Directors’ Resolution to Appoint First Auditors

Director’s resolution to appoint company auditors FAQ

A Directors’ Resolution to Appoint Company Auditors is a resolution passed by the directors of a newly incorporated company to appoint a company auditor for the first financial year.

There are two options when using a Directors’ Resolution to Appoint First Auditors:

• When a meeting of the board of directors convenes to appoint the first auditors, use a Board Minutes to Appoint First Auditors; or
• If the board resolution will be passed by way of a written resolution, use a Board Resolution to Appoint First Auditors.

What is the purpose of an auditor in a company?

An auditor will analyse the accounts kept by the directors of a company and give financial updates on the general state of the business.

Their role is to safeguard the interest of a company’s shareholders, and their analysis of the company’s financial position helps investors and shareholders make future decisions.

Why do I need to appoint company auditors?

A newly incorporated company, whether public or private, needs to appoint its first auditors.

Generally, they are put in place by the company’s board of directors by passing a resolution (Director’s resolution or Board resolution) within a certain time limit.

Different countries have different time limits. For example, in Hong Kong, the board must appoint an auditor before the company’s annual general meeting.

In cases where the board has yet to appoint the first auditors, the company’s shareholders can appoint them in a general meeting.

Importantly, for any incorporated company, whether private or public, appointing the first auditors for the first financial year is a requirement under corporate law.

How can I appoint company auditors?

Essentially, there are two ways to appoint company auditors.

Firstly, the board of directors can appoint the first auditors by passing a resolution. Secondly, the company’s shareholders can appoint auditors by passing a resolution in the shareholders’ meeting.

Generally, a company must appoint auditors annually by the shareholders at the annual general meeting. However, the board of directors can appoint auditors for the first financial year of a newly incorporated company.

What is a director’s resolution?

Notably, a director’s resolution is a document that records the decisions and/or actions of the board of directors of a company. You may also refer to it as a board resolution.

What is the difference between a board minutes and a director’s resolution?

In essence, the board minutes is a document that records all the details of a board meeting. This includes the number of directors present in the meeting, names of the directors who were present (and/or absent), name of the chairman, what matters were discussed and what decisions were taken by the board.

The decisions taken by the board are recorded as resolutions in the minutes. A minute can include many resolutions as multiple decisions can be made in a board meeting. In simple terms, a resolution forms part of the minutes of a meeting.

Conversely, a resolution is a document that only mentions the decision/s taken by the board. Since this document comes into play when there is no meeting among the directors, it naturally does not include any details of the meeting. The document then goes to all directors to obtain their consent.

What should I include in a director’s resolution to appoint first company auditors?

You should include:

• Details of the company;
• Details the meeting (if there was a board meeting);
• Date of passing the resolution; and
• Name of the auditor appointed.

Who can sign a director’s resolution?

Generally, a director’s resolution needs the signature of a director. If a board meeting has been held, then the resolutions form part of the minutes of the meeting. Usually, the chairman of the meeting (a director) will sign. Whereas if the resolution is circulating to the board without a meeting, then all directors need to sign. 

The company secretary can sign true copies of any board resolution or director’s resolution.

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