# Term, Cooling Period, Rotation & Remuneration [Sections 139 & 142]
## (1) Term of Auditor — To Whom Does Rotation Apply?
### Companies subject to mandatory rotation (term limit):
- Listed company,
- Unlisted public company with paid-up share capital ≥ ₹ 10 crores,
- Private company with paid-up share capital ≥ ₹ 50 crores, OR
- Any company having public borrowings from financial institutions/banks OR public deposits ≥ ₹ 50 crores.
> Exemptions: OPC and Small Company are exempt.
### Maximum Term (for above companies):
| Type | Maximum Term |
|---|---|
| Individual | 1 term of 5 consecutive years |
| Audit Firm | 2 terms of 5 consecutive years (i.e., 10 years) |
### Other Companies
Can appoint or re-appoint an auditor for any number of terms (no rotation requirement).
## (2) Important Notes on Term
- No requirement to ratify auditor's appointment at every AGM (the earlier requirement is removed).
- Period as 1st auditor and period filling a casual vacancy are NOT counted for the subsequent auditor's term.
- Change in constitution of auditor (e.g., proprietorship to firm, or vice versa) is treated as appointment of new auditor. Company must file Form ADT-1 after the next AGM.
## (3) Cooling Period
After completing the maximum term:
- Individual or audit firm shall not be eligible for re-appointment in the same company as statutory auditor for 5 years from completion of the term.
### Scope of Cooling Period
| Permitted During Cooling Period | NOT Permitted |
|---|---|
| Audit of other companies (e.g., subsidiary, associate) | Statutory audit of the same company |
| Other services (non-statutory audit) to the same company |
### Common Partner Rule
On the date of appointment of an audit firm, it must NOT have any common partner who is or was a partner in another firm whose tenure expired in the immediately preceding FY. If there are common partners, the new firm also serves the 5-year cooling period.
### Retiring Partner Joining Another Firm
If a partner who certified the FS retires from a firm (whose term has completed) and joins another firm, that other firm also becomes ineligible for appointment in the same company for 5 years.
### Network Firm Rule
A person/firm associated with the outgoing auditor under the same network (operating under same brand name, trade name, or common control) is also ineligible.
## (4) Rotation Within the Term (Optional)
Members may decide that:
- Audit shall be conducted by more than one auditor, OR
- In case of a firm, the audit partner and his team shall be rotated at intervals decided by members.
### Joint Auditors
Where joint auditors are appointed, rotation may be arranged so that all joint auditors do not complete their terms in the same year (to ensure continuity).
## (5) Remuneration of Auditors [Section 142]
### Components of Remuneration
Remuneration includes:
- Fee payable to auditor,
- Out-of-pocket expenses incurred for audit, and
- Any facility extended to him.
Remuneration EXCLUDES:
- Amount paid for any other services rendered at the request of the company (e.g., tax services).
### Who Fixes Remuneration?
| Auditor Type | Authority |
|---|---|
| First auditor appointed by BOD | BOD fixes remuneration |
| Other auditors | Fixed in general meeting, or in the manner determined in general meeting |