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Secretarial Audit in India

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Secretarial Audit – An Overview

  • 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.

Benefits of Secretarial Audit (Statutory or Forensic)

  • Possessing a secretarial audit will help your organization have an effective mechanism with the legal and procedural requirements to make sure of the compliance handled.
  • It helps in spreading a level of confidence to the directors & Key Management Personnel (KMP), etc.
  • The company directors can concentrate on their important business matters and meeting only when the Secretarial Audit ensures legal and procedural requirements in a safer, better and audible way.
  • Thereby, it helps to reduce the work of law enforcement authorities.
  • By following this, it shows the right path to investors by showcasing your legal records.
  • secretarial audit applicability is a productive governance and compliance risk management tool. It produces the result in a much better way.

Process Of Secretarial Audit

  • 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.

 

Documents Required for Secretarial Audit

  • Charter Documents
  • Last year Secretarial Audit Report
  • Statutory Registers
  • Board and General Meeting Minutes & Notices thereto
  • Audited financial statements
  • Filings & Intimations with Registrar of Companies, Stock Exchanges, Newspaper Advertisements (if Listed)
  • Annual Performance Reports, Lease Deed, LUT cum Bond, softex returns
  • Filings with other statutory departments
  • Filings with RBI (If there is a foreign investment)
  • ECB Returns (if there are foreign borrowings in the company)
  • Registers maintained under Labour Laws
  • Disclosures and Declaration for code of conduct received from the directors
  • Sitting fees and Remuneration details paid to directors
  • Proof of spending CSR amount
  • SAST Disclosures
  • Bank account details for dividend

Services Provided Under Secretarial Audit

The secretarial audit checks compliance of various legislations including the Companies Act and other corporate and economic laws applicable to the company. A secretarial audit is a process to check the compliances made by a company under the Corporate Law and the other relevant laws, regulations, rules, and procedures, etc. It was enacted vide section 204 of the 2013 Companies Act. Under this, the regulators monitor the companies for compliances as needed by the stated laws and processes.

Every company must comply with government rules, regulations, and laws. Any non-adherence to the compliances can be dicey for the company. Organizations need to conduct a periodical examination of their work to point out the errors and to maintain a strong compliance mechanism system in any organization.

It is maintained that periodical inspections of the records give the Authority the exact information of the company’s compliance policy.

A detailed secretarial audit helps:

  • To check reports on compliances.
  • To protect the interest of employees, customers, society, etc.
  • To avoid any unnecessary legal actions by the law enforcement agencies.
  • To point out inadequate compliances and non-compliances.
  • To ensure that the procedural and legal requirements are suitably complied and that is important for the image and the goodwill of any company.

Timeline

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Frequently Asked Questions (FAQs)

A regular Secretarial Audit can help a company. It can guide the company to take corrective actions and improve its compliance methods. It is recommended that the Secretarial Audit is done regularly (quarterly, every half year, or annually). Any negative findings should be reported to the Board right away. The Secretarial Audit Report needs to be added to the Board’s report. This should be done before the Board’s Report is prepared.
The Secretarial Auditor needs to give details about certain events and actions. These events and actions must have had a big impact on the company during the reporting period. This is according to the laws, rules, and regulations mentioned above. Some events are also given as examples in the audit report format.
The Institute of Company Secretaries of India (ICSI) doesn’t set a minimum fee for a Secretarial Audit by a practicing Company Secretary. But the Company Secretary should decide the fee based on the company’s nature and size, the type of company, and the work needed for the audit. The member should keep the audit process at a high standard and quality.
Section 143 of the Companies Act, 2013 talks about the roles and rights of Auditors. Sub-section (14) says that this section also applies to a Company Secretary in Practice doing a Secretarial Audit under section 204. This means the rules for Auditors also apply to them.

As per Section 204(1) of Companies Act, 2013, the following companies are required to obtain Secretarial Audit Report in Form MR-3:

  • Every Listed Company
  • Every Public Company having a paid-up share capital of Rupees 50 Crores or more
  • Every Public Company having a turnover of Rupees 250 Crores or more
Only members of the Institute of Company Secretaries of India holding Certificate of Practice can conduct Secretarial Audit and submit the report in Form MR-3 to the management.
If any company official, the company itself or the concerned company secretary is found to contravene the stated provisions of the aforesaid section, the official, company or the practicing company secretary shall be liable for punishment. The punishment will be added with a fine starting from Rs one lakh and may even get extended to Rs 5 lakhs.
The Institute of Company Secretaries of India (ICSI) has established the structure for the Secretarial Audit Report, which includes information on the company’s compliance with laws and regulations, board and general meeting minutes, share capital and debentures, related party transactions, etc.
According to the Companies Act, 2013 secretarial audit is required for some classes of corporations. It is not a decision that you make.

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