Auditors · Section 139(2) · Rule 5

Auditor Rotation Under the Companies Act — Who Must Change Auditor, and When

Most companies can keep the same auditor for as long as the members choose. A defined set of larger companies cannot: after a fixed number of terms they must change, and the old auditor must then stay out for five years. Whether you are in that set depends on a handful of thresholds — and the private-company figure changed in 2017, so older guides still show the wrong one.

Short answer

Rotation applies to every listed company and to these classes (section 139(2) and rule 5 of the Companies (Audit and Auditors) Rules, 2014): unlisted public companies with paid-up share capital of ₹10 crore or more; private companies with paid-up share capital of ₹50 crore or more; and any other company with public borrowings from financial institutions or banks, or public deposits, of ₹50 crore or more. One Person Companies and small companies are excluded.

An individual auditor may serve one term of five consecutive years; an audit firm may serve two terms (ten years). Then a five-year cooling-off period applies.

Which companies are caught

Company	Threshold	Rotation?
Listed company	Any size	Yes
Unlisted public company	Paid-up share capital of ₹10 crore or more	Yes
Private company	Paid-up share capital of ₹50 crore or more	Yes
Any other company	Public borrowings from financial institutions or banks, or public deposits, of ₹50 crore or more	Yes
One Person Company or small company	Excluded from the classes above	No

A number that changed in 2017

For private companies the figure in rule 5 is ₹50 crore of paid-up share capital. As originally notified in March 2014 it was ₹20 crore; the Companies (Audit and Auditors) Second Amendment Rules, 2017, dated 22 June 2017, raised it to ₹50 crore. Older guides, and the original text of the rules, still show ₹20 crore, so check the date on whatever you are reading. The ₹10 crore figure for unlisted public companies and the ₹50 crore borrowings and deposits figure were not changed.

Terms and the cooling-off period

Individual auditor: one term of five consecutive years, then a five-year cooling-off period.
Audit firm: two terms of five consecutive years — ten years in all — then a five-year cooling-off period.

A term is the five-year appointment described on the ADT-1 page. At the end of the last permitted term a different auditor is appointed at the AGM and ADT-1 is filed within 15 days.

What we have not covered: how terms are counted for an auditor who was already in office when the rotation rule came in, and the restrictions on a firm in the same network as the outgoing one. Both are in the Act and rules; check them if either is your situation.

The small-company exclusion — when it actually matters

Rule 5 excludes One Person Companies and small companies. For two of the three classes the exclusion makes no practical difference: a small company is never a public company, and a private company with ₹50 crore of paid-up capital is too large to be small (the small-company ceiling is ₹10 crore).

It matters in the third class. A company with paid-up capital up to ₹10 crore and turnover up to ₹100 crore can still carry ₹50 crore or more of bank borrowings. That company would otherwise fall in the borrowings class, and the exclusion takes it out. For ordinary startups and owner-managed companies, the exclusion rarely bites; the thresholds do the work.

Planning a change of auditor

Work out in which year the current auditor’s last permitted term ends, and plan the successor appointment for that AGM.
Obtain the incoming auditor’s written consent and eligibility certificate before the appointment.
File ADT-1 within 15 days of the AGM.
A company that crosses ₹50 crore of paid-up capital (private) or ₹10 crore (unlisted public), or ₹50 crore of borrowings, should check how its current auditor’s tenure is treated from that point; the sources we read do not settle that, so take advice.

Any change coming?

On the analyses we read, the Corporate Laws (Amendment) Bill, 2026 does not propose to change the rotation rule. It does propose letting the Government exempt prescribed classes of companies from appointing an auditor at all, and a new NFRA registration step for specified auditors; neither is law. The Bill was introduced in the Lok Sabha on 23 March 2026, the Joint Parliamentary Committee reported on 3 August 2026, and we found no sign of passage as of 1 October 2026.

Limited liability partnerships

Section 139 has not been extended to LLPs, so there is no rotation requirement for an LLP’s auditor. See ADT-1 and auditor rotation for an LLP.

FAQ

Is auditor rotation mandatory for a private limited company?

Only if paid-up share capital is ₹50 crore or more, or the company has public borrowings from financial institutions or banks, or public deposits, of ₹50 crore or more — and it is not a One Person Company or small company. Smaller private companies are not subject to it.

What is the paid-up capital limit for auditor rotation in a private company?

₹50 crore since the Companies (Audit and Auditors) Second Amendment Rules, 2017 (22 June 2017). It was ₹20 crore before that, and older guides still show ₹20 crore.

Does auditor rotation apply to small companies?

No. Rule 5 excludes One Person Companies and small companies.

How many years can an audit firm serve?

Two terms of five consecutive years — ten years — and then it must stay out for five years.

How many years can an individual auditor serve?

One term of five consecutive years, followed by a five-year cooling-off period.

Does rotation apply to an unlisted public company with ₹8 crore of paid-up capital?

Not under the paid-up capital class, which starts at ₹10 crore. It could still be caught if its public borrowings or deposits reach ₹50 crore.

Do we file ADT-1 for the new auditor?

Yes, within 15 days of the AGM at which the new auditor is appointed.

Does an LLP have to rotate its auditor?

No. Section 139 is a Companies Act provision and has not been extended to LLPs.

Sources: Companies Act, 2013, section 139(2); Companies (Audit and Auditors) Rules, 2014, rule 5, as amended by the Companies (Audit and Auditors) Second Amendment Rules, 2017 dated 22 June 2017 (the amendment is as reported by Vinod Kothari & Company; we read the original March 2014 text directly, which shows the superseded figure); the number of terms and the cooling-off period are from professional summaries; Corporate Laws (Amendment) Bill, 2026 and the Joint Parliamentary Committee report summary of PRS Legislative Research.

Position as at 1 October 2026, based on section 139(2) of the Companies Act, 2013 and rule 5 of the Audit and Auditors Rules, 2014. Guidance, not legal advice.