Realising the need of growing Compliance Reporting mechanism in letter and spirit, SEBI came out with the Circular dated February 08, 2019 mandating Annual Secretarial Compliance Report to be submitted by a Company Secretary in Practice to the listed entity on an annual basis, regarding compliance of all applicable SEBI Regulations and Circulars/ Guidelines issued thereunder.
Based on the recommendations of the Kotak Committee, SEBI notified the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018 dated May 09, 2018 enhancing the Corporate Governance norms to be complied with by a listed entity; which were followed by a Circular on May 10, 2018 for implementation of certain recommendations of the Kotak Committee.
Therefore, SEBI inserted a new regulation i.e. Regulation 24A and made effective for the financial year ended March 31, 2019 in the SEBI(LODR) Regulations which mandated the requirements of annexing a Secretarial Audit report in a specified format for the listed entity and all its material unlisted subsidiaries.
KEY TERMS: –
1. Listed entity: – Means an entity which has listed, on a recognized 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 recognized stock exchange(s).
2. Material subsidiary: – shall 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.
SECRETARIAL AUDIT UNDER COMPANIES ACT, 2013
Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 which provides that:
1. every listed company;
2. every public company having a paid-up share capital of fifty crore rupees or more; or
3. every public company having a turnover of two hundred fifty crore rupees or more 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 such form as may be prescribed.
The Annual Secretarial Compliance Report should be signed by the Company Secretary in Practice by whom the exercise for verifying/ checking the compliances was conducted or under whose supervision the same was conducted.
In case of PCS firm, the Annual Secretarial Compliance Report may be signed by the partner by whom the exercise for verifying/ checking the compliances was conducted or under whose supervision the same was conducted.
WHEN AND HOW TO BE FILED
The Secretarial Audit Report shall as per FORM MR-3 by all the Listed entities and its material Subsidiaries within 60 days from the end of Financial year.