Section 204(1) of the companies Act, 2013 read with Rule 9 of the companies (Appointment and remuneration of managerial personnel) Rules, 2014.
Secretarial audit is an audit to check compliance of various legislation including the companies Act and other laws relevant for company. It helps company to build their corporate image. Companies with extra compliances have less chances of penalty and it gives company recognition as a good corporate citizen.
Secretarial Audit is mandatory for following classes of Companies:
- Listed company
- Public company having paid of share of Rs. 50 crore or more or having turnover of Rs. 250 crore or more.
- Private company which is subsidiary of Public company.
Secretarial Audit shall be conducted by member of company secretaries of India who holds certificate of practice (Practicing company secretary). And Secretarial Audit Report shall be provided in format prescribed in Form MR-3. (Rule 9 of the companies Appointment and Remuneration of Managerial Personnel) Rules, 2014.
While conducting secretarial Audit various laws and reports needs examine such as :
- Companies Act, 2013 and Rules made thereunder
- Foreign Exchange Management Act,1999
- Securities Contract (Regulations) Act, 1956
- The Depository Act, 1996
- Regulations and Guidelines prescribed under Securities and Exchange Board of India (SEBI), Act, 1992
- Secretarial Standards issued by Institute of Company secretaries of India and approved by central Government.
- Secretarial Audit Report also require to check whether composition of Board of Directors of the company duly composited or not.
- Notice of every board meeting send every directors or not within 7 days before the date of meeting.
- Notice of AGM/ EGM or notice of committee meeting has been send on time or not.
- Company give requisite disclosure to stock exchange on time or not.
- All form which requires to file to Roc is filed on time or not.
- Company has prepared all minutes and requisite resolution of the meeting or not.
The Audit Report shall be signed by Company secretary in practice, which is appointed by company as a secretarial Auditor. As per Rule-8 of the Companies (Meetings of Board and its powers) Rules, 2014 secretarial auditor is required to be appointed by means of resolution passed at duly convened Board Meeting.
Penalty for wrong/ incorrect Audit Report:
As per Section 448 of Companies Act, 2013, deals with false statement. Which said any person who is found to be guilty for fraud shall be punishable with imprisonment for a term of which shall not be less than six months which may extend to ten years and shall also be liable for fine as per section 447.