Understand the applicability of Secretarial Audit under the Companies Act, 2013, including triggers, limits, and exemptions. Learn when Secretarial Audit is required.
There are some instances in which Limits get triggered of Secretarial Audit of the company and due to due date’s pressure we skip to observe the applicability of Secretarial Audit.
Section 204(1) of the Companies Act, 2013 read with rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 provides that-
1. Every listed company
2. Every public company having a paid-up share capital of fifty crore rupees or more (50 Crore or more)
3. Every public company having a turnover of two hundred fifty crore rupees or more (250 Crore or more)
4. Every Company having loans or borrowings from banks or public financial institutions of one hundred crore rupees or more.(Private Companies also included in this clause)
shall annex with its Board’s Report made in terms of sub-section (3) of section 134, a Secretarial Audit Report, given by a Company Secretary in practice, in form MR- 3.
Explanation For the purposes of this sub-rule, it is hereby clarified that the paid up share capital, turnover, or outstanding loans or borrowings as the case may be, existing on the last date of latest audited financial statement shall be taken into account.
Explanation “listed company” means a company which has any of its securities listed on any recognised stock exchange;
Provided that such class of companies, which have listed or intend to list such class of securities, as may be prescribed in consultation with the Securities and Exchange Board, shall not be considered as listed companies. (whose debt securities or preference shares are listed on recognized stock exchange)
For Example:
ABC INFRA PRIVATE LIMITED is a private company whose debts security is listed in SEBI and having outstanding loan of 70 lakh rupee, is it required to conduct Secretarial Audit????
We might think no the limits does not trigger, company is not a public company or listed company Therefore Secretarial Audit is not applicable.
But in is case also SECRETARIAL AUDIT Is Applicable.
Because it is a Listed Company AS per SEBI(LODR) REGULATION & as per Regulation 24A,
Every listed entity and its material unlisted subsidiaries incorporated in India shall undertake secretarial audit and shall annex with its annual report, a secretarial audit report, given by a company secretary in practice, in such form as may be prescribed with effect from the year ended March 31, 2019.
The terms “listed entity” means an entity which has listed, on a recognised stock exchange(s), the designated securities issued by it or designated securities issued under schemes managed by it, in accordance with the listing agreement entered into between the entity and the recognised stock exchange(s).
‘Designated securities’ includes the equity shares, convertible securities, non-convertible debt securities, nonconvertible redeemable preference shares, perpetual debt instrument, perpetual non-cumulative preference shares, Indian depository receipts, securitised debt instruments, security receipts, units issued by mutual funds and any other securities as may be specified by the Board.
Material subsidiary mean a subsidiary, whose income or net worth exceeds ten percent of the consolidated income or net worth respectively, of the listed entity and its subsidiaries in the immediately preceding accounting year.
Hence secretarial audit is applicable in above case.
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