Our in-house Company Secretaries will conduct a secretarial audit to ensure compliance with various laws, including the Companies Act, and other economic and corporate regulations applicable to your organization
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A secretarial audit is a part of the organization’s total compliance management system. The secretarial audit acts as an effective tool for corporate compliance management.
Also, it benefits in detecting the noncompliance and to take the respective measures.
Secretarial Audit applicability is a process to check the company compliance with the provisions of many laws and rules or regulations or procedures, records, accounting, maintenance of books, etc.
An independent professional can take control of the secretarial audit of the company. It is a procedure to make sure that the legal and procedural specifications are followed and observed.
No matter what, the secretarial audit report applicability follows the due process. It is primarily a mechanism to monitor compliance concerning the requirements of stated laws.
Secretarial audit report is filed by a company secretary to ensure that the company has complied with all the applicable laws, rules and regulations.
It includes a comprehensive analysis of the company's compliance and governance processes, and can help identify potential risks and areas of improvement.
The report also includes recommendations for any necessary improvements or corrective actions.
It is mandatory for certain classes of companies in India to obtain a secretarial audit report, as required by the Companies Act, 2013.
Who can be appointed as Secretarial Auditor?
Members of the Institute of Company Secretaries of India, who are holding the certificate of practice which certifies to perform as a secretarial audit, can only conduct Secretarial Audit and provide with the secretarial audit report applicability to the Company or organization.
The applicability of Secretarial Audit is as follows:
Every listed company is required to conduct a secretarial audit of its records every year
Any public business with a paid-up share capital of at least ₹50 crores or a yearly revenue of at least ₹250 crores is obligated to undergo an annual secretarial audit of its books
Every private firm that has a paid-up share capital of at least ₹50 crores or a yearly revenue of at least ₹250 crores is obligated to conduct an annual secretarial audit of its books
Every business that owes banks or other public financial institutions loans or borrowings totaling at least ₹100 crore is expected to undergo an annual secretarial audit of its books.
The purview of a secretarial audit is the set of activities that the audit procedure covers. So fo them are discussed below:
It includes the examination of the company's legal and regulatory compliance, corporate governance framework, secretarial and procedural compliances, and overall compliance with applicable laws and regulations
The audit aims to ensure that the company is functioning within the framework of the law and that the interests of stakeholders, shareholders, and the public are protected
A certified company secretary conducts the audit, evaluates the business' performance, and makes suggestions for strengthening compliance and governance.
The scope of the audit may differ based on the size and nature of the company and the industry it operates in.
A member of the Institute of Company Secretaries of India (ICSI) is required for the secretarial auditor
The secretarial auditor must have a certificate of practice (CoP) issued by the ICSI
The secretarial auditor must have undergone training in secretarial audit conducted by the ICSI
There cannot be any conflicts of interest between the secretarial auditor and the company under audit
The secretarial auditor must have experience in handling secretarial matters of companies
The secretarial auditor must not have been convicted of any offence involving moral turpitude
The secretarial auditor must not have been found guilty of professional misconduct by the ICSI
The secretarial auditor must have a good reputation and high professional standards
The secretarial auditor must have the necessary infrastructure and resources to conduct the audit
The secretarial auditor must comply with the ethical guidelines and standards set by the ICSI
Step 1: Prepare a checklist for the audit, which includes all the statutory and regulatory requirements to be complied with
Step 2: Verify the compliance of the company with the checklist prepared
Step 3: Management of the business is informed of the verification process' results and, if necessary, suggestions for corrective action
Step 4: The company's management is expected to take necessary action to rectify any non-compliances identified in the audit report
Step 5: The final step is to file the audit report with the relevant regulatory authorities.
The secretarial auditor must comply with the ethical guidelines and standards set by the ICSI
Enhanced Compliance: Secretarial Audit helps companies to identify and rectify any non-compliance with legal and regulatory requirements, thereby reducing the risk of penalties and legal action.
Improved Governance: Secretarial Audit promotes good corporate governance practices by ensuring that the company is operating in a transparent and accountable manner.
Enhanced Stakeholder Confidence: Secretarial Audit helps to build trust and confidence among stakeholders, such as investors, creditors, and customers.
Reduced Risk of Legal Disputes: Secretarial Audit helps to identify and mitigate potential legal risks, thereby reducing the likelihood of costly legal disputes.
Improved Decision-Making: Secretarial Audit provides companies with valuable insights into their compliance status, which can help them to make better-informed business decisions.
To make sure a business abides by the relevant laws, rules, regulations, and requirements
To assess the efficacy of the company's entire governance structure in ensuring that the company's goals and objectives are met
To guarantee that the company's board of directors and management adhere to accepted moral and ethical standards
To evaluate and evaluate the company's internal control system and find any vulnerabilities or weak points
To identify and address any instances of non-compliance or potential non-compliance with legal and regulatory requirements.
Secretarial Audit is a process of ensuring that a company is complying with all the applicable laws and regulations. The documents required for the secretarial Audit are as follows:
Company's Certificate of Incorporation or Memorandum of Association and Articles of Association
Company's Share Capital Structure
Company's Board of Directors and their details
Company's General Meetings and their minutes
Company's Financial Statements and their reports
Company's Register of Members
Company's Register of Directors and Key Managerial Personnel
Company's Register of Shareholdings
Company's Register of Debentures and Bonds
Company's Register of Charges
Company's Minutes of Board Meetings
Company's Annual Reports
Company's Agreements with third parties
Company's Statutory Compliance Documents
Company's Internal Policies and Procedures
Company secretarial audit characteristics include:
The main goal of a secretarial audit is to make sure that the organisation is in compliance with all applicable laws and regulations
A company secretarial audit is an independent evaluation of the company's compliance with the law. This helps in providing an unbiased view of the company's operations
A secretarial audit covers a broad range of areas, including company law, securities law, taxation, labor laws, and environmental laws
The company secretary prepares a secretarial audit report that includes observations, qualifications, and recommendations.
Here are some key items that are typically included in a secretarial audit checklist:
Review of company registration documents
Verification of the company's statutory registers
Review of board and shareholder meeting minutes
Review of director appointments and resignations
Review of share capital and related transactions
Compliance with Companies Act provisions
Compliance with other applicable laws and regulations
Filing of statutory returns and other documentation
Examining transactions between linked parties
Review of the business's policies and code of conduct
Review of the company's risk management practices
Review of the company's sustainability practices
Review of the company's financial statements and related disclosures
Verification of compliance with the company's internal controls and policies.
The board of directors, stockholders, management, governmental organisations, and other stakeholders of the business profit from secretarial investigations
It helps to ensure that the company's operations are conducted in accordance with legal and regulatory requirements, minimise the risk of non-compliance, and improve corporate governance
The audit report can also be useful for potential investors and creditors who can evaluate the company's compliance status and governance practices before investing or extending credit to the company.
Important clauses relating to secretarial audit include some of the following:
Every listed company and any public company with a paid-up share capital of ₹50 crores or more or a revenue of ₹250 crores or more is required to perform a secretarial audit under Section 204 of the Companies Act, 2013, according to the law
The secretarial audit of the firm must be carried out by a company secretary
The Companies Act of 2013 and other relevant laws, rules, regulations, and guidelines are evaluated for conformity as part of the secretarial audit's scope
The secretarial audit report must be presented to the company's board of directors in Form MR—3 and must be attached to the board's report
The board's report, the company's financial statements, and the secretarial audit report must all be submitted with the Registrar of Companies (ROC).
Secretarial Audit is an independent assessment of a company's compliance with legal and regulatory requirements. It is an essential tool for business matters, as it helps to identify and mitigate compliance risks.
By ensuring that a company follows all applicable laws and regulations, secretarial Audits can help protect the goodwill of the company and its directors. It can also help to improve the company's governance and stakeholder relationships.
Secretarial audit services typically cover the following areas:
Company formation and registration: Review the company's incorporation documents and ensure all required filings have been made.
Share capital management: Verifying the company's share capital structure and ensuring that all shareholdings are properly recorded.
Board and general meeting procedures: Review the company's board and general meeting procedures to ensure that they are compliant with the law and the company's articles of association.
Regulatory compliance: Reviewing the company's compliance with all applicable laws and regulations, including the Companies Act, SEBI regulations, and FEMA provisions.
Maintenance of statutory registers: Verifying that the company is maintaining all required statutory registers, such as the register of members, the register of directors, and the register of charges.
Return filing: Ensuring that all required returns are filed with the Registrar of Companies and other regulatory bodies within the prescribed time limits.
In India, the Companies Act, 2013, requires certain companies to conduct a Secretarial Audit. The limit for Secretarial Audit is as follows:
All listed companies and their Indian subsidiaries
Public companies with a paid-up share capital of ₹50 crores or more
Private companies with a paid-up share capital of ₹50 crores or more
Companies with an annual turnover of ₹250 crores or more.
Therefore, if a company falls under any of the above categories, it is required to conduct a Secretarial Audit.
Section 448 of the Companies Act 2013 lays out rules about dishonest statements. If someone knowingly makes a false statement in any document required by the Act, they could be penalised under section 447.
The false statement could either be:
(a) Incorrect and known to be so by the individual; or
(b) An omission of an important fact known to be significant.
Section 447 stipulates the penalties for fraud. A person found guilty of fraud could be imprisoned for six months to ten years. They might also be fined an amount up to three times the amount involved in the fraud. If the fraud impacts the public, the minimum jail term is three years.
Under Section 448, a Practicing Company Secretary who knowingly lies or omits an important fact in the Secretarial Audit Report could face penalties. They might also be penalised for professional misconduct as per the Company Secretaries Act, 1980. If found guilty, the penalties could include:
(i) For misconduct as per the First Schedule:
(a) A formal reprimand;
(b) Removal from the register of members for up to three months;
(c) A fine of up to one lakh rupees.
(ii) For misconduct as per the Second Schedule:
(a) A formal reprimand;
(b) Permanent removal from the register of members, or for a period determined by the Disciplinary Committee;
(c) A fine of up to five lakh rupees.
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