SECRETARIAL AUDIT
WHAT IS SECRETARIAL AUDIT
Ø Secretarial audit is a part of legal compliance reporting system & a tool for good corporate law compliance management.
Ø It is an independent appraisal of the secretarial practices, systems and procedures.
NEED OF SECRETARIAL AUDIT
Ø Compliance of various applicable laws for good Corporate Governance
Ø Protection of Interest of the Stakeholders.
Ø Era of self-regulation and shareholders Democracy.
Ø Need for Transparency and Arm’s length transactions.
EMERGENCE OF SECRETARIAL AUDIT
Ø The Ministry of Corporate Affairs, Government of India released CORPORATE GOVERNANCE VOLUNTARY GUIDELINES 2009 on December 21, 2009. The preamble to Guidelines states that “These guidelines provide for a set of good practices which may be voluntarily adopted by the Public companies. Private companies, particularly the bigger ones, may also like to adopt these guidelines.”
Ø The Guidelines, amongst other things, recommend the introduction of SECRETARIAL AUDIT. Companies, which do not adopt these guidelines, either fully or partially, are expected to inform their shareholders about the reasons for not adopting these Guidelines. This is in consonance with the popular doctrine of “Comply or Explain”. The Board should give its comments on the Secretarial Audit in Directors’ Report as provided in Para V of the Guidelines.
Ø Further Companies Act 2013, states that every listed company and a company belonging to other class of companies as may be prescribed shall annex with its Board’s report a Secretarial Audit Report, given by a Company Secretary in Practice, in such form as may be prescribed. It shall be the duty of the company to give all assistance and facilities to the Company Secretary in Practice, for auditing the secretarial and related records of the company. The Board of Directors, in their report shall explain in full any qualification or observation or other remarks made by the Company Secretary in Practice in his report.
OBJECTIVES OF SECRETARIAL AUDIT
Ø To check & Report on Compliances
Ø To Point out Non-Compliances and Inadequate Compliances
Ø To protect the interest of the Customers, employees, society etc.
Ø To avoid any unwarranted legal actions by law enforcing agencies and other persons as well.
SCOPE OF SECRETARIAL AUDIT
Ø The scope of Secretarial Audit comprises verification of the compliances under the following enactments, rules, regulations and guidelines:
Ø The Companies Act, 2013 and the Rules made there under;
Ø The Securities Contracts (Regulation) Act, 1956 (‘SCRA’) and the Rules made there under;
Ø The Depositories Act, 1996 and the Regulations and Bye-laws framed there under;
Ø Foreign Exchange Management Act, 1999 and the rules & regulations made there under;
Ø The Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’) which inter alia includes;
v The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;
v The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992;
v The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009;
v The Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999;
v The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008;
v The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; and
v The Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998;
v The Listing Agreement(s) entered into by the Company with Stock Exchange (s).
v Secretarial Standards issued by The Institute of Company Secretaries of India.
v Corporate Governance Voluntary Guidelines, 2009 issued by the Ministry of Corporate Affairs, Government of India;
v Corporate Social Responsibility Voluntary Guidelines, 2009 issued by the Ministry of Corporate Affairs, Government of India;
v Guidelines on Corporate Governance for Central Public Sector Enterprises, 2010;
v Corporate Governance Guidelines for Insurance Companies, issued by IRDA in case of companies regulated by IRDA; and
vOther corporate laws as may be applicable specifically to the audited company.
ELIGIBILITY CRITERIA FOR SECRETARIAL AUDIT
Section 204 of companies act 2013 deals with secretarial audit & alongwith corresponding rules states that
Every Company as mentioned herein below shall annex with its Board’s report, a secretarial audit report, given by a PCS, in such form as may be prescribed.
I. Every Listed Company
II. Public company with Paid up capital of Rs 50 Crore or more
III. Public company with turnover of Rs 250 Crores or more
PENAL PROVISIONS
Ø if a company or
Ø any officer of the company or
Ø the company secretary in practice
Contravenes the provisions of this section then the
Ø company or
Ø any officer of the company or
Ø company secretary in practice
Who is in default shall be punishable with fine which shall not be less than one lac rupees which may extend to five lacs rupees
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