Secretarial Audit in India

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Secretarial Audit Services

Enterslice provides the service of a Secretarial Audit to examine and check that your business is complying with the laws, rules, regulations, notifications, etc., prevailed at the time of the Audit. Our teams of experts analyze whether your business complies with provisions such as the Companies Act 2013 or various other provisions related to your business's requirements. We provide secretarial audit services to your business to ensure sustainable growth and aid investors in making complex decisions. Enterslice investigates audits or performance reviews to confirm facts or details of your business. Our team of experts also helps your business check that it is legally complying with the regulations to enable more perspective on growth. We aim to help your business make an informed assessment of its ability, potential, performance, and reputation.

Overview of the Secretarial Audit

The Secretarial Audit is a mechanism to analyze or check whether your business is complying with the recent laws, rules, regulations, etc. The secretarial Audit was introduced by the Companies Act 2013, and it is a process to check compliances made by the company under the laws or regulations, etc. The periodic examination of work is necessary to point out errors and mistakes and to make a robust compliance mechanism system in your business. Enterslice will help your company by periodically inspecting or examining the company's records or data, which gives accurate information about your company and whether it complies with the laws. The secretarial Audit comforts the regulators, shareholders, and management if your company complies with the laws.

Secretarial Audit key services by Enterslice

1. Regulatory Compliance Check

We thoroughly examine your company’s adherence to applicable laws, regulations and compliance requirements. Our team of experts checks your company's compliance with the laws, regulations, rules, etc., at the time of conducting the secretarial Audit. 

2. Corporate Governance Review

Corporate governance is the system by which companies are directed and controlled by the board of directors responsible for the governance of their companies however Enterslice assesses the effectiveness of your company’s corporate governance structure, ensuring transparency and accountability.

3. Statutory records verification

We meticulously examine and verify statutory records to confirm accuracy and completeness, covering minutes of meetings, registers and other essential Documents. Our team in Enterslice will help you maintain and verify statutory records to confirm accuracy.

Benefits of Secretarial Audit

1. Ensures Investors

Enterslice helps your company to attract investors and stakeholders in making informed decisions by evaluating the company checking the company in terms of compliance and governance norms and ensuring that the company is complying with the laws to make key investment decisions for the benefit of the investors.

2. Safeguarding the Company

If the companies comply with compliance management, they face a lesser chance of facing risk or penalties, and if the companies stick with compliance and personal ethics as a foundation of their work culture, they mitigate the risk. If they comply with the laws, then the banks and financial institutions are more inclined to fund the companies to function smoothly.

3. Attracting and Retaining the Employees

Enterslice ensures that your company complies with the latest laws, rules, or regulations to maintain a good culture of work environment, which helps to retain more employees and attract new employees to join your company for a healthy environment and growth.

4. Maintaining the Goodwill

Enterslice ensures compliance management in your company, which leads to customer loyalty and maintenance of the goodwill of the company in the market because recognition for the company as a good company may help your company to gain more customers, which leads to an increase in profits.

Scope of Secretarial Audit

A secretarial audit has to check compliance by the company under the following laws and rules made for the benefit or working of the business.

1. Companies Act, 2013

Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies Rule, 2014 which states that the following companies are mandatorily required to perform the secretarial Audit: every listed company, every public company having a paid-up share capital of Rupees 50 Crore or more, every public company having a turnover of Rupees 250 crore or more, every private company that is subordinate of an unlisted public company, and every company having a borrowing of Rupees 100 crore or more is required to perform the secretarial Audit periodically.

2. Secretarial Standards Issued by ICSI

The secretarial standards are n=mandatory to all companies except one person company, and Enterslice ensures compliance with applicable secretarial standards and guides tour company to discharge duties as may be prescribed in the secretarial standards. The ICSI issues secretarial standards. The secretarial standards are issued ten as of now by ICSI, such as authority to convene meetings, meeting standards of the Board of Directors, etc., for the functioning of the company.

3. Depositories Act, 1996

The Depositories Act provides a legal framework for the establishment of depositories, which helps investors buy or sell securities in an electronic form, so the companies need to comply with the Depositories Act for the deposit-related function. However, our professional experience with all the laws helps your company comply with the Depositories Act to buy or sell securities in an electronic form.

4. Securities Exchange Board of India Act, 1992

Regulation 24A of SEBI Regulation provides that every listed entity and its unlisted subsidiaries formed in India is required to perform the Secretarial Audit. The secretarial Audit is performed under the regulations and guidelines made under the SEBI Act under various regulations, such as the Substantial Acquisition of Shares and Takeovers Regulation, 2011. Prohibition of Insider Trading, 2015; Issue of Capital and Disclosure Requirements Regulation, 2009. Shared Based Employee Benefits Regulation, 2008. Registrars to an Issue and Share Transfer Agents Regulation 1993, LODR, 2015 and Buybacks of Securities Regulation, 1998, the companies need to comply with the regulation of various SEBI factors or laws to work smoothly in the market.

Applicability of the Secretarial Audit

Every Listed Companies

The applicability of the secretarial Audit to every listed company varies depending on the regulatory requirements of the specific jurisdiction in which the company is listed. In many countries, the regulatory body of the stock exchange mandates secretarial audits as part of the corporate governance norms for the listed companies. The primary objective is to ensure transparency, compliance with laws, and protection of the interests of the shareholders. Every listed business with a paid-up share capital of Rupees 50 Crore or yearly revenue of Rupees 250 Crore or more is required to undertake the secretarial Audit.

Public and Private companies

The public companies listed on the stock exchange are often subject to regulatory requirements and secretarial audits may be managed by regulatory bodies or stock exchanges to ensure transparency and compliance. Public companies may need to adhere to the corporate government codes but for private companies, it is an option to conduct a secretarial audit for corporate governance. Public companies operating in certain sectors such as financial institutions may be subject to specific regulatory requirements including mandatory secretarial audits. Every public company has a turnover of Rupees 250 Crore and a paid-up share capital of Rupees 50 Crore or more, and the secretarial Audit is mandatory to conduct.

Banks and Financial Institutions

When providing loans or financial services to companies, they engage in secretarial audits because the financial institution may assess the corporate governance and legal compliance of the borrowing companies through a secretarial audit to mitigate risks associated with non-compliance. For every company having outstanding loans or borrowings from a bank or public financial institution of one hundred crore rupees or more the secretarial Audit is mandatory to conduct.

Company Secretarial Services

The Secretarial Audit is the portion of the legal compliance system. It is the company's responsibility to undertake a company secretarial audit because the Audit assures the board of directors or management that the company is complying with laws or regulations. The secretarial Audit justifies that the company is not involved in any commission or mission, any technical errors, violation, contravention or breach of any laws. Enterslice directs your company to adopt measures for mitigating the consequences of offences. Enterslice has a team of company secretaries, chartered accountants, and legal experts who have experience providing services to your company. Our team helps in planning and preparing agendas and ensures that the laws are managed properly. Our team assist the board of directors and management with their duties and responsibilities, assisting with matters affecting shareholders and our experts ensure that the company complies with company law and maintains Documents. The team keep the company well informed of all the internal information and matters related to directors, management, operations, registration, etc. 

Documents need to be verified for conducting Secretarial Audits

1. Incorporation of Documents

The MOA and AOA contain all the details of the company signed by all the shareholders agreeing to incorporate the companies. The certificate of incorporation and list of shareholders will be required.

2. Board of Directors and Shareholders meeting

The notices and minutes of the board of the meeting and general meeting and also the resolution passed by the directors or shareholders in the company.

3. Register and Records

The records of the registration of members, the board of directors, and key personnel, as well as the register of the contracts and arrangements, are required at the time of the secretarial Audit.

4. Deposits taken by the Companies

The details of the deposits taken by the companies.

5. Compliance Certificates

The secretarial compliance certificate and the compliance certificate related to other specific laws or regulations are required.

6. Financial Statements and reports

The financial statement and annual reports by the shareholders or directors of the company are required at the time of the secretarial Audit.

7. Policies and Procedures

The policies and procedures followed by the companies for corporate governance and the code of conduct made by the company for its functioning are required for the secretarial Audit.

8. Statutory registers including the share transfer register

Under the Companies Act, 2013 provisions a company must maintain a statutory register of shares and other securities bought back and the authorized buyback shares all the details are to be maintained in the statutory register which is required to be examined at the time of secretarial Audit.

9. Regulatory Filings

The copies of filings made within the regulatory authority and annual returns filed with the companies' registers.

10. Board and General Meeting Agendas

The boards' and general meetings' agendas are required to be checked to determine whether they comply with the laws or not at the time of the secretarial Audit.

11. Contracts and Agreements

The copies of the contracts made between the company and other parties need to be presented at the time of the secretarial audit to check whether the provisions of the contracts comply with the laws.

12. Licenses and Approvals

The copies of the license or approval secured from the government for running a business are required for the secretarial Audit.

Legal Framework Governing Secretarial Audit

Section 204 of the Companies Act, 2013 contains provisions concerning secretarial audits where the following companies are mandatorily required to carry out a secretarial audit. However, the Ministry of Corporate Affairs has released Corporate Governance Guidelines to ensure companies follow effective compliance rules. In addition to the legal compliance regulation, 24A SEBI (LODR) Regulation, 2015 provides that every listed entity and its unlisted subsidiaries incorporated in India shall undertake a secretarial audit and attach its secretarial audit report. The Companies Act Section 204(1) make the secretarial report mandatory to be attached to the board reports. The scope of the secretarial Audit is also applicable to the nature of business so there are various other specific laws such as income tax, labour laws, etc.

Penalties in Secretarial Audit

Section 204 subsection 4 of the Companies Act, 2013 states that if a company contravenes the provision of Section 204 of the Companies Act, every person in the company shall be punished with a fine which shall not be less than one lakh rupees but may extend to five lakh rupees. If a secretarial auditor has an idea that an offence involving fraud is being committed by an employee of the company then the auditor has to report the central government but if he fails to do so then he will be punished under section subsection 15 of Section 143 of the Companies Act, 2013 and Section 448 deals with the penalty for false statements to any report, certificate, financial statement etc.

Important Criteria focused for performing Secretarial Audit

1. Planning

The secretarial Audit is performed by selecting key areas to examine, Documents to evaluate, and methods or strategies to apply to sustain growth in the market. The secretarial auditor should make certain that the Audit is completed on schedule and efficiently. Enterslice provides an experienced professional to plan the secretarial Audit which includes understanding your business and assessing the risk factors. Our team established an overall audit strategy for the engagement and development of an audit plan because adequate planning benefits the Audit of financial statements.

2. Examination

To guarantee compliance with applicable rules and regulations, the secretarial auditor should perform a comprehensive inspection of the company’s record. The secretarial auditor should also identify any weaknesses in compliance and recommend corrective actions. Enterslice provides secretarial audit services by our experts, who will conduct a thorough examination of an organization's financial records, transactions, and statements and ensure that the company’s information is accurate, complete and in compliance with relevant rules, laws or regulations.

3. Report

The secretarial auditor creates a detailed audit report that contains the audit findings, areas of non-compliance, and proposed corrective actions. It covers all the information of the company by checking on compliance with the overall applicable acts of the company and this report needs to be addressed to the members similar to an independent auditors report. Enterslice helps your company prepare the report by examining it thoroughly to give you the correct information about your company by mentioning the findings and loopholes for the companies. 

Benefits to Opting Enterslice for Statutory Audit

Due Diligence on Legal Documents

Enterslice performs a detailed examination of the company’s legal Documents, contracts, agreements, and licenses to check whether your company is complying with applicable laws and regulations. We investigate the company properly to provide confidence to the investors and minimize the risk.

Board of Director and Shareholder Meeting Compliance

Enterslice helps your company by expressing an opinion on whether the company is complying with the laws while conducting a meeting of the board of directors and shareholders to maintain accuracy and present an actual company report.

Annual Compliance Calendar Management

Enterslice provides annual compliance for your company to avoid risks that will arise due to non-compliance, and we will ensure that the company avoids failures and maintains efficiency in its workings.

Prevent Penalties and Legal Issues

Enterslice helps your company by investigating its functioning as per the laws, rules, or regulations to avoid penalties and legal actions against the company. If the company complies with the laws then it will help your company survive in the market competition.

Challenges for not performing Secretarial Audit

1. Non-Compliance with Laws & Regulations

The most challenging part of not conducting a secretarial audit is that your company will not comply with laws and this will impact the functioning of the company.

2. Legal Penalties

If the company is not complying with the laws and regulations then it will attract legal penalties and fines which will impact the goodwill and profits of your company.

3. Lack of Decision Making

The secretarial Audit provides valuable insights into the company's operations and if there is no secretarial audit then there will be no insights or strategies for the company's operation which will affect the decision-making.

4. Reduced Transparency

The company will not promote transparency if its functioning does not comply with the laws, and this will affect investors' confidence in investing in your company.

Who needs to conduct a Secretarial Audit?

A secretarial Audit is required for some companies, and the ways of conducting the secretarial Audit are stated under section 204 of the Companies Act, 2013; all publicly traded companies are to perform a secretarial audit as per the SEBI Regulations, and the private companies have a choice to conduct the secretarial Audit for good corporate governance practices. Even SMEs can perform the secretarial Audit to ensure good governance.

Secretarial Compliance Management and Due Diligence in Startups

The secretarial audit services help your company in examining the contracts or agreements complying with the laws or regulations for your startup's business so there will be fewer legal challenges for your business however Enterslice helps you to meet regulatory requirements to meet the growth in the business. The accurate information and compliance by our experts will help your startup achieve growth and attract investors. Enterslice also helps your startup review your policies and rules for the code of conduct for directors and shareholders, and it also ensures that all the Documents are accurately prepared as per the laws because our team provide due diligence to all the legal Documents and reports.

Frequently Asked Questions

The secretarial Audit is a compliance management system and it acts as an effective tool for corporate compliance management.

The report is maintained to ensure that the company has complied with all the applicable laws, rules and regulations and includes necessary improvement actions.

Yes, a Secretarial audit must be carried out in the format stated under Form MR-3.

The report usually gets signed by the certified company secretary.

When the secretarial audit is prepared, it must be submitted as per the requirements of the board meetings.

The following companies are required to carry out secretarial audits such as:

·        Listed Companies

·        Companies with paid-up capital of Rupees 50 crore,

·        The Turnover of the public company is more than Rupees 250 Crore,

·        Borrowing of the public company is more than Rupees 100 Crore or more.

As per the provision of Section 204 of the Companies Act the listed company is mandatory to perform the secretarial Audit and for private companies, it's voluntary to perform the secretarial Audit.

Yes, it needs to be examined while conducting the secretarial Audit.

The secretarial auditor is required to report the actions bearing on the affairs of the company complying with the laws, rules or regulations.

At present ICSI has not placed any restrictions on the number of secretarial audits.

Section 143 of the Companies Act 2013 deals with the power and duties of auditors, and sub-section (14) provides the provision for conducting secretarial audits under section 204.

If any company is found contravening the provisions, it shall be liable for punishment.

The ICSI has established the structure for conducting secretarial audit reports.

A secretarial audit must consider the tax rule because the procedure of the Audit depends on the company complying with the tax laws.

The company and all its related members if contravene any provisions of this section shall be punished with a penalty of fines of Rupees one lakh and which can be extended to Rupees five lakh.

The benefits of the secretarial audit are that it attracts the confidence of investors, stakeholders, employees, and management in the function of the company and maintains goodwill.

Reviewing of the company registration Documents,

Verification of the statutory register,

·        Reviewing the BOD and shareholder meetings,

·        Review of share capital and related transactions,

·        Compliance with laws,

·        Review of the business policies,

·        Verification of compliance with the companies' internal controls. 

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