Secretarial audit

Secretarial audit concept & its Applicability under Companies Act,2013

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SECRETARIAL AUDIT
Secretarial audit defined under Companies Act, 2013. It is Compliance of
various applicable laws under companies act or any other act, rules ,
regulation and Procedure.
Secretarial audit will be helpful to the Promoters, Independent & Non-
Independent Directors, government authorities & regulators, Investors,
stakeholders, Creditors and management of the company .
The main focus of stakeholder is to validate statutory compliance of the
company, good governance & evaluate performance of the company.
The Secretarial audit helps to find out or detect any non-compliance made
by the company and taking corrective steps (measures) for that the same.
It is one of the important tool of risk mitigation and allow companies to
effectively address compliance risk issue.
It is also helpful to the company to build their corporate image.
Secretarial Audit is carried out quarterly, half yearly or annually and in case
of any adverse finding in audit report immediately intimated to the board of
directors.
PROVISION UNDER COMPANIES ACT, 2013
As per Section 204(1) of the companies Act, 2013 read with Companies
rule9 of the (Appointment and remuneration of managerial personnel)
Rules,2014.The following companies are required to prepare Secretarial
Audit Report from Practicing Company Secretary.
1. Every listed company
2. Every public company having paid-up share capital of fifty crore rupees
or more OR
3. Every public company having turnov er of two hundred fifty crore
rupees or more.
Secretarial audit is also mandatory to a private company which is subsidiary
of a public company, and which falls under the prescribed class of
companies.

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Companies which are not covered under the provision of section 204 of the
Companies Act, 2013 may obtain secretarial audit report voluntarily as it
provides an independent assurance of the compliance in the company.
Section 143 of the Companies Act, 2013 deals with the powers and duties of
auditors. Sub-section 14 of section 143 provides that the provision of this
section shall mutatis mutandis apply to the Company secretary in
practice conducting Secretarial Audit under section 204.
SECRETARIAL AUDITOR
Member of the Institute of Company Secretaries of India holding Certificate
of practice (Practicing company secretary PCS) can conduct Secretarial
audit and given secretarial audit report to the company in format of MR-3.
APPOINTMENT OF SECRETARIAL AUDITOR
As per Rule 8 of the Companies (Meeting of board and its powers) Rules,
2014 Secretarial auditor is required to be appointed by means of resolution
passed at a duly convened board meeting and resolution for appointment
shall be filed with ROC within 30days in e-form MGT-14.
SECRETARIAL AUDIT REPORT
Secretarial Audit Report is required to be provided in the format prescribed
in Form MR-3.
The Secretarial audit Report should be signed by the Company Secretary in
practice or in case of a firm of company secretaries, by the partner under
whose supervision the secretarial audit was conducted.
The Secretarial audit report to be annexed with Board’s report.
As per the section 134(3)(f) of the Companies Act,2013 defines that in the
board of directors report shall give explanations or comment by the board on
every qualification, reservation or adverse remarks or disclaimer made by
the company secretary in practice in their secretarial audit report.
SCOPE OF SECRETARIAL AUDIT
A secretarial auditor has to check compliances by the company under the
following laws and rules made there-under;
i. The Companies Act, 2013 (the Act) and the rules made there-under;

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ii. The Securities Contracts (Regulation) Act, 1956 (‘SCRA’) and the rules
made there-under;
iii. The Depositories Act, 1996 and the Regulations and Bye-laws framed
there-under;


iv. Foreign Exchange Management Act, 1999 and the rules and regulations
made there-under to the extent of Foreign Direct Investment, Overseas
Direct Investment and External Commercial Borrowings;

v. The following Regulations and Guidelines prescribed under the Securities
and Exchange Board of India Act, 1992 (‘SEBI Act’):-
a. The Securities and Exchange Board of India (Substantial Acquisition of
Shares and Takeovers) Regulations, 2011;
b. The Securities and Exchange Board of India (Prohibition of Insider
Trading) Regulations, 1992;
c. The Securities and Exchange Board of India (Issue of Capital and
Disclosure Requirements) Regulations, 2009;
d. The Securities and Exchange Board of India (Employee Stock Option
Scheme and Employee Stock Purchase Scheme) Guidelines, 1999;
e. The Securities and Exchange Board of India (Issue and Listing of Debt
Securities) Regulations, 2008;
f. The Securities and Exchange Board of India (Registrars to an Issue and
Share Transfer Agents) Regulations, 1993 regarding the Companies
Act and dealing with client;
g. The Securities and Exchange Board of India (Delisting of Equity Shares)
Regulations, 2009; and
h. The Securities and Exchange Board of India (Buyback of Securities)
Regulations, 1998;
vi. Secretarial Standards issued by The Institute of Company Secretaries of
India.
vii. The Listing Agreements entered into by the Company with Stock
Exchange(s), if applicable.

viii. Other laws as may be applicable specifically to the company.

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Thus the scope of Secretarial audit is not limited to the corporate laws
applicable to company but it extent to all laws applicable to Company.
MINIMUM FEES
There is no minimum fee prescribed by ICSI for conducting Secretarial audit
by Practicing Company secretary practice.
NUMBER OF SECRETARIAL AUDIT
A Practicing Company Secretary is allowed to do 10 Secretarial Audits per
partner/ PCS, and an additional limit of 5 secretarial audits per partner/PCS
in case the unit is peer reviewed.
PROFESSIONAL RESPONSIBILITY AND PENALTY FOR INCORRECT
AUDIT REPORT
Section 204(4) of the Companies Act, 2013, provides that if a company or
any officer of the company or the company secretary in practice,
contravenes the provisions of section 204 of the Act, 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 1 lakh
rupees but which may extend to 5 lakh rupees.
Section 448 of Compan ies Act, 2013 deals with Punishment for false
statements. the section provides that if in any return, report, certificate,
financial statement, prospectus, statement or other document required by,
or for the purposes of any of the provisions of this Act or the rules made
thereunder, any person makes a statement,
(a) Which is false in any material particulars, knowing it to be false; or
(b) Which omits any material fact, knowing it to be material,
He shall be liable under section 447.
In terms of Section 448, a Company Secretary in Practice is liable to attract
penal provision if, he makes statement in the Secretarial Audit Report which
is false is any material particulars, knowing it be false or omits any material
fact knowing it to be material.

Name:- CS Yashree Dixit
Email Id:- [email protected]