Table of Contents
Why Secretarial Audit is Required?
Background of Secretarial Audit
Meaning of Secretarial Audit
Objective of Secretarial Audit
Two Fold Objective of Secretarial Audit
- To protect the interests of the customers, employees, revenue, environment and the directors and officers of the company.
- To avoid any unwarranted legal actions by the law-enforcing agencies and other persons as well.
The need of Secretarial Audit Requirements
- Effective mechanism to ensure that the legal and procedural requirement are duly complied with.
- Provides a level of confidence to the directors, offices in default, Key Managerial Personnel etc.
- Strengthen the image and goodwill of a company in the mind of regulators and stakeholders.
- “Secretarial Audit is an effective compliance risk management tool.”
- It helps the investor in analysing the compliance level of companies, thereby helping them to get accurate information or position of the company
- Secretarial Audit is an effective governance tool.
- Several Companies that have committed violations of various legal provisions and shown utter disregard for various Board and other processes contemplated in the Companies Act.
- There is no mechanism in place to verify compliance of various laws applicable to a company. Secretarial audit will fill the vacuum which presently exists in the realm of legal compliance management.
Secretarial Audit Requirements – A New Concept Introduced by Companies Act 2013:
Section 204(1) of Companies Act, 2013 introduces concept of Secretarial Audit Report by Company Secretary in practice which is a welcome step. It is a step towards good corporate governance and in line with the provisions of Clause 49-C(iii) of the Listing Agreement of Stock Exchanges i.e. part of Corporate Governance which states the Board shall periodically review legal compliance reports prepared by the company as well as steps taken by the company to cure instances of non-compliance.
Format of Secretarial Audit Report
Applicability of Secretarial Audit:
- It is compulsory for listed companies and other specified class of companies which include:
- Public limited company having a paid up capital of 50 crore or more.
- Public limited company having a turnover of 250 crores or more.
- It should be done by a practicing company secretary.
Section 2(71) of the Companies Act, 2013 defines a “Public Company as one
- Which is not a private company;
- Has a minimum paid-up share capital of five lakh rupees or such higher paid-up capital as may be prescribed.
- Increase in the authorised, issued and paid up capital.
- Appointment and cessation of office of directors.
- Issuance and stamping of share certificates
- Acceptance of deposits, secured or unsecured.
- Payment of dividends.
- Review of board meetings conducted.
- Review of statutory registers maintained by the company.
- Information filed with ROC for change in promoters and shareholders.
- Appointment of key personnel and others, etc.
- The Companies Act 2013
- The Depositories Act 1996.
- The Foreign Exchange Management Act, 1999
- Securities and Exchange Board of India Act, 1992 (‘SEBI Act’)
- The Equity Listing Agreements with BSE Limited and National Stock Exchange of India Limited and GDR Listing Agreement with Luxembourg Stock Exchange and Debt Listing Agreements with National Stock Exchange of India Limited and BSE Limited; and
- The Memorandum and Articles of Association
- Board to appoint at its meeting the Secretarial Auditor (on yearly basis) and fix his remuneration.
- Company to file the resolution with Registrar of Companies.
As per Companies Act, 2013 the functions of the company secretary shall include:
- To report to the Board about compliance with the provisions of this Act, the rules made thereunder and other laws applicable to the company
- To ensure that the company complies with the applicable secretarial standards
The duties of Company Secretary shall also discharge, the following duties, namely:
- To provide to the directors of the company, collectively and individually, such guidance as they may require, with regard to their duties, responsibilities and powers;
- To facilitate the convening of the meetings and attend Board, committee and general meetings and maintain the minutes of these meetings;
- To obtain approvals from the Board, general meeting, the Government and such other authorities as required under provisions of the Act;
- To represent before various regulators, and other authorities under the Act in connection with discharge of various duties under the Act;
- To assist the Board in the conduct of the Affairs of the company;
- To assist and advise the Board in ensuring good corporate governance and in complying with the corporate governance requirements and best practices; and
- To discharge such other duties as have been specified under the Act or rules; and
- Such other duties as may be assigned by the Board from time to time
the company, every officer of the company or the company secretary in practice, who is in default, shall be punishable with the fine which shall not be less than 1 lakh rupees but which may extend to 5 lakh rupees.
- 10 Secretarial Audits per partner/ PCS, and
- An additional limit of 5 secretarial audits per partner/PCS in case the unit is peer reviewed.