A secretarial audit is a compliance tool. It is a mechanism which checks for compliance on the existence of proper systems and processes in the company under the applicable laws of the company. It provides relief to regulators and stakeholders. Section 204 of the companies act, 2013 mandated secretarial audits from 2014-2015. Further, every listed and unlisted subsidiary incorporated in India must perform a secretarial audit and annex a secretarial audit report along with its annual report in form no. Mr-3 as audited by a company secretary in practice from 2019, as mandated by regulation 24a of the Sebi (LODR) Regulations, 2015.
Compliance Check - Secretarial Audit Overview
The approach for managing compliance overall throughout the organisation includes a secretarial audit. The secretarial audit is a useful technique for managing company compliance. Additionally, it helps in identifying noncompliance and implementing the appropriate remedies.
A secretarial audit is a procedure used to examine a company's adherence to various laws, rules, regulations, or processes, records, accounting, bookkeeping, etc. The company's secretarial audit can be overseen by a separate expert. Making sure that the rules and regulations are adhered to and obeyed is a practice. The secretarial audit always adheres to the correct procedure. It serves largely as a means to check that stated laws are being followed.
Your organization's ability to effectively handle the legal and procedural requirements to ensure compliance will be improved with the help of a secretarial audit.
It aids in boosting the confidence of the directors and other key management personnel (KMP), etc.
Only when the Secretarial Audit assures that legal and procedural obligations are met in a safer, better, and audible manner can the company directors focus on their crucial business matters and meetings.
Thus, it aids in lightening the workload of law enforcement officials.
By doing this and displaying your legal history, you may demonstrate to investors the correct course to take.
A useful governance and risk management tool is secretarial audit. It produces the outcome considerably more effectively.
Documents Required for Secretarial Audit
- The Charter Documents
- Secretarial Audit Report from last year
- Statutory Registers
- Minutes of Board and General Meetings and related notices
- Certified financial statements
- Registrar of Companies filings and notifications, stock exchanges, and newspaper advertisements (if listed)
- Softex returns, Lease Deed, LUT Cum Bond, and Annual Performance Reports
- Filings with other statutory agencies
- Files with the RBI (If there is a foreign investment)
- ECB Results (if there are foreign borrowings in the company)
- Registers kept in accordance with labour laws
- Received from the directors: Disclosures and Code of Conduct Declaration
- Sitting costs and director compensation information
- Proof of CSR expenditure
- Disclosures SAST
- Account information for a dividend
FAQ
Who is required to request a secretarial audit report?
- The following companies are obliged to acquire a Secretarial Audit Report in Form MR-3 under Section 204(1) of the 2013 Companies Act:
- All Listed Companies
- Every Public Company with at least Rs. 50 crores in paid-up share capital
- Every public company with a revenue of at least 250 crores of rupees
The secretarial audit may be performed by whom?
Secretarial audits can only be performed by members of the Institute of Company Secretaries of India who possess a Certificate of Practice and who then present their findings to management in Form MR-3.
What if the Secretarial Audit is not conducted?
Any corporate official, the corporation as a whole, or the concerned company secretary could face sanctions if it is determined that they violated the provisions of the aforementioned section. A fine starting at Rs. 1 lakh and perhaps going up to Rs. 5 lakhs will be added to the sentence.