Checklist For Corporate Governance Audit

In this article, we have created a checklist for corporate governance audit of a company and the procedures involved therein.

For any company to check whether it complies with all the rules and regulations of the laws mentioned, it is necessary to file a corporate governance audit. The main purpose of this audit is to maintain corporate governance.  Section 204 of the Companies Act, 2013 along with Rule 9 of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 states that all listed companies, all Public Limited Companies who have a paid-up share capital of 50 crores or more and all Public Limited Companies who have a turnover of 250 crores or more. The corporate governance audit is done and carried out by an individual professional of the company in MR-3 form. And let us discuss the checklist for corporate governance audit.

The corporate governance audit should be signed by the corporate governance auditor, in case of more than one auditor, everyone should sign. In default of filing, the person responsible i.e. the company auditor will be fined not less than 1 lakh and extend to 5 lakhs. The corporate governance audit is exempted for Private Limited Companies. If the companies are not mentioned under the Section, they can voluntarily file the corporate governance audit thereby providing independent assurance. In this blog, let us check out the checklist for Corporate Governance Audit along with the secretarial compliance checklist and the checklist for companies act 2013 for private companies.

Checklist For Corporate Governance Audit

Let’s dive into the checklist. The auditor has to check and comply with the documents on the basis of five specific laws.

1. The Companies Act and Rules, 2013,
2. Securities Contracts (Regulation) Act and Rules, 1956 (SCRA)
3. Depositories Act, 1996 and their bylaws
4. Foreign Exchange Management Act (FEMA) 1999
5. Securities and Exchange Board of India Act 1992(SEBI), its regulations and guidelines.

General Compliances

The Importance of secretarial audit is to check whether the company has maintained all registers, returns, and files under the Companies Act 2013 and also the company should fulfil the provisions of the Memorandum and Articles of Association of the company.

Documents to be checked

The auditor should check the following statutory reports under the Companies Act, 2013:

• Register of investments

Under Section 49- When a company calls for further share capital, the details of the investors should be recorded.

• Register of deposits

Under Rule 7 of the Companies (acceptance of deposits) Rule, 1975 – Whenever a company accepts deposits, the particulars of each depositor should be entered and maintained separately.

• Register of charges

Under Section 143- The company has to maintain all the charges especially those affecting the property of the company and also all the floating charges made for the company.

• Register of members

Under Section 150- The company has to maintain one or more books of records regarding the details of each and every member, how many shares they hold etc.

• Register and index debenture holders

Under Section 152- The company has to record all the debenture holders. Also, the date when they cease the debentures should also be mentioned

• Foreign registers of members or debenture holders

Under Section 157 – The company which has shared and issued debentures outside India, any members who buy it are known as foreign registered members. The company should record within 30 days in the registrar’s office.

• Registers and returns

Under Section 163 – The company has to file annual returns, annual accounts (balance sheet and profit and loss account), the return of allotment, and a notice of change in the situation of the registered office. The court or CLB Order, Return of Appointment of MD/WTD/Manager, Return of Deposits, Registration of Resolutions and Agreements.

• Minute’s book of meetings

Under Sec 118 – The company has to maintain a minute of all the meetings. It should contain the members, agenda, and all the matters discussed. The minute should be fairly drafted.

• Books of accounts and cost records

Under Section 209 – Every company should have proper books of accounts for the particular financial year

• Register of particulars of contracts

In which directors are interested under Section 301-The company should maintain a book of records of all the contracts the directors are interested in. It should contain the date of the agreement, parties involved and time period (if any)

• Register of directors, managing director, manager, and secretary

Under Section 303 – The company should maintain the full details of its directors, manager, etc. In the case of corporate being the member, its name should be recorded

• Register of investments of loans made,

Guarantee given or security provided under Section 372A- It is nothing but an Inter-Corporate loan and investment. The company should record the names where the company is borrowing/ making an investment

The auditor has to check the observance of Secretarial Standards i.e. they have to check whether there are any sundry items, remuneration of directors, etc. Also, the auditor should have a record of any changes made in MOA and AOA.

The auditor should make sure that the company had an E-Filed MG-14 Form. After the resolution is passed, the form should be filed within 30 days.

Compliances Under SEBI

The company has to check whether the securities of the company are listed in the stock exchange and also it has to check whether they issued shares/debentures to the public. If yes, the auditors have to make sure those shares got approved and finalized by the stock exchange, if not, they have to see whether they can file an appeal. They have to see whether the closure of the transfer of books is done at least once in a year of the Annual General Meeting. However, they have to indicate the date of the meeting in certain cases. They should file all the documents relating to accounts under SEBI Guidelines.

When the corporate governance audit is filed; it gives benefits to the executive directors, officers of the company, governmental institutions etc.  It helps the investors in analyzing the level of the company. Also, it helps in strengthening the goodwill and reputation of the company thereby ensuring legal directions to the directors.