What is a Secretarial Audit?
A secretarial audit is a part of the organization’s total compliance management system. The secretarial audit acts as an effective tool for corporate compliance management. Also, it benefits in detecting the noncompliance and to take the respective measures.
Secretarial Audit is a process to check the company compliance with the provisions of many laws and rules or regulations or procedures, records, accounting, maintenance of books, etc. An independent professional can take control of the secretarial audit of the company. It is a procedure to make sure that the legal and procedural specifications are followed and observed. No matter what, the secretarial audit follows the due process. It is primarily a mechanism to monitor compliance concerning the requirements of stated laws.
Every Listed CompanyEvery public company (Conditions apply)
Secretarial Audit is applicable and mandatory to which companies?
It is mandatory for the following companies which relate to the applicability of the secretarial audit and has to be followed. These are mentioned below:
When it comes to a public company, then it has a few restrictions:
A public company with a Paid-up share capital of more than Rs. 50 crore and a turnover of more than Rs. 250 crore is only applicable. If anyone of the criteria meets, a secretarial audit is mandatory for that as well. A Company Secretary who has been practicing has also been recognized to conduct a secretarial audit to organizations.
Who can be appointed as Secretarial Auditor?
Members of the Institute of Company Secretaries of India, who are holding the certificate of practice which certifies to perform as a secretarial audit, can only conduct Secretarial Audit and provide with the Secretarial Audit Report to the Company or organization.
A Company Secretary in Practice shall prepare for the audit report.It shall be prepared in Form M-3.RConsidering the increasing importance of Corporate Governance, it has annexed the Board’s Report.
Secretarial Audit Report
For every company, the secretarial audit report is applicable only when it is fulfilled by the following conditions such as:
What are the services provided under the Secretarial Audit?
The secretarial audit checks compliance of various legislations including the Companies Act and other corporate and economic laws applicable to the company. A secretarial audit is a process to check the compliances made by a company under the Corporate Law and the other relevant laws, regulations, rules, and procedures, etc. It was enacted vide section 204 of the 2013 Companies Act. Under this, the regulators monitor the companies for compliances as needed by the stated laws and processes.
Every company must comply with government rules, regulations, and laws. Any non-adherence to the compliances can be dicey for the company. Organizations need to conduct a periodical examination of their work to point out the errors and to maintain a strong compliance mechanism system in any organization.
It is maintained that periodical inspections of the records give the Authority the exact information of the company’s compliance policy.
To check reports on compliances.To protect the interest of employees, customers, society, etc.To avoid any unnecessary legal actions by the law enforcement agencies.To point out inadequate compliances and non-compliances.To ensure that the procedural and legal requirements are suitably complied and that is important for the image and the goodwill of any company.
A detailed secretarial audit helps:
Benefits of Secretarial Audit Possessing a secretarial audit will help your organization have an effective mechanism with the legal and procedural requirements to make sure of the compliance handled.It helps in spreading a level of confidence to the directors & Key Management Personnel (KMP), etc.The company directors can concentrate on their important business matters and meeting only when the Secretarial Audit ensures legal and procedural requirements in a safer, better and audible way.Thereby, it helps to reduce the work of law enforcement authorities.By following this, it shows the right path to investors by showcasing your legal records.Secretarial Audit is a productive governance and compliance risk management tool. It produces the result in a much better way.
Companies Act, 2013 Review of Charter Documents alterations if any and related compliancesShare Capital and Debentures Rules - Compliance related to ICDR, Pre and Post Issue CompliancesBorrowings - Borrowing Limit, Pre and Post Borrowing CompliancesPublic Deposit if any - Pre and Post CompliancesBoard and General Meetings - Notice, Agenda and MinutesDeclaration and Payment of Dividend - Pre and Post CompliancesBoard of Directors - Appointment & ResignationInternal Audit and Internal Audit ReportAuditor Appointment, Tenure of Appointment & RotationCSR Compliances - Committee Formation, Limit of ContributionRelated Party Transactions & its CompliancesInter Corporate Loan, Investments and Corporate GuaranteeBuy-Back of Shares - Pre & Post CompliancesAnnual Return & Annual CompliancesMember Register and Change in any Shareholding PatternSecretarial Standards
Foreign Exchange Management Act Foreign Direct InvestmentOverseas Direct InvestmentExternal Commercial Borrowings
Securities And Exchange Board Of India Act, 1992 The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993The Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999The Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015
Labour, Fiscal & Other Laws Factories Act, 1948Industrial Disputes Act, 1947The Payment of Wages Act, 1936The Minimum Wages Act, 1948Employees’ State Insurance Act, 1948The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952The Payment of Bonus Act, 1965The Payment of Gratuity Act, 1972The Contract Labour(Regulation and Abolition)Act,1970The Maternity Benefit Act, 1961The Child Labour (Prohibition and Regulation Act), 1986The Employees’ Compensation Act, 1923The Apprentices Act, 1961Equal Remuneration Act, 1976The Employment Exchange (Compulsory Notification of Vacancies) Act, 1959The Environment (Protection) Act, 1986The Sexual Harassment Of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013The Water (Prevention & Control of Pollution)Act,1974The Air (Prevention & Control of Pollution) Act, 1981Tax deducted at SourceAdvance TaxGSTProfessional, Property & Dividend Tax
Securities Contracts (Regulation) Act, 1956 (‘SCRA’)
Depositories Act, 1996
* Labour, Fiscal, and Other laws are limited to the applicability of the Company
Documents Required for Secretarial Audit Charter DocumentsLast year Secretarial Audit ReportStatutory RegistersBoard and General Meeting Minutes & Notices theretoAudited financial statementsFilings & Intimations with Registrar of Companies, Stock Exchanges, Newspaper Advertisements (if Listed)Annual Performance Reports, Lease Deed, LUT cum Bond, softex returnsFilings with other statutory departmentsFilings with RBI (If there is a foreign investment)ECB Returns (if there are foreign borrowings in the company)Registers maintained under Labour LawsDisclosures and Declaration for code of conduct received from the directorsSitting fees and Remuneration details paid to directorsProof of spending CSR amountSAST DisclosuresBank account details for dividend
FAQs on Secretarial Audit Package for Companies
As per Section 204(1) of Companies Act, 2013, the following companies are required to obtain Secretarial Audit Report in Form MR-3:
- Every Listed Company
- Every Public Company having a paid-up share capital of Rupees 50 Crores or more
- Every Public Company having a turnover of Rupees 250 Crores or more
Only members of the Institute of Company Secretaries of India holding Certificate of Practice can conduct Secretarial Audit and submit the report in Form MR-3 to the management.
If a company or any officer of the company or the company secretary in practice, contravenes the provisions of the section, the company, every officer of the company or the company secretary in practice, who is in default, shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.
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25-Mar-2020: More Unlisted Companies to Come Under Secretarial Audit
With effect from 1st April 2020, all unlisted companies/private firms with outstanding loans on or above Rs 1 billion will come under the ambit of the secretarial audit. Such companies will have to submit the findings of the mandatory audit to the MCA, without fail.
20-Mar-2020: ICSI Sets up New Secretarial Audit Standards
The Institute of Company Secretaries India (ICSI) has published new guidelines for Secretarial Auditing standards for the upcoming financial year. This is in adherence to the audit provisions mentioned in Section 204 of the Companies Act, 2013.