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Secretarial Audit

An affective corporate governance which is used to form procedures or regulations, accounting, rules, records, maintenance of books, laws, etc. is called Corporate Compliance. An independent professional can operate the Secretarial Audit of the company as the belongs to the ICSI Membership. A procedure for observing and ensuring whether the company is abiding its procedural and legal specifications is Secretarial Audit. It is a mechanism for monitoring compliance concerned with needs of the laws which are stated, and it also administers due process.


Applicability of Secretarial Audit :

  • Applicability of Secretarial Audit :All public companies with Paid-up share capital of fifty crores or more
  • All public companies having a turnover of two hundred crores or more
    [or]

    Any company having an outstanding loan or borrowing from public financial institutions or banks of one hundred crores or more.

  • All Listed Companies

    Only the individuals who are holding the certificate of practice endorsing them to perform,  individuals of the Institute of Company Secretaries of India can conduct the process of Secretarial Audit and provide the report concerned with Company.

Secretarial Audit Report

Only when the below conditions are fulfilled, the secretarial audit report is applicable for every company.

1) Generation of Form MR-3
2) Audit Report is prepared by the Company Secretary in practice.

Taking these into account the increasing importance of Corporate Governance, Board’s Report has annexed.

Scope of Secretarial Audit

Compliance of distinct legislations which are applicable to the company involved in corporate and economic law and Companies Act is examined by the Secretarial Audit. It is a process for verifying compliances made by the Company under the Corporate law and relevant procedures,  rules, regulations, etc. It has been imposed as vide  204-section of Companies Act 2013.

Regulations, Government laws and rules must be complied by every company. Non-adherence runs huge risks for the firm. In order to identify the errors and to improve performance and implementation of compliance, periodical examinations should be conducted by the Company.

Appropriate information related to the company’s compliance policy is obtained by the Authority during periodical inspections of the records.

A detailed secretarial audit helps:

  • Identify inadequate compliances and non-compliances.
  • Verify compliance reports.
  • Safeguard public interests of customers and employees
  • Establish suitable compliance of legal and procedural requirements which are important for the goodwill and image of the company.
  • Avoid legal actions by the law enforcement agencies and to stay compliant.

Advantages of Secretarial Audit

  • Secretarial Audit is useful for guiding the organisation to be productive with implementation of procedural and legal requirements for ensuring compliance maintenance.
  • It is a tool which provides effective governance and plays a predominant role in risk management.
  • The work of the Law Enforcement Authorities is minimized.
  • The confidence levels of the Directors and Key Management Personnel (KMP) will be boosted with its influence.
  • If this is followed, legal records will be portrayed for the Investors to showcase the legal records.
  • When secretarial audit ensures procedural and legal requirements in safe, better and audible means, important matter and meetings concerned with business activities will be taken into account by the Directors.

Companies Act, 2013

  • Charter Documents concerned compliances review, if any
  • Share Capital and Debenture Rules- Pre & Post Issue Compliances and compliances concerned with ICDR.
  • Borrowings – Pre and post borrowing compliances and borrowing limit
  • Public deposits, if any – Pre & Post Compliances
  • Board and General Meetings – Agenda, Minutes and Notice
  • Declaration and Payment of Dividend – Pre & Post Compliances
  • Board of Directors – Resignations and Appointment
  • Internal Audit Report and Internal Audit
  • Auditor Appointment, Tenure of Appointment & Rotation
  • CSR Compliances - Limit of Contribution and Committee Formation
  • Related Party Transactions & its Compliances
  • Inter Corporate Loan, Investments and Corporate Guarantee
  • Buy-Back of Shares - Pre and Post Compliances
  • Annual Return & Annual Compliances
  • Member Register and Change in any Shareholding Pattern
  • Secretarial Standards

Foreign Exchange Management Act

  • Foreign Direct Investment
  • Overseas Direct Investment
  • External Commercial Borrowings

Securities and Exchange Board of India Act, 1992

  • The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993
  • The Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999
  • The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009
  • The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011
  • The Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015
  • The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015

Labour, Fiscal & Other Laws

  • The Employee’s Compensation Act, 1923
  • The Payment of Wages Act, 1936
  • Industrial Disputes Act, 1947
  • Employee’s State Insurance Act, 1948
  • The Minimum Wages Act, 1948
  • Factories Act, 1948
  • Employee’s Provident Fund and Miscellaneous Provisions Act, 1952
  • The Employment Exchange (Compulsory Notification of Vacancies) Act, 1959
  • The Apprentices Act, 1961
  • The Maternity Benefit Act, 1961
  • The Payment of Bous Act, 1965
  • The Contract Labour (Regulation and Abolition) Act, 1970
  • The Payment of Gratuity Act, 1972
  • The Water (Prevention and Control of Pollution) Act, 1974
  • Equal Remuneration Act, 1976
  • The Air (Prevention and Control of Pollution) Act, 1981
  • The Environment (Protection) Act, 1986
  • The Child Labour (Prohibition and Regulation) Act, 1986
  • The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
  • Professional, Property and Dividend Tax
  • GST
  • Advance Tax
  • Tax deducted at Source

Securities Contracts (Regulation) Act, 1956 (‘SCRA’)

Depositories Act, 1996

  • Labour, Fiscal, and Other laws are limited to the applicability of the Company

Documents Required for Secretarial Audit

  • SAST Disclosures
  • Charter Documents
  • Statutory Register
  • Bank account details for Dividend
  • Annual Performance Reports, Lease Deed, LUT cum Bond, Softex returns
  • Proof of spending CSR Amount
  • Last year Secretarial Audit Report
  • Registers maintained under Labour Laws
  • Audited Financial statements
  • Sitting fees and Remuneration details paid to Directors
  • ECB Returns (if there are foreign borrowings in the company)
  • Filings with RBI (If there is a foreign investment)
  • Filings and Intimations with Registrar of Companies, Soft Exchanges, Newspaper Advertisements (if listed)
  • Filings with other statutory departments

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