Section 141 : 1. Section 141 states that any person whose subsidiary or associate is engaged as on date of appointment in services as per section 144 then such person shall be disqualified. Suppose, Mr. A was appointed on 30/4 and did not provide the service but during his tenure of 5 years, suppose he starts providing prohibited service to the company, will it amount to disqualification? Will the answer be different if he starts providing such services to any of 5 companies during his appointment? 2. A company A ltd. has a holding company H Ltd. which also has another subsidiary S Ltd. Mr. P( CA by profession) is a director of A Ltd. Now as per section 141, a person whose relative is a director or who is in the employment of the company as KMP or director of the company shall not be eligible for appointment. Now as per the section, Mr P is disqualified to be appointed as auditor of A Ltd. & as per ICAI notification, also disqualified to become auditor of H Ltd. as well, but can he become auditor of S ltd? 3. Section 141 also states that a person should not be hold any security in any of the 5 co.’s but the relative can hold securities of the company in which the auditor is to be appointed with face value upto 10000. Suppose currently, the face value per reliance share is rupees 10 but market value is 900 so technically, a relative can hold securities of reliance having value 900000. Is it correct? Further, kindly confirm, such 100000 limit is per relative and that too for the company in which the auditor is to be appointed. Suppose if the relative is holding securities in the subsidiary co. of reliance then there shall be no disqualification irrespective of the limit of face value.?

1. Section 141 states that any person whose subsidiary or associate is engaged <strong>as on date of appointment</strong> in services as per section 144 then such person shall be disqualified. Suppose, Mr. A was appointed on 30/4 and did not provide the service but during his tenure of 5 years, suppose he starts providing prohibited service to the company, will it amount to disqualification? Will the answer be different if he starts providing such services to any of 5 companies during his appointment? 2. A company A ltd. has a holding company H Ltd. which also has another subsidiary S Ltd. Mr. P( CA by profession) is a director of A Ltd. Now as per section 141, a person whose relative is a director or who is in the employment of the company as KMP or director of the company shall not be eligible for appointment. Now as per the section, Mr P is disqualified to be appointed as auditor of A Ltd. &amp; as per ICAI notification, also disqualified to become auditor of H Ltd. as well, but can he become auditor of S ltd?  3. Section 141 also states that a person should not be hold any security in any of the 5 co.’s but the relative can hold securities of the company in which the auditor is to be appointed with face value upto 10000. Suppose currently, the face value per reliance share is rupees 10 but market value is 900 so technically, a relative can hold securities of reliance having value 900000. Is it correct? Further, kindly confirm, such 100000 limit is per relative and that too for the company in which the auditor is to be appointed. Suppose if the relative is holding securities in the subsidiary co. of reliance then there shall be no disqualification irrespective of the limit of face value.?

1 answer

Ravi Staff October 24, 2017

1. Sec 141 (4) covers the part that if disqualification is attracted after appointment then automatic removal will take place , so ca will disqualified if he is giving services on date of appointment or after date of appointment
2. This is loop whole in claw , only director of that company is disqualified, but directors of other related companies are not disqualified
ICAI has plugged one loop whole which says, director of holding company cannot become auditor of subsidiary, but vice versa is not specified
So technically in this case director of A Ltd ( Sub) can do audit of holding company , A Ltd 
3. Market value is not relevant onl6 face vale for disqualification
Limit of 1,00,000 is for each relative
As per literal interpretation relatives can hold shares only of that company 
As per resonable interpretation relatives can hold shares of that company and its holding / subsidiary / associate / co subsidiary

#
Audit Staff June 19, 2018

1. Sec 141 (4) covers the part that if disqualification is attracted after appointment then automatic removal will take place , so ca will disqualified if he is giving services on date of appointment or after date of appointment
2. This is loop whole in claw , only director of that company is disqualified, but directors of other related companies are not disqualified
ICAI has plugged one loop whole which says, director of holding company cannot become auditor of subsidiary, but vice versa is not specified
So technically in this case director of A Ltd ( Sub) can do audit of holding company , A Ltd
3. Market value is not relevant onl6 face vale for disqualification
Limit of 1,00,000 is for each relative
As per literal interpretation relatives can hold shares only of that company
As per reasonable interpretation relatives can hold shares of that company and its holding/subsidiary / associate/co subsidiary

#1

Please login here to Submit Answer

No announcement available or all announcement expired.