Secretarial Audit

A secretarial audit is an audit conducted by a practising Company Secretary. The purpose of a secretarial audit is to enable the company secretary to form an opinion concerning the degree of corporate law compliance which the company is maintaining. The company secretary carries out verification issues a report for various compliance requirements under the Companies Act. The specified companies are required to have secretarial audit each year as a part of the compliance requirement under the Companies Act, 2013. The Government of India observed that several corporate entities are making default in compliance with the rules and regulations governing companies as per the Act. Hence, to bring such cases to the notice of the Ministry of Corporate Affairs (MCA), the GoI has incorporated the requirement for such an audit under the Companies Act, 2013.

Applicability

As per Companies Act, 2013, the following types of companies are required to have a secretarial audit. The companies which are governed by the need to undergo such an audit should annexe with the Board's report, the audit report given by a practising Company Secretary:

All listed companies
A public limited company having a paid-up share capital of Rs.50 crore rupees or more
A public limited company having a turnover of Rs.250 crore or more

Secretarial Audit

In a secretarial audit, the Company Secretary would verify various statutory registers, forms and other relevant records and documents maintained by the company for the current period and previous period, as per professional judgement. The Company Secretary has the powers to call for any records or forms or returns to check proof of filing and receipts obtained from relevant Registrars and other authorities. It is the duty of the board of directors of the company to provide full support to the company secretary who carries out the audit.

Scope

The Institute of Company Secretaries of India has issued guidance for the procedure using which the audit should be performed under the Companies Act, 2013. As per the guidance, compliance with respect to the following major legislations fall under the scope of the audit:

Companies Act
Securities Contracts Act
Depositories Act
Foreign Exchange Management Act
Securities and Exchanges Board of India Act

In addition to the above, the Company Secretary would also verify compliance of the Company with respect to other laws as may be applicable specifically to the company.

Important Areas of Coverage:

increase in authorised, issued and paid-up share capital;
appointment and cessation of office of directors;
appointment of Key Managerial Personnel;
information filed with the ROC for change in promoters and shareholders;
issuance of share certificates;
loans, guarantee or security provided to Directors and other related parties;
acceptance of deposits, if any;
registration and modification of charges, if any;
remittance of security deposits collected from employees;
payment of dividends;
review of board meetings conducted;
review of the statutory register maintained by the company;
compliance with FEMA regulations

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Frequently Asked Questions

Common questions about Secretarial Audit Compliance for Companies in India.

A secretarial audit is an audit conducted by a practicing Company Secretary to assess the degree of a company's compliance with corporate laws and regulations under the Companies Act. It involves verifying statutory registers, forms, and other relevant records and documents maintained by the company.

The Government of India introduced the requirement for secretarial audits under the Companies Act, 2013, as it observed that several corporate entities were defaulting on compliance with the rules and regulations governing companies. The audit aims to bring such non-compliance cases to the notice of the Ministry of Corporate Affairs (MCA).

According to the Companies Act, 2013, all listed companies, public limited companies with a paid-up share capital of Rs. 50 crore or more, and public limited companies with a turnover of Rs. 250 crore or more are required to have a secretarial audit conducted annually.

The scope of a secretarial audit includes compliance with various laws, such as the Companies Act, Securities Contracts Act, Depositories Act, Foreign Exchange Management Act, and Securities and Exchange Board of India Act, as well as any other laws specifically applicable to the company.

Some important areas covered in a secretarial audit include changes in authorized, issued, and paid-up share capital; appointment and cessation of directors and Key Managerial Personnel; information filed with the Registrar of Companies (ROC) regarding changes in promoters and shareholders; issuance of share certificates; loans, guarantees, or security provided to directors and related parties; acceptance of deposits; registration and modification of charges; remittance of security deposits collected from employees; payment of dividends; review of board meetings and statutory registers; and compliance with Foreign Exchange Management Act (FEMA) regulations.

A secretarial audit is conducted by a practicing Company Secretary, who is authorized to carry out such audits under the Companies Act, 2013.

It is the duty of the board of directors of the company to provide full support and cooperation to the Company Secretary who is conducting the secretarial audit, including providing access to all necessary records, forms, and documents.

Companies that are required to undergo a secretarial audit must have it conducted annually as part of their compliance requirements under the Companies Act, 2013.

The Company Secretary conducting the secretarial audit issues a report on their findings and opinion regarding the company's degree of compliance with corporate laws and regulations. This report is annexed to the company's Board's report.

During a secretarial audit, the Company Secretary has the power to call for any records, forms, or returns maintained by the company and to check proof of filing and receipts obtained from relevant Registrars and other authorities.