● Secretarial Audit :

Secretarial Audit is a process to check compliance with the provisions of various laws and rules/regulations/procedures, maintenance of books, records etc., by an independent professional to ensure that the company has complied with the legal and procedural requirements and also followed due processes. It is essentially a mechanism to monitor compliance with the requirements of stated laws and processes.

● The Objectives of Secretarial Audit

The objectives of Secretarial Audit may be briefed as under.

     • To check & Report on Compliances
     • To Point out Non-Compliances and Inadequate Compliances
     • To protect the interest of the Customers, employees, society etc.
     • To avoid any unwarranted legal actions by law enforcing agencies and other persons as well.

● NEED FOR SECRETARIAL AUDIT :

Secretarial Audit is the process of independent verification, examination of level of compliance of applicable Corporate Laws to a company. The audit process if properly devised ensures timely compliance and eliminates any un-intended non compliance of various applicable rules and regulations. An action plan of the Corporate Secretarial Department is to be designed so as to ensure that all event based and time based compliances are considered and acted upon. Secretarial Audit is to be on the principle of “Prevention is better than cure” rather than post mortem exercise and to find faults. Broadly, the need for Secretarial Audit is:

     • Effective mechanism to ensure that the legal and procedural requirements are duly complied with.
     • Provides a level of confidence to the directors, officers in default, Key Managerial Personnel etc.
     • Directors can concentrate on important business matters as Secretarial Audit ensures legal and procedural requirements.
     • Strengthen the image and goodwill of a company in the minds of regulators and stakeholders
     • Secretarial Audit is an effective compliance risk management tool.
     • It helps the investor in analyzing the compliance level of companies, thereby increases the reputation.
     •Secretarial Audit is an effective governance tool.

● The scope of Secretarial Audit :

The scope of Secretarial Audit comprises verification of the compliances under the following enactments, rules, regulations and guidelines:

(i) The Companies Act, 1956 and the Rules made there under;
(ii) The Securities Contracts (Regulation) Act, 1956 (‘SCRA’) and the Rules made there under;
(iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed there under;
(iv) Foreign Exchange Management Act, 1999 and the rules & regulations made there under;
(v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’) which inter alia includes;

        (a) The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;
        (b) The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992;
        (c) The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009;
        (d) The Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999;
        (e) The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008;
        (f) The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; and
        (g) The Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998;

(vi) The Listing Agreement(s) entered into by the Company with Stock Exchange (s).
(vii) Secretarial Standards issued by The Institute of Company Secretaries of India.
(viii) Corporate Governance Voluntary Guidelines, 2009 issued by the Ministry of Corporate Affairs, Government of India;
(ix) Corporate Social Responsibility Voluntary Guidelines, 2009 issued by the Ministry of Corporate Affairs, Government of India;
(x) Guidelines on Corporate Governance for Central Public Sector Enterprises, 2010;
(xi) Corporate Governance Guidelines for Insurance Companies, issued by IRDA in case of companies regulated by IRDA; and
(xii) Other corporate laws as may be applicable specifically to the auditee company.

WHICH COMPANIES ARE REQUIRED TO APPOINT SECRETARIAL AUDITOR?

As per section 204 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, following companies are required to obtain ‘Secretarial Audit Report’ form independent practicing company secretary;

     1. Every listed company
     2. Every public company having a paid-up share capital of Fifty Crore rupees or more; or
     3. Every public company having a turnover of Two Hundred Fifty Crore rupees or more.
     4. Those Companies Not Covered above can option Voluntary Secretarial audit service .

“Turnover” means the aggregate value of the realization of amount made from the sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year. [Section 2(91)]

Secretarial Audit is also mandatory to a private company which is a subsidiary of a public company, and which falls under the prescribed class of companies.

● The beneficiaries :

The major beneficiaries of Secretarial Audit include:

(a) Promoters

Secretarial Audit will assure the Promoters of a company that those in-charge of its management are conducting its affairs in accordance with requirements of laws.

(b) Management

Secretarial Audit will assure the Management of a company that those who are entrusted with the duty and responsibility of compliance are performing their role effectively and efficiently. This also helps the management to establish benchmarks for the compliance mechanism, review and improve the compliances on a continuing basis.

(c) Non-executive directors

Secretarial Audit will provide comfort to the Non-executive Directors that appropriate mechanisms and processes are in place to ensure compliance with laws applicable to the company, thus mitigating any risk from a regulatory or governance perspective; so that the Directors not in-charge of the day-to-day management of the company are not likely to be exposed to penal or other liability on account of non-compliance with law.

(d) Government authorities/regulators

Being a pro-active measure, Secretarial Audit facilitates reducing the burden of the law-enforcement authorities and promotes governance and the level of compliance.

(e) Investors

Secretarial Audit will inform the investors whether the company is conducting its affairs within the applicable legal framework.

(f) Other Stakeholders

Financial Institutions, Banks, Creditors and Consumers are enabled to measure the law abiding nature of Company management

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