Legal Opinion on Appointment of Auditors of Bank 1.

Mr. Z

Address….

Dear Sir,

RE: LEGAL OPINION ON APPOINTMENT OF AUDITORS OF Bank 1.

We refer to your letter no. …………….. dated 19.02.2007 on the above subject.

On perusal of your letter, it appears that in the 1st Annual General Meeting (“AGM”) of Bank 1 held on 26 December 1984, the shareholders of the Bank approved appointment of Auditors for 2 consecutive year, i.e. for current year and for the following year – for 1984 and 1985. Thereafter, it has become a practice of the Bank to appoint Auditors for the year, which follows the year of holding of the AGM (i.e. one year in advance). Following this practice, in the AGM held in 2006 the shareholders approved appointment of Auditors for the year 2007 (not 2006 for which Auditors were appointed in the AGM of 2005).

After consulting section 210(1) of the Companies Act 1994, the Bank now believes that there is no need for appointing Auditor for the advance year.

In the circumstances, the Bank has requested us to provide our legal opinion regarding the following points:

1.      Whether the Bank may discontinue to appoint Auditor for the advance year i.e. for the year, which follows the year of holding of the AGM.

2.      If the Bank has to discontinue such advance appointment of Auditors, may the Bank drop the agendum of appointment of Auditors from the forthcoming 24th AGM to be held this year because the appointment of Auditors for the year of 2007 has already been approved in the AGM held last year on 25.05.2006.

3.      Is it necessary to adopt a resolution on the matter of appointment of Auditors to the effect that “henceforth Auditors will not be appointed for the advance year and since Auditor for the year 2007 was already appointed in the previous AGM, the Bank did not keep any agenda on the concerned issue for the 24th AGM.”

4.      Any other point that we deem necessary to advise on.

OUR OPINION

Section 210(1) of the Companies Act 1994 states as follows:

“210. (1) Every company shall, at each annual general meeting appoint an auditor or auditors to hold office from the conclusion of that meeting until the next annual general meeting and shall within seven days of the appointment, give intimation thereof to every auditor so appointed:

Provided that no person can be appointed auditor of any company unless his written consent has been obtained prior to such appointment or re-appointment.”

Therefore the Bank is under a duty to appoint an Auditor at each AGM and this Auditor shall hold office from the conclusion of that meeting until the next AGM. As such, we are of the opinion that the practice of the Bank, to appoint Auditor at each AGM for the advance year i.e. the year, which follows the year of holding of the AGM, was not according to the requirements under law.

So we advise the Bank to discontinue appointing Auditor for the advance year. However, as the Bank is under a duty to appoint Auditors at each AGM the Bank cannot drop the agendum of appointment of Auditors from the forthcoming 24th AGM to be held this year. Therefore, although in the 2006 AGM the shareholders approved appointment of Auditors for the year 2007, the Bank will again have to reappoint those auditors in the 24th AGM to be within the ambit of law. In the 24th AGM the Bank will reappoint these auditors to hold office from the conclusion of that meeting until the next AGM.

There is no need to adopt any resolution on the matter of appointment of Auditors to the effect that “henceforth Auditors will not be appointed for the advance year”.

Should you have any further query, do not hesitate to revert to us.

Thanking you.

Yours faithfully,

………………….

For: “The Lawyers & Jurists”

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