Compliance Check – Secretarial Audit

What is a Secretarial Audit?

Secretarial audits are part of an organization’s overall compliance management system. Corporate compliance can be managed effectively with the help of secretarial audits. Furthermore, non-compliance can be detected, and appropriate measures are taken.

The purpose of a secretarial audit is to ensure that the Company is in compliance with laws, rules, and regulations and to maintain records, accounting, and books, among other things. The secretarial audit of the Company can be handled by an independent professional. The purpose of this procedure is to ensure legal and procedural specifications are followed. Whatever the case, the secretarial audit follows due process.

Secretarial Audit Report

The Secretarial Audit Report is only applicable for companies if it meets the following requirements:

• The report must be prepared only by a Company Secretary in Practice.
• It should be prepared in Form M-3.R
• It has annexed the Board’s Report as per the increasing importance of Corporate Governance.

The services which are provided under the Secretarial Audit

The secretarial audit ensures that the Company complies with a number of legislations, including the Companies Act and other economic and corporate laws. Secretarial audits are conducted by companies to verify that they are complying with laws, regulations, rules, procedures, etc., related to Corporate Law. In 2013, section 204 of the Companies Act enacted this provision. A regulator monitors the compliance of the companies with the laws and processes under this system.

Companies must comply with government regulations, laws, and rules. The Company may suffer serious consequences if it fails to comply with the regulations. Periodically examining work is essential for organizations to identify errors and to maintain meeting compliance through their system.

A detailed secretarial audit helps in the following ways:

• It helps in checking that compliances are being met through reports.
• It protects the interests of customers, employees, society, etc.
• To protect against unnecessary legal actions taken by law enforcement agencies.
• It pinpoints inadequate compliance and non-compliances.
• It ensures the upliftment of the image and goodwill of the Company by checking that the procedural and legal requirements are suitably met.

What are the Benefits of Secretarial Audit?

• It is a way to check and handle several compliances or various legislations.
• The directors & Key Management Personnel (KMP) feel confident about their firm. 
• Only if the Secretarial Audit ensures legal and procedural requirements in a safer, better and audible manner it needs a meeting of the directors. This helps them focus on other business matters otherwise. 
• Investors trust your Company more and are willing to fund because of your legal record.
• It is a productive governance and compliance risk management tool and produces a result which is beneficial.

Companies Act, 2013

• Review of Charter Documents alterations, if any, and related compliances
• Share Capital and Debentures Rules – Compliance related to ICDR, Pre and Post-Issue Compliances
• Borrowings – Borrowing Limit, Pre and Post-Borrowing Compliances
• Public Deposit, if any – Pre and Post Compliances
• Board and General Meetings – Notice, Agenda and Minutes
• Declaration and Payment of Dividend – Pre and Post Compliances
• Board of Directors – Appointment & Resignation
• Internal Audit and Internal Audit Report
• Auditor Appointment, Tenure of Appointment & Rotation
• CSR Compliances – Committee Formation, Limit of Contribution
• Related Party Transactions & its Compliances
• Inter Corporate Loans, Investments and Corporate Guarantee
• Buy-Back of Shares – Pre & Post Compliances
• Annual Return & Annual Compliances
• Member Register and Change in any Shareholding Pattern
• Secretarial Standards

Foreign Exchange Management Act

• Foreign Direct Investment
• Overseas Direct Investment
• External Commercial Borrowings

Securities And Exchange Board Of India Act, 1992

• The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011
• The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015
• The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009
• The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993
• The Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999
• The Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015

Labour, Fiscal & Other Laws

• Factories Act, 1948
• Industrial Disputes Act, 1947
• The Payment of Wages Act, 1936
• The Minimum Wages Act of 1948
• Employees’ State Insurance Act, 1948
• The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952
• The Payment of Bonus Act, 1965
• The Payment of Gratuity Act, 1972
• The Contract Labour(Regulation and Abolition)Act,1970
• The Maternity Benefit Act of 1961
• The Child Labour (Prohibition and Regulation Act), 1986
• The Employees’ Compensation Act, 1923
• The Apprentices Act of 1961
• Equal Remuneration Act, 1976
• The Employment Exchange (Compulsory Notification of Vacancies) Act, 1959
• The Environment (Protection) Act, 1986
• The Sexual Harassment Of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
• The Water (Prevention & Control of Pollution)Act,1974
• The Air (Prevention & Control of Pollution) Act, 1981
• Tax deducted at Source.
• Advance Tax
• GST
• Professional, Property & Dividend Tax

Securities Contracts (Regulation) Act, 1956 (‘SCRA’)

Depositories Act, 1996

* Labour, Fiscal, and Other laws are limited to the applicability of the Company

Documents Required for Secretarial Audit

• Charter Documents
• Last year’s Secretarial Audit Report.
• Statutory Registers
• Board and General Meeting Minutes & Notices thereto.
• Audited financial statements
• Filings & Intimations with Registrar of Companies, Stock Exchanges, Newspaper Advertisements (if Listed)
• Annual Performance Reports, Lease Deed, LUT cum Bond, softex returns
• Filings with other statutory departments
• Filings with RBI (If there is a foreign investment)
• ECB Returns (if there are foreign borrowings in the Company)
• Registers maintained under Labour Laws.
• Disclosures and Declaration for code of conduct received from the directors
• Sitting fees and Remuneration details paid to directors
• Proof of spending CSR amount
• SAST Disclosures
• Bank account details for dividend

Frequently Asked Questions