Introduction: Secretarial Audit is an independent audit of companies’ management and corporate compliance which helps us to detect non compliance and to take corrective measures. It also called a compliance audit. It helps us to ensure that the company follow all applicable provisions and regulations of the different applicable acts. Secretarial auditing aids in the detection of non-compliance and the implementation of corrective actions. It examines the company’s adherence to good corporate practices.
Applicable Provisions: Section 204 of the Companies Act, 2013 read with Rule 9 of Companies, (Appointment and Remuneration of Managerial Personnel) Rules, 2014
Applicability:
Every Listed Company
- Every public company having a paid-up share capital of fifty crore rupees or more;
- Every public company having a turnover of two hundred fifty crore rupees or more;
- Every company having outstanding loans or borrowings from banks or public financial institutions of one hundred crore rupees or more
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
Qualification of Secretarial Auditor:
Any member of the Institute of “Company Secretaries of India” holding certificate of practice (company secretary in practice) can conduct Secretarial Audit and furnish the Secretarial Audit Report to the Company.
Procedure for appointment of Secretarial Auditor:
| 1. | Before appointment, ensure that the person who will be appointed as secretarial audit satisfy the Eligibility criteria as mentioned in the law. |
| 2. | Convene a board meeting by giving not less than 7 days notice to the directors of the company. |
| 3. | Hold the Board meeting and pass the resolution for the appointment of secretarial auditor of the company and to fix the remuneration to be paid to such auditor for issue of report. |
| 4. | File certified copy of Board resolution for appointment of auditor with the Registrar in Form MGT 14 under section 117 of the Act read with section 179(3) and Rule 8 of the companies (Meetings of Board and its Powers), Rules, 2014 |
Eligible companies, shall require to annex secretarial audit report with its Board report which was formed as per section 134(3) of the Companies Act, 2013.
It shall be the duty of the company to give all assistance and facilities to the company secretary in practice, for auditing the secretarial and related records of the company.
It is also the duty of the Board of the directors of the Company to give full explanation on any qualification or observation or other remarks made by the company secretary in practice in his secretarial report
Scope of Secretarial Audit
Followings points are covered under the ambit of secretarial audit:
1. The Companies Act, 2013 (the Act) and the rules made there-under;
2. The Securities Contracts (Regulation) Act, 1956 (‘SCRA’) and the rules made there-under;
3. The Depositories Act, 1996 and the Regulations and Bye-laws framed there-under;
4. Foreign Exchange Management Act, 1999 and the rules and regulations made there-under to the extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings;
5. The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’):-
- The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;
- The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992;
- The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements)Regulations, 2009;
- The Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999;
- The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008;
- The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client;
- The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; and,
- The Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998;
6. Secretarial Standards issued by The Institute of Company Secretaries of India.
7. The Listing Agreements entered into by the Company with Stock Exchange(s), if applicable;
8. Other laws as may be applicable specifically to the company
The secretarial Audit report must be provided in the Form No. MR 3 to the Board of Directors of the Company
Penalty:
Section 204: If a company or any officer of the company or the company secretary in practice contravenes the provisions of this section, the company, every officer of the company or the company secretary in practice, who is in default, shall be liable to a penalty of two lakh rupees.
Disclaimer: –The above mentioned article has been based on relevant provisions of Companies Act, 2013. Under no circumstance, the author shall not liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the information.
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