Secretarial Audit

A secretarial audit is an independent compliance check, carried out by a Company Secretary in Practice, verifying that a company has followed the Companies Act, 2013, SEBI regulations, FEMA and other laws applicable to it. It is governed by Section 204 of the Companies Act, 2013, read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The auditor records findings in Form MR-3, which is annexed to the Board's Report placed before shareholders.

Who it applies to

A secretarial audit is mandatory for:

• Every listed company;
• Every public company with paid-up share capital of ₹50 crore or more;
• Every public company with turnover of ₹250 crore or more;
• Every company (public or private) with outstanding loans or borrowings from banks or public financial institutions of ₹100 crore or more.

Thresholds are tested against the last audited financial statement. Separately, SEBI (LODR) Regulation 24A extends the requirement to listed entities and their material unlisted subsidiaries, along with an Annual Secretarial Compliance Report filed with the stock exchanges.

How it works

The practising Company Secretary examines statutory registers, board and general-meeting records, filings with the MCA and SEBI, and event-based compliances for the financial year. Any non-compliance, qualification or adverse remark is disclosed in the MR-3, and the Board must explain each qualification in its report.

Penalty

Under Section 204(4), as amended by the Companies (Amendment) Act, 2020, a company, any officer in default, or the Company Secretary in practice who contravenes the section is liable to a penalty of ₹2 lakh.