Every Company, while pursuing its business activities, has to comply with so many rules and regulations relating to the Companies Act, Securities laws, FEMA, Industry Specific laws and General laws like Labour laws and so on…
Therefore company have chances to face non- compliance risk like fine imprisonments penalties, loss of goodwill etc in order to avoid such compliance risk and pursue the good governance SECRETARIAL AUDIT is very important audit for a company.
The term “Secretarial Audit” is a mechanism which is connected with the audit of the non-financial aspects of the company which impact on the performance of the company. Secretarial Audit is accordingly an independent and objective assurance activity intended to add value and improve operations of a company.
APPLICABILITY OF SECRETARIAL AUDIT UNDER COMPANIES ACT, 2013
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;
3. Every public company having a turnover of two hundred fifty crore rupees or more; or
4. Every Company having loans or borrowings from banks or public financial institutions of one hundred 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 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.
So as per latest amendment the private listed company whose debs securities are listed are not consider as listed company or the companies whose securities other than equity shares are listed are not consider as listed companies.
Now I have one question
XYZ pvt limited is a private company whose debts security is listed in SEBI and having outstanding loan of 50 lakh rupee , is it required to conduct Secretarial Audit????
YOU might be think no the limits does not cross, 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, non-convertible 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.
BUT HOWEVER there are certain exception given under regulation 15 i.e Non applicability of Regulation 24A of SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations 2018 in view of claiming exemption under Regulation 15(2) of SEBI (LODR) Regulations 2015
We certify that our company having paid up equity share capital not exceeding rupees Ten crore and Net worth not exceeding rupees Twenty Five crore as on the last day of the previous financial year (i.e. 2019-2020). Therefore we hereby claim exemption under Regulation 15(2) of SEBI (LODR) Regulations 2015 and consequently Regulation 24A of SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations 2018 shall not be applicable to us.