Appointment of company’s First Auditor in India Explained for Beginners

When a new company is registered in India, one of the first legal tasks is to appoint a first auditor. Many beginners miss this step or get confused about who should appoint the auditor and within what time.

In practice, this confusion usually comes up just after a company’s incorporation, when promoters are busy opening bank accounts, issuing shares, or starting business operations.

In this guide, we will clearly explain the appointment of the first auditor under the Companies Act, 2013. You will understand who appoints the first auditor, the time limits involved, and what happens if deadlines are missed.

What Is a First Auditor

A first auditor is the very first auditor of a company after it is incorporated. After appointment, the first auditor checks the company’s accounts from the date of incorporation until the first Annual General Meeting (AGM).

Even a new company may receive share capital, pay expenses, or open bank accounts. Someone must legally verify these records. That role is played by the company’s first auditor.

Who Has the Power to Appoint the First Auditor

Under the Companies Act, the Board of Directors gets the first chance to appoint the first auditor. This means the directors must pass a resolution in a Board Meeting and formally appoint a practicing chartered accountant as its first auditor.

If the Board does not do this within the allowed time of 30 days from the date of incorporation, the power moves to the members of the company (shareholders).

Time Limit for Appointment by the Board of Directors

The Board of Directors must appoint the first auditor within 30 days from the date of incorporation.

The date of incorporation is the date mentioned on the Certificate of Incorporation issued by the Registrar of Companies.

For example, if a company is incorporated on 1 April, the Board must appoint the first auditor on or before 30 April.

What happens if the board fails to appoint the first auditor within 30 days

If the Board does not appoint the first auditor within 30 days from the date of incorporation, the law says the Board must inform the members about this failure.

After receiving this information, the members must appoint the first auditor within 90 days.

This appointment is done in an Extraordinary General Meeting (EGM), since the first AGM may not have happened yet.

An important practical point is that the members’ 90-day period starts from the date they are informed, not automatically from the incorporation date.

How long does the first auditor hold office

Once appointed, the first auditor holds office until the conclusion of the first Annual General Meeting (AGM).

At the first AGM, the company will appoint a regular auditor, who will then serve for a longer term as per the Act. The regular auditor can also be the first auditor.

Many beginners assume the first auditor is appointed for several years. That is not correct. The role is temporary and ends at the first AGM.

Common practical confusion about the 90-day period

One common confusion is “from when should the 90 days be counted if the Board fails to appoint?”

The law clearly places a duty on the Board to inform members after the 30-day period ends. Only after members receive this information does their responsibility start.

So, shareholders cannot be expected to appoint a first auditor unless they know that the Board has failed to do so.

Because the Act does not clearly mention exact timelines for calling the meeting, different companies follow different practices.

What If even the shareholders fail to appoint the first auditor

Another practical gap arises if both the Board and the shareholders fail to appoint the first auditor.

The Companies Act does not clearly state who will step in next to make the appointment.

There is no express provision saying whether the Registrar of Companies or the Central Government will appoint the first auditor in such cases.

Because of this lack of clarity, professionals generally try to ensure that at least one of the two — Board or members — completes the appointment on time.

Penalty for not appointing the first auditor

If a company fails to appoint the first auditor, it is treated as a default under the Companies Act, 2013.

The company may be fined not less than ₹25,000 and up to ₹5,00,000.

Every officer of the company who is in default may be fined not less than ₹10,000 and up to ₹1,00,000.

In practice, penalties usually arise during ROC scrutiny or compliance checks, which is why timely appointment is important.

In most cases, penalties arise only when the default is noticed during ROC scrutiny or filings, not automatically.

Example to tie everything together

Suppose a private limited company is incorporated on 10 June.

• The Board must appoint the first auditor by 9 July.
• If the Board fails, it must inform shareholders.
• After receiving information, shareholders must appoint the auditor within 90 days through an EGM.
• The auditor will work until the first AGM is completed.

This basic flow is usually enough for beginners to understand and apply correctly.

Recent Update: Mandatory ADT-1 Filing for First Auditor (Effective 14 July 2025)

The MCA Notifies Mandatory Filing of Form ADT-1 for First Auditor Appointment Effective 14 July 2025 is an important change for new companies in India. Until now, companies only had to pass a board resolution to appoint the first auditor. There was no need to inform the Registrar of Companies through Form ADT-1.

From 14 July 2025, this has changed. Every company that appoints its first auditor after this date must file Form ADT-1 on the MCA V3 portal. The date of appointment decides whether filing is required.

If a company appoints its first auditor on or after 14 July 2025, it must file Form ADT-1 with MCA.

If the appointment is done on or before 13 July 2025, the old practice can be followed and ADT-1 filing is not compulsory.

Example

A company called XYZ Technologies Private Limited was incorporated on 20 July 2025. The board appoints an auditor on 5 August 2025. Since this is after 14 July 2025, the company must file Form ADT-1.

Another company incorporated in June 2025 appoints its auditor on 10 July 2025. This company does not need to file ADT-1 for the first auditor.

Why the government made this change

This is not just a formality. The MCA wants better transparency from the first year of a company.

By capturing first auditor details in the system:

• The government can track who audits which company
• Records become uniform for all companies
• Misuse or back-dated appointments become difficult

From practical experience, many new companies were casual about auditor documentation. This rule brings discipline at an early stage.

Conclusion

Appointment of the first auditor is a basic but important compliance for every company in India.

The key points to remember are the 30-day limit for the Board, the 90-day window for members, and that the auditor serves only till the first AGM.

Understanding this early helps avoid confusion, penalties, and last-minute compliance stress.

We hope this article helped you understand the appointment of the first auditor in India in a clear and practical way.

To continue learning, you may also find our guides on AGM compliance and statutory auditor appointment useful.

Frequently Asked Questions About Appointment of First Auditor

When beginners first learn about the appointment of the first auditor under the Companies Act, 2013, many small but important doubts come up.

These FAQs cover both basic questions and slightly deeper, real-life situations that new company owners and learners in India commonly ask.

What does “first auditor” mean in simple words?

A first auditor is the very first auditor appointed after a company is registered. This auditor checks the company’s accounts from the incorporation date till the first AGM. Even if the company has very few transactions, the law still requires a first auditor.

Is appointing a first auditor compulsory for all companies in India?

Yes, every company registered under the Companies Act, 2013 must appoint a first auditor. This applies to private limited, public limited, and one-person companies. There is no exemption just because the company is new or inactive.

Who appoints the first auditor in a private limited company?

The Board of Directors appoints the first auditor within 30 days from incorporation. If the Board fails to do so, the shareholders get the power to appoint the auditor later. This same process applies to most companies.

What is the exact time limit to appoint the first auditor?

The Board has 30 days from the date of incorporation. If the Board does not appoint, shareholders must appoint the auditor within 90 days after being informed. These timelines are important to avoid non-compliance.

Does the first auditor need to be appointed in the first AGM?

No. The first auditor is appointed before the first AGM. In fact, the first auditor works up to the first AGM, where a regular auditor is appointed. If the board wishes, they may reappoint the first auditor at the first AGM for a period of five years as the regular statutory auditor. There is no restriction preventing the first auditor from being appointed as the regular auditor.

What happens if the Board forgets or delays the appointment?

If the Board misses the 30-day limit, it must inform the shareholders about this failure. After that, shareholders must appoint the first auditor through an Extraordinary General Meeting (EGM). This gap often causes confusion in practice.

When does the 90-day period for shareholders start?

The 90 days start from the date shareholders are informed about the Board’s failure. It does not automatically start from the incorporation date. This point is not clearly written in one line in the law, which is why many beginners misunderstand it.

Can the same person be both first auditor and regular auditor?

Yes, in many cases the same auditor continues as the regular auditor after the first AGM. However, as discussed earlier, a fresh appointment still has to be made at the AGM. The roles are legally treated as separate appointments.

Is appointing a first auditor required even if there is no business activity?

Yes. Even if there is no income or expense, the law still requires a first auditor. Many startups assume they can skip this step if the company is dormant, which is a common beginner mistake.

How is the first auditor appointment different from regular auditor appointment?

The first auditor is appointed soon after incorporation and works only till the first AGM. A regular auditor is appointed at the AGM and usually holds office for a longer term. Many beginners mix up these two roles.