Secretarial Audit was introduced under section 204 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Secretarial Audit is a process by which the compliances with the provisions of various laws and rules/regulations/procedures, maintenance of books, records etc., are duly checked by the independent practising Company Secretary. The audit process if properly devised ensures timely compliance and eliminates any un-intended non-compliance of various applicable rules and regulations.
A Company Secretary in practice is a professional who is well-versed in matters of statutory, procedural and practical aspects of laws applicable to companies, both listed and unlisted public and private companies. A strong knowledge base makes him a competent professional to conduct Secretarial Audit. In terms of section 204(1), only a 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.
Limits for Applicability:
As per Section 204 of the companies act, 2013 the secretarial audit is applicable on the following companies:
(a) Every public company having a paid-up share capital of Rs. 50 crore or more; or
(b) Every public company having a turnover of Rs. 250 crore or more; or
(c) Every company having outstanding loans or borrowings from banks or public financial institutions of Rs. 100 Cr. or more.
The Report for the Secretarial audit shall be in Form MR-3 as prescribed under sub-rule (2) of rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.
Scope of Secretarial Audit
- Companies Act, 2013 and the rules made thereunder;
- Securities Contracts (Regulation) Act, 1956 (‘SCRA’), and the rules made thereunder;
- Depositories Act, 1996, and the rules made thereunder;
- Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder;
- Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’)
- Compliance of secretarial standards issued by the Institute of Company Secretaries of India;
- Monitor and ensure compliance with general laws like labour laws, competition law, and environmental laws and also check compliance of Income Tax, Customs, GST.