A secretarial Audit is a compliance audit, it is an effective tool for corporate compliance management. It helps to take corrective measures and detects non-compliances.
It is a process to check that the company has complied with the legal and procedural requirements, and compliance with the provisions of various laws and rules/regulations/procedures, maintenance of books, records, etc.
Section 204 of the Companies Act, 2013, considering the increasing importance of Corporate Governance mandates every listed company and such other class as prescribed to attach a Secretarial Audit Report with its Board’s report.
Secretarial auditing is a form of objective, independent assurance that adds value to and improves the operations of a company. It helps the organizations to improve and evaluate the effectiveness of risk management, control, and governance processes and accomplish its objectives.
As per rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the prescribed class of companies is as follows:
- Every listed company
- Every Public Company having paid-up share capital of 50 crores or more; or
- Every Public Company having a turnover of 250 crores or more or
- Every Public Company has outstanding loans or borrowings from banks or public financial institutions of 100 crores or more.
ROLE OF COMPANY SECRETARY
The practicing company secretary has been exclusively recognized for conducting the secretarial audit. Section204 further provides that Secretarial Audit Report is to be submitted in a format prescribed, the format of the Secretarial Audit Report shall be in Form MR-3.
Section 204(3)and section provides that the Directors, inboardreport, shall explain any qualification or other remarks made by the practicing company secretary in the secretarial audit report.
The Objectives of Secretarial Audit
The objectives of Secretarial Audit are as follows: –
- To check & report compliances of Secretarial Standards and applicable laws.
- To check inadequate compliances and non-compliances.
- To protect the interest of the customers, employees, society, and various stakeholders.
- To avoid any legal actions/penalties.
NEED FOR SECRETARIAL AUDIT
Secretarial Audit is the process of independent examination and verifying several applicable Laws to a company. It ensures timely compliance and eliminates non-compliance with various applicable rules and regulations. The need for Secretarial Audit is as follows: –
- It ensures that the procedural and legal requirements are duly complied with.
- It assures and gives a level of confidence to the directors & Key Managerial Personnel etc.
- As Secretarial Audit ensures legal and procedural requirements, Directors can concentrate on important business matters.
- Enhance the image and goodwill of a company in the minds of stakeholders and regulators
- It helps the investor in analyzing the exact legal position and how much comply with laws.
This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.
Posted by:
CS Neetu Saini
AKGVG & Associates