of the company if a copy of the notice of nomination has been sent to the individual, firm or company’ under section 328B(3).

If the company does not pass the special resolution, it can appoint a new auditor by an ordinary resolution under section 327D(3).

ASIC is notified of the appointment of the new auditor when the company next lodges its financial report (Form 388 Copy of financial statements and reports), where applicable.

Step 7. Adjournment of the meeting to appoint a new auditor

If the special resolution to appoint a new auditor is not passed, or could not be passed because notice of the nomination of the auditor had not been sent, the meeting may be adjourned for between 20 and 30 days after the first meeting: section 327D(4).

Nominations for the appointment of an auditor at the adjourned meeting must be received by the company 14 days before the meeting and must be from a member: sections 327D(3)(c) and (d).

The resolution appointing an auditor at the adjourned meeting is an ordinary resolution that must be passed by a simple majority of those voting in person at the meeting, or by proxy if applicable: section 327D(3).

If the company is a public company and it fails to appoint a replacement auditor, it must notify ASIC within seven days (there is no prescribed form): section 327E(2). We then have the discretion to appoint an auditor to the company.

If the company has failed to appoint an auditor, a member of the company can ask ASIC to appoint an auditor: section 327E(3).

Single member companies

If a company has only one member, the resolution to remove the auditor may be passed by the member recording it and signing the record: section 249B(1). We will take that resolution as being a ‘general meeting’ for the purposes of section 329(1).

The notice of intention is still required to be given and would state that the resolution to remove the auditor is to be considered by the single member of the company on …………, rather than specifying a date on which a general meeting will be held. Similarly, the notice of meeting would state that the member will consider the resolution on …………

Unlike other companies, single member companies must lodge a copy of the resolution with the notice of the removal of the auditor: Form 315.

In all other respects, the requirements for removing the auditor of a single member company are the same as those that apply to any other company.

Where can I get more information?

Download RG 26 Resignation, removal and replacement of auditors.

Call ASIC on 1300 300 630.

Submit a question online at www.asic.gov.au/question.

Important notice

Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases your particular circumstances must be taken into account when determining how the law applies to you.

This is Information Sheet 62 (INFO 62), reissued in June 2015. Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance.

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Last updated: 20/10/2014 12:00