‘Secretarial Audit’ is introduced by recently enacted Companies Act, 2013. It is a process to check compliances made by the Company under Corporate Law & other laws, rules, regulations, procedures etc. It is a mechanism to monitor compliance with the requirements of stated laws and processes. Periodically examination of work is necessary to point out errors & mistakes and to make a robust compliance mechanism system in an organization.
The word “Secretarial Audit” has not been defined in the Companies Act, 1956 or the Act of 2013 or rules made there under or in any other Corporate Laws. The meaning could be ascertained and gathered since the words “Secretarial Audit” has appeared in number of circulars/recommendations issued by the SEBI and following are some of those -
The word “Secretarial Audit” has not been defined in the Companies Act, 1956 or the Act of 2013 or rules made there under or in any other Corporate Laws. The meaning could be ascertained and gathered since the words “Secretarial Audit” has appeared in number of circulars/recommendations issued by the SEBI and following are some of those -
- The SEBI has issued a Circular No. CIR/MRD/DP/30/2010 dated 06.09.2010
- The SEBI has issued Circular No. D&CC/FITTC/CIR - 16/2002 dated 31.12.2002
To which Companies Secretarial Audit is mandatory?
As per Section 204 (1) of the Companies Act 2013 read with rule 9 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014, following companies are required to obtain Secretarial Audit Report;
- Every listed company.
- Every public company having a paid up share capital of 50 crore rupees or more or.
- Every public company having a turnover of 250 crores or more.
Turnover means the aggregate value of the realisation 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.
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Secretarial Auditor -
Eligibility:
Only a member of the Institute of Company Secretaries of India holding certificate of practice (company secretary in practice) can conduct Secretarial Audit and furnish the Secretarial Audit Report to the Company.
As of now, ICSI has not placed any restrictions on number of audits that can be conducted by a Company Secretary in Practice in one financial year.
Eligibility:
Only a member of the Institute of Company Secretaries of India holding certificate of practice (company secretary in practice) can conduct Secretarial Audit and furnish the Secretarial Audit Report to the Company.
As of now, ICSI has not placed any restrictions on number of audits that can be conducted by a Company Secretary in Practice in one financial year.
Appointment:
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 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.
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.
Who should sign Secretarial Audit Report?
The Secretarial Audit Report should be signed by the Secretarial Auditor who has been engaged by the company to conduct the Secretarial Audit. In case of firm, by the partner under whose supervision the audit was conducted.
Source -
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 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.
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.
Who should sign Secretarial Audit Report?
The Secretarial Audit Report should be signed by the Secretarial Auditor who has been engaged by the company to conduct the Secretarial Audit. In case of firm, by the partner under whose supervision the audit was conducted.
Source -
- Article from Chartered Secretary Journal - June 2015
- Taxguru.in
- Yourfinancebook.com
