Secretarial Audit :
Secretarial Audit is an audit to check compliance of various legislations including the Companies Act and other corporate and economic laws applicable to the company. The Secretarial Auditor expresses an opinion as to whether there exist adequate systems and processes in the company commensurate with the size and operations of the company to monitor and ensure compliance with applicable laws, rules, regulations and guidelines.
Secretarial Audit helps to detect the instances of non-compliance and facilitates taking corrective measures. It audits the adherence of good corporate practices by the company. It is therefore an independent and objective assurance intended to add value and improve operations of the Company. It helps to accomplish the organisation’s objectives by bringing a systematic, disciplined approach to evaluate and improve effectiveness of risk management, control, and governance processes. Secretarial Audit thus provides necessary comfort to the management, regulators and the stakeholders, as to the statutory compliance, good governance and the existence of proper and adequate systems and processes.
As per Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the following companies are required to obtain Secretarial Audit Report:
• Every listed company;
• Every public company having a paid-up share capital of fifty crore rupees or more; or
• Every public company having a turnover of two hundred fifty crore rupees or more.
Companies which are not covered above may obtain Secretarial Audit Report voluntarily as it provides an independent assurance of the compliances in the company.
Eligibility of Secretarial auditor – Only a member of the Institute of Company Secretaries of India holding certificate of practice (company secretary in practice) can conduct Secretarial Audit and furnish the Secretarial Audit Report to the company.
The Secretarial Auditor needs to examine and report on the compliance of the following five specific laws:
(i) The Companies Act, 2013 (the Act) and the rules made thereunder;
(ii) The Securities Contracts (Regulation) Act, 1956 (SCRA) and the rules made thereunder;
(iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed thereunder;
(iv) Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder
(v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (SEBI Act):-
• The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;
• The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992;
• The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009;
• 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 and Listing of Debt Securities) Regulations, 2008;
• The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client;
• The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; and
• The Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998;
(vi) Any other laws as may be applicable specifically to the company.
The Secretarial Audit Report should be signed by the Secretarial Auditor who has been engaged by the company to conduct the Secretarial Audit and in case of a firm of Company Secretaries, by the partner under whose supervision the Secretarial Audit was conducted.