Secretarial Audit under Companies Act, 2013
Meaning of Secretarial Audit
Secretarial audit is normally conducted to verify whether company has complied with various legal rules and regulations applicable to it under Companies Act as well as other applicable economic laws.
Why Secretarial Audits are conducted?
Secretarial audit are conducted to find out the whether company is doing all compliance regularly, whether company is following sound corporate practices. When secretarial audit are conducted regularly in a company, it provides an assurance to various stakeholders like management, regulator, third party user that company is governed properly and all systems and processes are in place.
Who are required to conduct Secretarial Audits?
Following companies are required to obtain ‘Secretarial Audit Report’ from independent practicing company secretary:
- Every listed company
- Every public company having a paid-up share capital of Fifty Crore rupees or more; or
- Every public company having a turnover of Two Hundred Fifty Crore rupees or more.
For aforesaid purpose, Turnover means total value of receipt made from sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year.
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.
We at EzyBiz India has expert team of Practising Company Secretaries having relevant expertise and experience in conducting Secretarial Audits and issue of Secretarial Audit reports
Checklist of Documents normally verified during Secretarial Audit
Below are the lists of documents normally verified at time of secretarial Audit. Please note that list is only illustrative and not complete list.
Under Companies Act
Following records and registers are required to be kept by every company which are verified:
- All types of Registers like register of members, debentureholders, investments, charges, register of contracts, register of deposits, proxies, shareholder’s attendance, director’s attendance, director’s shareholding, fixed assets register, register of transfers etc
- Whether for each meetings, Minutes book has been prepared
- Books of accounts & cost records
- Copies of Annual Returns
- Copies of Annual Accounts (Balance Sheet and Profit and Loss Account)
- Return copies of Allotment
- Any Notice for change in Registered office
- Any order of Court or CLB
- Return copies for Appointment of MD/WTD/Manager
- Return copies of Deposits
- Registration of any agreement and Resolutions
- Registration of any charge created or modified or satisfied
- All types of meetings like Board of Directors Meetings, Extraordinary General Meeting, Annual General Meeting, Committee Meetings.
- Whether Minutes of All Meetings properly maintained as required under Companies Act, 2013.
- Whether proper Proof has been kept for Dispatch of Notices to Members/ Directors
Whether following documents has been properly maintained and filed by company within due date:
- Return of allotment need to be filed with ROC in form PAS-3 within 30 days of allotment of share.
- In case of buy back of securities, form SH-11 need to be filed
- For return of deposit, File form DPT 3
- In case of creation or modification of charge, form CHG-1 need to be filed within 30 days of its creation/modification.
- Details of Satisfaction of Charge need to be filed with ROC in form no CHG-4
- In case of condonation of delay in filing charge, request need to be made with CG in form no CHG 8
- MGT 7 (Annual Return) need to be filed within 60 days of its AGM with ROC.
- For related party disclosure, form AOC 2 need to be maintained.
- In case of appointment of auditors, form ADT 1 needs to be filed within 30 days of Appointment.
- For removing auditors, application need to be made with CG in ADT 2 for removal of Auditors
- Consent to act as Director need to be receive in form DIR 2
- Any appointment or change of Director, KMP need to be intimated in form DIR 12 with ROC within 30 days
- In case of resignation/ retirement of directors, intimation need to be filed in Form DIR 11 within 30 days
- Register for any Loans and investment need to be made in MBP 2
- In case of interested directors, nature of interest in Form MBP-1 shall be received from all directors in its first Board meeting.
- MGT- 14 need to be filed within 30 Days of passing Special Resolutions/Board Resolutions as the case may be
MGT-14 required in following case of Board Resolutions (other than Private Company)
- For making political contributions
- For diversifying company’s Business
- For approving reconstruction of business or Merger, Amalgamation
- For company’s takeover
- For appointing Secretarial Auditor
- For appointing Internal Auditor
- For investing fund of Company
- For approving Financial statement and Board’s Report
- For appointment or removal of Key management personnel
- For issuing securities by letter of offer
- For Borrowing Monies from any sources including Directors
MGT- 14 required in following case of Ordinary Resolutions
- For Appointing Director under companies Act, 2013
- For giving Invitation to member for Deposit
- For Appointing Small Shareholder Director
- For Appointing independent Director
- In case of Bonus Share issue
- For changing the name of the Company
MGT-14 in case of following Special Resolutions
- When Private Company is to be converted into OPC
- For approving any scheme of giving loan to MD/WTD
- In case any Loan or Investment exceed the limit under section 186
- In case of winding of the Company
- In case of Appointment of Managerial Personnel more than the age of 70 Years
- In case of inadequate profit, if Remuneration is to be given to managerial personnel
- For keeping of the register any other place in India
- In case of buyback of share
- In case of reduction of share capital
- In case of Sweat equity share issue
- In case of Private Placement of Securities
- In case of change of registered office of company
Share Certificates, Transfer/Transmission of Shares, Dividend, Board’s Report
- Every company need to maintain Endorsed shares certificates copies and other securities
- Whether transmission request letters and Transfer Deeds kept
- Documents relating to payment and transfer of dividend and declarations
- Copies of Board’s report
- Whether unpaid amounts has been transferred to the IEPF
Compliances under Securities Contracts (Regulation) Act, 1956
(1) In case of listed companies, whether the company’s securities are already listed on a Stock Exchange;
(2) In case of issuance of shares/debentures/bonds to public, whether:
(a) Proper application has been filed with the stock exchange along with the documents and particulars mentioned in Rule 19(1) of the Securities Contracts (Regulation) Rules, 1957;
(b) Whether Board has finalized and approved the listing agreement and executed with the stock exchange concerned. Whether any restrictions/conditions imposed by stock exchange has been incorporated in the agreement.
(c) Whether within the statutory time limit, listing was done
(d) In case stock exchange has refused to grant permission for listing
- Whether appeal was filed and
- What happened in that appeal?
(e) Whether company has complied with all terms and conditions of the listing agreement.
Frequently Asked Questions
The Secretarial Audit Report need to be submitted along with financial statements in form AOC-4 within 30 days from date of AGM. Also, secretarial audit report is to be annexed with Board’s report, is required to be submitted before the preparation of Board’s Report.
Compliances of following laws are required to be checked.
- The Companies Act, 2013
- The SCRA Act, 1956 and rules
- Depositories Act, 1996 and the Bye-laws and Regulations
- FEMA, 1999
The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act (SEBI), 1992:
- SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011
- SEBI (Prohibition of Insider Trading) Regulations, 1992
- SEBI(Issue of Capital and Disclosure Requirements) Regulations, 2009;
- SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999;
- SEBI (Issue and Listing of Debt Securities) Regulations, 2008
- SEBI (Registrars to an 12 Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client
- SEBI (Delisting of Equity Shares) Regulations, 2009; and
- SEBI (Buyback of Securities) Regulations, 1998
Independent practicing company secretaries are authorized to issue secretarial audit report.
If a company or any officer of the company or the company secretary in practice contravenes the provisions of this section, the company, every officer of the company or the company secretary in practice, who is in default, shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.