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SECRETARIAL AUDIT

A. What is a Secretarial Audit?

One of the major additions made by the Companies Act, 2013 to strengthen the compliance management and reporting in the cooperate atmosphere of India is by way of Secretarial Audit. Secretarial Audit is a compliance Audit done by a Practicing Company Secretary. It is a part of the compliance management system of the organization which helps in keeping the surveillance on the compliance of the applicable laws on the company in a correct and timely manner.

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B. Applicability of Secretarial Audit

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;

  • Every listed company

  • Every public company having a paid-up share capital of 50 crore rupees or more.

  • Every public company having a turnover of 250 crore rupees or more.

Note: A new rule 9(c) was inserted by an amendment on 03rd January 2020. As per that Every Company having outstanding loans or borrowings from banks or public financial institutions of 100 Crore or More. Shall also get Secretarial Audit Done mandatory.

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C. Who can conduct the Secretarial Audit?

Only a Company Secretary in Practice can conduct Secretarial Audit. The secretarial audit report is prepared by a Practicing Company Secretary in the specified format as mentioned in form MR-3. The Secretarial Report shall be Annexed with Board’s Report, considering the increasing importance of Corporate Governance.

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D. Benefits of Secretarial Audit  

It is very important to keep a check on the compliances of the companies are done correctly and timely so as to avoid any penal provision in the law and secretarial audit serve this requirement of the company. Some other benefits of a secretarial audit are as follows:

  1. An effective mechanism to make sure of the compliance with the legal and procedural requirements

  2. Provides a level of confidence to the directors & Key Managerial Personnel etc.

  3. Secretarial Audit ensures legal and procedural requirements so directors can concentrate on important business matters.

  4. Strengthen the goodwill of a company for its regulators and stakeholders.

  5. Secretarial Audit is an effective governance and compliance risk management tool.

  6. It helps the investor in analyzing the compliance level of companies, thereby increases the reputation.

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E. Scope of Secretarial Audit

As per the form MR-3, the secretarial auditor Shall check for the following 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 to the extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings;

(v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’):-

(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 (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client;

(g) The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; and

(h) The Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998;

(vi) Other laws as may be applicable specifically to the company.

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Note: Reporting on compliance of ‘Other laws as may be applicable specifically to the company which shall include all the laws which are applicable to specific industry for example for Banks- all laws applicable to Banking Industry; for insurance company-all laws applicable to insurance industry; likewise for a company in petroleum sector- all laws applicable to petroleum industry; similarly for companies in pharmaceutical sector, cement industry, etc. 


F. Appointment of Secretarial Auditor

As per Rule 8 of the Companies (Meetings of Board and its Powers) Rules, 2014. Secretarial Auditor is required to be appointed by means of a resolution passed at a duly convened Board meeting and resolution for appointment shall be filed with Registrar of Companies within 30 days in E-form MGT-14.

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It is advisable for Secretarial Auditor to get the letter of engagement from the company. Secretarial Auditor should formally accept the letter of engagement. Further, as a prudent corporate practice, it is advisable that change in the Secretarial Auditor during the year is reported to the members in the Board’s Report.


It is advisable that Secretarial Auditor is appointed at the beginning of the financial year as secretarial audit entails checking of compliances on a continuous basis. As a good practice, the Secretarial Auditor should submit a report to the Board at the end of each quarter as to the compliances of the company.

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G. Contravention/ Punishment

If a company or any officer of the company or the company secretary in practice, contravenes the provisions of this secretarial audit, then

  • The company, or

  • Every officer of the company, or

  • The company secretary in practice,

who is in default, shall be punishable with a fine of Minimum Rs. 1 lakh and Maximum Rs. 5 lakh.


H. How we can Help

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We here at Mukul Dusad & Associate have a team of highly experienced professionals who will conduct the secretarial audit of your company will all diligence and in the committed time frame. We make sure that all the compliances as applicable to the company are complied not only on papers but also in true sense.

We visit the client on a quarterly basis as and when mutually decided and make sure all the compliances are in place and there is no non-compliance in the company and give a quarterly report to the board of directors. This not only reduces the probability of attracting any penalty but also helps in the growth of the company as a whole.

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Contact us for the Secretarial Audit of your company.

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