Appointment Process of Secretarial Auditor

1. Board Resolution

The Board of Directors passes a resolution under Section 204 appointing the Secretarial Auditor, confirming the audit requirement based on the company's status (e.g., whether it is a listed company, public company, or has a paid-up share capital of ₹50 crore rupees or more).

2. Consent and Confirmation

The proposed auditor must provide written consent and confirm eligibility under Company Law provisions.

3. Defining the Scope

The company and the auditor agree on the process of secretarial audit, including timelines, documentation requirements, and audit expectations.

Step-by-Step Process of Company Secretarial Audit

Step 1: Initial Consultation and Scope Definition

The audit begins with a consultation between the Secretarial Auditor and the company's management. This stage includes:

• Identifying the nature and size of the company (e.g., private company, public company, listed entity)
• Understanding the company's governance structure and Board of Directors
• Determining the audit's objectives based on Secretarial Audit Applicability
• Defining the Scope of Secretarial Audit, including regulatory focus areas such as compliance with the Companies Act, 2013, SEBI Act, Foreign Exchange Management Act, and Securities Contracts (Regulation) Act

Step 2: Documentation Review

The auditor reviews all relevant corporate and legal documentation, including:

• Statutory registers (e.g., Register of Members, Directors, Charges)
• Board meeting notices, agendas, and minutes
• Incorporation documents (e.g., Certificate of Incorporation, Memorandum & Articles of Association)
• Shareholding patterns and Equity Shares transactions
• Corporate filings with the Registrar of Companies, SEBI, and other government authorities

This phase ensures accuracy, completeness, and adherence to applicable laws.

Step 3: Audit Execution and Compliance Verification

A thorough audit is conducted to evaluate the company's compliance with:

• Company Law, including remuneration of managerial personnel, disclosures, and resolutions
• SEBI regulations and other provisions under the Exchange Board of India Act
• Industry-specific regulations such as those applicable to the insurance company, banking industry, or entities involved in foreign investment

This step helps identify:

• Gaps in compliance
• False statements or errors in filings
• Deficiencies in governance processes
• Non-compliance with Secretarial Standards

Step 4: Preparation of Secretarial Audit Report (Form MR-3)

The Secretarial Audit Report is prepared in Form MR-3, which includes:

• Observations on the company's regulatory compliance
• Details of non-compliances, if any, including incorrect disclosures or delays in filings
• Assessment of compliance with statutory auditors' requirements and financial records
• Recommendations for corrective actions to align with legal and procedural expectations

Step 5: Presentation to Board of Directors and Regulatory Filing

The final audit report is:

• Submitted to the Board of Directors for their review and documentation in the Board's Report
• Used by the management to develop a compliance roadmap for the upcoming financial year
• Shared with regulatory bodies (e.g., SEBI, Registrar of Companies) if required under specific laws
• Incorporated into the company's annual report for stakeholder reference

Documents Required for Company Secretarial Audit

• Incorporation Documents: Certificate of Incorporation, Memorandum & Articles of Association
• Board and Meetings: Notices, agendas, and minutes of board, general, and committee meetings; attendance registers
• Registers and Records: Register of Members, Directors & KMP, Charges, Contracts/Related Party Transactions, Loans/Guarantees/Securities/Investments, Share Transfer/Transmission Register
• Shareholding and Securities: Shareholding pattern, share allotment/transfer/buyback records, dividend payment records
• Compliance Filings: Annual return (MGT-7, MGT-9), Financial statements (AOC-4), ROC filings (DIR-12, CHG-1, etc.), SEBI filings (for listed companies)
• Director and KMP Disclosures: DIR-8, MBP-1, declarations under Section 149
• Legal and Regulatory Compliance: Compliance certificates, licenses and approvals, regulator notices, proof of labor/environmental law compliance
• Financial and Tax Records: Audited financial statements, tax returns and assessments, CSR expenditure records
• Policies and Codes: Code of Conduct, Whistleblower policy, Insider Trading policy, other company policies
• Other Documents: Agreements, contracts, MOUs, borrowing/loan/guarantee details, records of legal proceedings/penalties