What is Secretarial Audit?
It is a process to check compliance with the provisions of various laws and rules/regulations/procedures, maintenance of books, records etc., by an independent professional who shall be a Practicing Company Secretary appointed by the company for the same vide Board meeting to ensure that the company has complied with the legal and procedural requirements and also followed due processes. It is essentially a mechanism to monitor compliance with the requirements of stated laws and processes.
Types of Companies
According to section 204 of Companies Act, 2013 and Rule 9 of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, following companies are required to obtain Secretarial Audit Report from independent practicing company Secretary:
- Every public company having a paid-up share capital of fifty crore rupees or more; or
- Every public company having a turnover of Rs. 250 Cr. or more; or
- Every company having outstanding loans or borrowings from banks or public financial institutions of Rs. 100 Cr. or more.
Other Companies may get the Secretarial Audit Report Voluntarily.
The Objectives of Secretarial Audit
• To check & Report on Compliances
• To Point out Non-Compliances and Inadequate Compliances
• To Protect the interest of the Customers, employees, society etc.
• To avoid any unwarranted legal actions by law enforcing agencies and other persons as well.
The Key Benefits
The benefits of secretarial audit includes the following:
(a) It can be an effective due diligence exercise for the prospective acquirer of a company or controlling interest or a joint venture partner.
(b) It assures the owners that management and affairs of the company are being conducted in accordance with requirements of laws, and that the owners stake is not being exposed to undue risk.
(c) It ensures the Management of a company that those who are charged with the duty and responsibility of compliance with the requirements of law are performing their duties competently, effectively and efficiently.
(d) It ensures the Management that the company has complied with the laws and, therefore, they are not likely to be exposed to penal or other liability or to action by law enforcement agencies for noncompliance by the company.
(e) Secretarial Audit being proactive measure for compliance with a plethora of laws, it will have a salutary effect of substantially lessening the burden of the law-enforcement authorities.
(f) Instilling professional discipline and self-regulations.
(g) Reduces the work load of the regulators due to better and timely compliances.
Secretarial Audit Report Revelation (Scope of Secretarial Audit)
The scope of Secretarial Audit comprises verification of the compliances under the following enactments,
rules, regulations and guidelines:
(i) The Companies Act, 1956 and the Rules made there under;
(ii) The Securities Contracts (Regulation) Act, 1956 (‘SCRA’) and the Rules made there under;
(iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed there under;
(iv) Foreign Exchange Management Act, 1999 and the rules & regulations made there under;
(v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’) which inter alia includes;
(a) The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;
(b) The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992;
(c) The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009;
(d) The Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999;
(e) The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008;
(f) The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; and
(g) The Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998;
(vi) The Listing Agreement(s) entered into by the Company with Stock Exchange (s).
(vii) Secretarial Standards issued by The Institute of Company Secretaries of India.
(viii) Corporate Governance Voluntary Guidelines, 2009 issued by the Ministry of Corporate Affairs, Government of India;
(ix) Corporate Social Responsibility Voluntary Guidelines, 2009 issued by the Ministry of Corporate Affairs, Government of India;
(x) Guidelines on Corporate Governance for Central Public Sector Enterprises, 2010;
(xi) Corporate Governance Guidelines for Insurance Companies, issued by IRDA in case of companies regulated by IRDA; and
(xii) Other corporate laws as may be applicable specifically to the company.
COMPLIANCES UNDER COMPANIES ACT, 2013;
A. General Compliances
Whether company has kept and maintained all statutory registers, filed all forms, return and notices to respective authorities as per companies Act, 2013
Whether company follow all requirements of the Act and provisions of MOA & AOA
Details of Documents to be Checked
Register and Record
Register & Index of members
Register & Index of debenture holders
Foreign registers of members of debenture holders
Registers and returns
Minutes book of meetings
Minutes book of class meeting/creditors meeting
Register of investments
Register of deposits
Register of charges (creation)
Books of accounts & cost records
Register of contracts
Register of directors, MD, manager & secretary
Register of directors’ shareholding
Register of investments, loans made, guarantee given or security provided
Register of renewed & duplicate certificates
Register of directors’ attendance
Register of shareholders’ attendance
Register of proxies
Register of Transfer
Register of fixed assets
Register of debenture holders
Returns
Annual Returns
Annual Accounts (Balance Sheet and Profit and Loss Account)
Return of Allotment
Notice of change in situation of Registered office
Court or CLB Order
Return of Appointment of MD/WTD/Manager
Return of Deposits
Registration of Resolutions and Agreements
Registration of Creation/ modification/ satisfaction of Charge
Meetings
Board of Directors Meetings, as per section 173 of Companies Act, 2013
Extraordinary General Meeting, as per section 100 of Companies Act, 2013
Annual General Meeting, as per Section 96 of Companies Act, 2013
Committee Meetings duly convene as per provisions of Companies Act, 2013
Minutes of All Meetings maintained as per section 118 of Companies Act, 2013
Proof of Dispatch of Notices to Members/ Directors as per respective provisions of Companies Act, 2013
e- Filing
Check whether company has filed the following Documents;
MGT- 14 within 30 Days of passing Special Resolutions/Board Resolutions as the case may be
MGT-14 in case of Board Resolutions (other than Private Company)
- To make political contributions
- To Diversify the Business of the Company
- To approve Merger, Amalgamation or Reconstruction
- To takeover of the Company
- To Appoint Secretarial Auditor (section 204 of Companies Act, 2013)
- To Appoint Internal Auditor (section 138 of Companies Act, 2013)
- To invest the fund of Company under section 186 of Companies Act, 2013
- To Approve Financial statement and Board’s Report
- To Appoint or Remove KMP (defined under section 2(51) of the Companies act,2013
- To issue securities including debenture, by letter of offer
- To Borrow Monies from any sources including Directors
- To authorize Buy Back of Securities under Section 68
MGT- 14 in case of Ordinary Resolutions
- For Appointment of Director under section 152 of companies Act, 2013
- Invitation given to member for Deposit as per section 73 of Companies Act, 2013
- Appointment of Small Shareholder Director (section 151 )
- Appointment of independent Director
- Issue of Bonus Share
- Change of the name of the Company
MGT-14 in case of Special Resolutions
- Conversion of Private Company into OPC
- Approve the any scheme for giving loan to MD/WTD under section 185
- Loan or Investment by Company exceeding the limit under section 186 of the Companies Act, 2013
- Special resolution for winding of the Company
- Appoint Managerial Personnel exceeding the age of 70 Years
- Remuneration to managerial personnel in case of inadequacy of profit a per Schedule V
- Resolutions under Section 180 (a), (b) and (c) of the companies Act, 2013
- Re- appointment of Independent Director
- For keeping of the register any other place in India
- For buyback of share as per section 68
- For reduction of share capital as per section 66
- Issue of Sweat equity share as per section 54
- Private Placement of Securities
- Conversion of Section 8 Company in any other kinds or alteration of its MOA
- Change of its registered office under section 12 and 13 of Companies Act, 2013
- File return of allotment in form PAS-3 within 30 days of allotment of share with ROC
- File SH -11 returns in respect of Buy back of Securities
File form DPT 3 for return of deposit
File CHG-1 in case of Application for registration of creation, modification of charge, within 30 days of its creation
Particular for Satisfaction of Charge in form no CHG-4 filed with ROC
For condonation of delay in filing of charges has been made to CG in form no CHG 8
Whether MGT 7 (Annual Return) filed with ROC within 60 days of its AGM
Whether company maintained AOC 2 for related party disclosure
Whether company file ADT 1 within 30 days of Appointment of Auditors
Whether application has been made to CG in ADT 2 for removal of Auditors
Whether company received DIR 2 (consent to act as a director)
Whether company Filed DIR 12 (particular for Appointment of Director, KMP and changes among them) with ROC within 30 days of appointment or changes
Whether DIR 11 filed with ROC within 30 days of its Resignation
Whether Company maintain Register of Loans and investment in MBP 2
Whether Company Receive MBP 1 (nature of Interest) from all director in its first BM of Financial Year
Whether company maintained register of Contract and arrangement in which director are interested in Form MBP 4
Whether company file MR 1 with Roc within 30 days of appointment of MD/WTD/Manager
Whether MR 2 filed with CG for approval of appointment or reappointment and remuneration or increase in remuneration or waiver for excess or over payment to managing director or whole time director or manager and commission or remuneration.
Share Certificates, Transfer/Transmission of Shares, Dividend, Board’s Report
Copies of Endorsed shares certificates and other securities
Transfer Deeds and transmission request letters etc.
Declaration, payment and transfer of dividend
Board’s report
Transfer of unpaid amounts to the IEPF
COMPLIANCES UNDER SECURITIES CONTRACTS (REGULATION) ACT, 1956
(1) Check whether the company’s securities are already listed on a Stock Exchange;
(2) Check whether the company has issued shares/debentures/bonds to the public. If yes, whether:
(a) An application for this purpose to the stock exchange has been made along with the documents and particulars mentioned in Rule 19(1) of the Securities Contracts (Regulation) Rules, 1957;
(b) Has the listing agreement been finalized and approved by the company’s Board and executed with the stock exchange concerned. In case any conditions have been imposed by the stock exchange, have those restrictions/conditions been incorporated in the agreement.
(c) Whether listing was done within the statutory time limit
(d) Where permission for listing has been refused by the Stock Exchange:
Whether appeal was filed
What is the outcome of the appeal?
(e) Whether all terms and conditions of the listing agreement have been complied with.
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