The Imperative of Engaging Practicing Professionals for Certifications under Companies Act, 2013
Introduction
Corporate governance and statutory compliance are the backbone of any successful organization. The Companies Act, 2013 mandates several certifications and attestations to ensure transparency, accountability, and adherence to legal norms. These certifications are not mere formalities—they carry significant legal implications for both the company and its directors.
Under the Companies Act, 2013, various certifications—ranging from compliance reports to secretarial and audit reviews—are mandatory for companies and carry significant legal and financial consequences. To ensure credible, accurate, and thorough compliance, it is essential for companies and directors to engage qualified professionals Practicing Company Secretaries (CS) or Practicing Chartered Accountant (CA) Here’s why:
(a) Expertise and Legal Credibility
Practicing professionals have in-depth training in corporate regulations. They interpret complex provisions of the Act—ensuring accuracy in filings like annual return certifications (Section 92), secretarial audits (Section 204), and compliance certificates for corporate actions.
(b) Risk Mitigation and Stakeholder Trust
Professionals help detect and correct procedural lapses early, reducing the risk of penalties. Their certification adds credibility—bolstering stakeholder, investor, and regulatory confidence.
(c) Accountability and Professional Oversight
Certified experts are bound by ethical standards and are subject to oversight from their respective institutes (ICSI, ICAI, ICMAI), ensuring accountability and integrity in the compliance process.
Role of Practicing Professional
Engaging qualified Practicing Company Secretaries (PCS) is essential for accurate and lawful compliance. These professionals bring expertise in interpreting complex provisions of the Act and ensure that filings and certifications are done correctly.
Some key areas requiring professional certification include:
- Annual Return certification under Section 92 (only by PCS)
- Secretarial Audit under Section 204 (only by PCS)
- Compliance certificates for mergers, amalgamations, and other corporate actions
- Certification of e-forms filed with the Registrar of Companies
Importance of a Formal Engagement Letter
Before undertaking any certification or review, professionals must secure a formal engagement letter from the company. This letter serves multiple purposes:
- Defines Scope Clearly: Documents the specific services—such as audit, certification, or compliance.
- Clarifies Responsibilities: Specifies information required from the company and the professional’s duties.
- Limits Liability: Establishes terms of reliance, confidentiality, fees, indemnity provisions, and termination clauses.
- Upholds Ethical Standards: Complies with guidelines from ICAI, ICSI, and ICMAI, including SA 210 and associated standards.
This mutual agreement builds clarity, trust, and legal protection for both parties.
Benefits for Companies and Directors
- Risk Mitigation: Reduces chances of penalties and prosecution for non-compliance.
- Credibility: Enhances trust among stakeholders, investors, and regulators.
- Efficiency: Professionals streamline compliance processes, saving time and resources.
Conclusion
Compliance is not optional—it is a legal obligation. Companies and their directors should proactively engage practicing professionals for certifications under the Companies Act, 2013. Equally, professionals must insist on a formal engagement letter before commencing work to safeguard their interests and uphold professional integrity.
Sample Board Resolution
APPROVAL FOR ENGAGEMENT OF PRACTICING COMPANY SECRETARY FOR STATUTORY CERTIFICATIONS AND COMPLIANCE UNDER COMPANIES ACT, 2013
“RESOLVED THAT pursuant to the provisions of the Companies Act, 2013 and other applicable laws, the consent of the Board be and is hereby accorded to engage the services of [Name of Professional], a Practicing Company Secretary, holding Certificate of Practice No. [________], for the purpose of providing certifications and attestations as required under the Companies Act, 2013, including but not limited to: – Certification of Annual Return under Section 92; – Secretarial Audit under Section 204; – Certification of e-forms and other statutory filings; – Compliance certificates for corporate actions such as mergers, amalgamations, and related matters.
RESOLVED FURTHER THAT the Board hereby authorizes [Name & Designation of Authorized Signatory] to issue a formal engagement letter to the said professional, specifying the scope of work, terms of engagement, fees, and other conditions, and to do all such acts, deeds, and things as may be necessary to give effect to this resolution.
RESOLVED LASTLY THAT a copy of this resolution be provided to the concerned professional for their records.”
For and on behalf of the Board of [Company Name] _________________________
[Name of Director]
[Designation]
DIN: _____________
Date: _____________
Sample Engagement Letter Format
[Company Letterhead]
Engagement / Appointment of Practicing Professional
Date: ___________
To,
[Name of CS/CA/CMA]
[Professional Firm Name]
[Address]
Subject: Engagement as [Role] for FY _______ under the Companies Act, 2013
Dear [Name],
1. Appointment & Scope
The Board has appointed you as [Secretarial Auditor / Statutory Certifier] for the financial year ending 31 March ______. You are required to provide:
– Secretarial Audit under Section 204
– Certification of Annual Returns under Section 92
– Certification of ROC e-forms
– Compliance Certificates for [mergers/amalgamations/etc.]
2. Scope Limitations
Your role includes objective review of statutory records and filings. It excludes management responsibility for day-to-day compliance.
3. Company’s Obligations
We will provide timely access to records, registers, directors, and all necessary information.
4. Fee & Payment
Your professional fees will be INR ______ per annum, payable quarterly upon delivery of deliverables.
5. Liability and Indemnity
You will rely on information supplied by us. You agree to indemnify us only for gross negligence or wilful misconduct.
6. Confidentiality
All data will be treated with confidentiality, except as required by law.
7. Term & Termination
Engagement continues till report submission or until earlier termination with 30 days’ notice.
Please confirm acceptance by signing and returning a copy.
For, [Company Name]
[Name of the Director / Authorised Person]
[Designation]
[DIN]
Date: _______________
Accepted by: ____________________
[Name of Professional]
[Designation]
Date: _______________
Author Bio
