Company Secretarial Audit - an Overview

A Company Secretarial Audit ensures that a company complies with statutory obligations and regulatory frameworks. It is conducted by a qualified Company Secretary in practice. It is mandatory for listed companies and public companies with paid-up capital above ₹50 crore or turnover exceeding ₹250 crore. The audit examines compliance with:

• The Companies Act, 2013
• SEBI regulations
• Other applicable laws and standards

The audit enhances transparency, accountability, and stakeholder confidence. It enforces compliance, ensures governance, and identifies risks.

Applicability of Company Secretarial Audit

As per Section 204 of the Companies Act, 2013, Company secretarial audit applies to all listed companies and specific public companies meeting the following thresholds:

• (a) companies with a paid-up share capital of ₹50 crores or more, or
• (b) companies with an annual turnover of ₹250 crores or more.

Section 204 mandates the submission of the Company secretarial audit Report in the prescribed format. According to Rule 9(2), the report must be in Form MR-3, issued exclusively by a Company Secretary in Practice.

Scope of Company Secretarial Audit

The Objectives of Secretarial Audit go far beyond simple compliance checks—they are designed to ensure that every company, including a public company, private company, or listed company, adheres to applicable laws and follows sound corporate governance practices. Under Section 204 of the Companies Act, 2013, it is mandatory for certain companies to conduct this audit, which must be carried out by a Practising Company Secretary (PCS).

The audit findings are a critical input in the Board's Report, guiding corporate decision-making and compliance strategy.

Clauses and Legal Framework - Section 204 of the Companies Act, 2013

Section 204 of the Companies Act, 2013 provides for Company secretarial audit. It is specifically made mandatory for some classes of companies such as listed companies, public companies having paid-up share capital and the turnover exceeding certain limits, and to be prescribed by the government.

Key Points of Section 205: Functions of Company Secretary

• Compliance Reporting: Reports to the Board on compliance with the Companies Act, rules, and other applicable laws and regulations
• Secretarial Standards: Ensures the company complies with secretarial standards as issued by the Institute of Company Secretaries of India (ICSI) and approved by the Central Government
• Other Duties: Performs other duties as may be prescribed

Secretarial standards refer to the standards issued by ICSI under Section 3 of the Company Secretaries Act, 1980, and approved by the Central Government. The provisions of Sections 204 and 205 do not affect the duties of the Board of Directors, Chairperson, Managing Director, or Whole-Time Director under the Companies Act or any other applicable law.

SEBI Compliance

The Securities and Exchange Board of India (SEBI) has laid out several guidelines and circulars regarding company secretarial audit and Compliance Audits for listed companies and their subsidiaries.

• SEBI Circulars: SEBI has issued specific circulars related to company secretarial audit reports and secretarial compliance reports that listed companies must follow.
• Deadline for Compliance: Companies are required to submit their secretarial compliance reports by 31st March each year.
• Applicability to Subsidiaries and Banks: SEBI's circulars also extend to the subsidiaries of listed companies, banks, and other entities involved in public trading.
• Audit Scope and Guidelines: SEBI's guidelines outline the specific aspects of compliance audits that must be reported, including adherence to listing agreements and corporate governance norms.
• Regulatory Oversight: SEBI plays a key role in ensuring the audit and compliance processes are rigorous for publicly traded entities.