Penalty in case of Non Compliance of Secretarial Audit
Secretarial audit are very important tools for any company to ensure whether they are complying with all rules and regulations applicable to it as per Companies Act and other allied Acts. Lot of stakeholders like bankers, shareholders and outside investors reply on such audit in order to make an informed decision about the company. Therefore, it is very important that all the officers of the company and company secretary conduct such audit with due diligence, care and high level of professional expertise.
We at Ezybiz India through our team of expert company secretaries in practice assist listed companies and unlisted public companies in timely conducting of secretarial audit and issue of secretarial audit report.
The companies Act has provided for following type of penalties for non-compliance relating to secretarial audit.
- In case of contravention of section 204 of the companies Act, 2013 which deals with conducting of secretarial audit and furnishing of secretarial audit report along with board report, every officer of company including company secretary will be punishable with minimum fine of Rs 1 lac and maximum fine of Rs 5 lac.
- In case company secretary did not report matter to Central Government relating to fraud or other offence in the company which has been committed by any officer or employee of the company, shall be punishable with minimum fine of Rs 1 lac which may extend upto Rs 25 lac
- As per provisions of section 448 of the Companies Act, 2013 read with section 447, if any person makes any statement relating to any return, report, certificate, financial statement, prospectus or other document which is false, knowing that it is false or omits any material fact knowing same to be material, He shall be liable for following penalties and punishments:
- Imprisonment of minimum 6 months and maximum 10 years and
- Liable to fine – minimum fine is upto amount involved in fraud and maximum fine is upto 3 times of amount involved in fraud.
- In case, the fraud involves public interest, the term of imprisonment shall not be less than three years.
Besides above, in case company secretary in practice is found to be guilty, He shall be liable for professional and other misconduct per first schedule or second schedule or both and following actions may be taken against Him
In case professional or other misconduct is as mentioned in first schedule, He shall be reprimanded and His name would be removed from register of members for 3 months and subject to maximum fine of Rs 1 lac.
In case professional or other misconduct is as mentioned in second schedule, He shall be reprimanded and His name would be removed from register of members permanently or such period as may be thought fit by the Disciplinary Committee; and subject to maximum fine of Rs 5 lac.
Thus, it may be seen from above that legislature has attached lot of importance to proper conduct of secretarial audit and any contravention or noncompliance of same would result in penalty including imprisonment not only to officers and directors of the company but also to company secretary who has conducted such audit.