According to the case facts of Delima Enterprise Sdn Bhd, the auditors from Encik Zayed’s company should be protected from the unfair dismissals by Encik Zayed. First of all, Encik Zayed cannot simply terminate the auditor and appoint a new “friendly party” auditor. Based on the Companies Act 1965, under Section 172. Appointment and remuneration of auditors, an auditor of a company may be removed from office by resolution of the company at a general meeting of which special notice has been given, but not otherwise.
Furthermore, where special notice of a resolution to remove an auditor is received by a company whereby it shall send a copy of the notice to the auditor concerned and to the Registrar. Encik Zayed should do any of these things in order to terminate the auditor in his company by following all the rules and statutory provision of companies act. Furthermore, under the companies act1965, the auditor may, within seven days after the receipt by him of the copy of the notice make representations in writing to the company ( not exciding a reasonable length) and request that, prior to the meeting at which the resolution is to be considered, a copy of the representations be sent by the company to every member of the company to whom notice of the meeting is sent.
Encik Zayed should do follow the rules by sending a notice to all the members of the company about the termination of the auditor of the company. This is because the member of the company should know each and every actions that have been taken in the company. In addition, unless the Registrar on the application of the company otherwise orders, the company shall send a copy of the representations as so requested and the auditor may (without prejudice to his right to be heard orally) require that the representations be read out at the meeting. In order to have a proper termination of auditor, the notice should be read out orally in the annual general meeting so that everyone could hear the notice as a proof.
Next, based on the companies act 1965, where an auditor of a company is removed from office in pursuance of subsection at a general meeting of a company. This statement clearly says that termination of an auditor should be done in annual general meeting only. In addition, the company may, at the meeting, by a resolution passed by a majority of not less than three-fourths of such members of the company as being entitled so to do vote in person or, where proxies are allowed, by proxy forthwith appoint another person nominated at the meeting as auditor. In the annual general meeting three forth of the members should vote in order to terminate a auditor so without doing annual general meeting Encik Zayed should not terminate or have rights to terminate the auditor by himself only.
On the other hand, the annual general meeting may be adjourned to a date not earlier than twenty days and not later than thirty days after the meeting and the company may, by ordinary resolution, appoint another person as auditor, being a person notice of whose nomination as auditor has, at least ten days before the resumption of the adjourned meeting, been received by the company. Encik Zayed should follow these rules of Companies Act 1965, so that before appointing a “friendly auditor” for his company he should have a meeting in order for the members to know the new auditor of the company and the have the rights to vote on whether they want the new auditor or not.