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Secretarial Audit

Applicability of Secretarial Audit in India

A Secretarial Audit is an independent review conducted by a qualified professional, typically a Practicing Company Secretary (PCS), to assess a company’s compliance with various statutory and regulatory requirements. This process ensures that the company adheres to the provisions of the Companies Act, 2013 and other applicable laws. In India, secretarial audits are governed by the Companies Act, 2013, and certain companies are mandated to undergo this audit.

Here’s an overview of the applicability of Secretarial Audits for companies in India

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    1. Applicability to Companies

    Under Section 204 of the Companies Act, 2013 and the related rules, the following entities are required to conduct an annual Secretarial Audit:

    1. Every public listed company
    2. Unlisted public companies with paid-up capital of ₹50 crores or more
    3. Private limited companies with either:
      • Paid-up capital of ₹50 crores or more, or
      • Turnover of ₹250 crores or more

    2. Key Components of Secretarial Audit

    The Secretarial Audit involves a detailed examination of the company’s affairs, focusing on compliance with corporate laws and regulations. Key components of a secretarial audit include:

    • Review of Compliance with Laws: The auditor reviews the company’s compliance with the Companies Act, 2013, Securities and Exchange Board of India (SEBI) regulations, foreign exchange regulations, labour laws, tax laws, and other applicable statutory requirements.
    • Audit Report: The Secretarial Auditor prepares a report in the prescribed format (Form MR-3), which is submitted to the Registrar of Companies. The report contains the auditor’s findings, any non-compliance issues, and recommendations.
    • Constitutional Documents: The audit includes reviewing the Memorandum of Association (MoA) and Articles of Association (AoA), board and shareholder meeting minutes, and other essential corporate documents.
    • Other Areas of Review: It covers governance practices, filing compliance, shareholding pattern, shareholder communications, and compliance with the Fair Practices Code.

    3. Importance of Secretarial Audit

    The Secretarial Audit serves multiple purposes:

    • Ensuring Compliance: It helps ensure that the company adheres to all legal and regulatory obligations under the Companies Act and other applicable laws.
    • Strengthening Corporate Governance: Secretarial audits promote transparency and accountability in the company’s operations, helping to improve corporate governance practices.
    • Risk Mitigation: By identifying non-compliance or lapses, a secretarial audit helps mitigate legal and financial risks that could adversely affect the company.
    • Investor Confidence: For listed companies, conducting a secretarial audit can boost investor confidence, as it reflects a commitment to good governance and regulatory compliance.
    • Timely Filings: The audit helps ensure that the company files all necessary returns and documents with the Registrar of Companies, SEBI, and other regulatory bodies on time..