Secretarial Audit

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Detail Explanation about Secretarial Audit

With the Increasing compliance in the corp-orates and to keep an eye on the compliance's made under law by the corp-orates. Government has introduced the concept of Secretarial Audit under Companies Act, 2013.

Secretarial Audit can be defined as the check made by the professional on the compliance's made by the company on the applicable laws applicable to them.

Secretarial Audit is not only useful for the government for the audit purpose but it also helps the corp-orates in many ways such as:

  • To assure the management that proper compliance has been made.
  • To avoid the risk of non-compliance
  • It gives assurity to the shareholders
  • It helps the company to know the non-compliance and to mitigate them by taking the corrective measures.
  • To avoid the non-compliance in near future.
  • It helps the company in building their corporate image.
  • It helps to improve the operations of the company
  • It helps to monitor the laws applicable to the company

Companies should conduct the secretarial audit not only to adhere to the laws but as a good practice to ensure that they are adhering to all the applicable compliance's.

Applicability of the Secretarial Audit Act

As per the Provisions of companies Act, 2013, Secretarial audit is applicable on:

  • Every listed company
  • Public companies having a paid-up share capital of Fifty Crore rupees or more; or
  • Public companies having a turnover of Two Hundred Fifty Crorerupees or more.

Who Give the Secretarial Audit Report?

Secretarial Audit can be given by a company secretary in practice and It shall be given in the prescribed format i.e. MR-3.

If there is any qualification or observation made by the practicing company secretary it shall be mention in the Secretarial Audit report and as per section 204 (1) company shall annex the same with the board report along with the justification on the report made under the Secretarial Audit Act.

Scope of the Secretarial Audit Act

  • The Companies Act, 2013 (the Act) and the rules made there under;
  • SCRA  Act, 1956 and the rules made there under;
  • Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992;
  • Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009;
  • Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999
  • SEBI (Issue and Listing of Debt Securities) Regulations, 2008;
  • SEBI (RTA) Regulations, 1993 regarding the Companies Act and dealing with client;
  • Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; and
  • Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998;
  • Secretarial Standards issued by ICSI
  • Listing Agreements entered into by the Company with ….. Stock Exchange(s), if applicable;

Penalty for Non-Compliance

If a company or an officer or company secretary in practice contravene any of the provisions of section 204, it shall be liable to a penalty of Rupees one Lakh which may extend to five Lakh rupees.

Further, Section 448 of companies Act, 2013 says that if in under any return, financial statement, prospectus or any other documents of the company under the provision of companies Act,2013 or rules made there under, makes a statement

(a) Which is false in any material particulars, knowing it to be false; or

(b) Which omits material fact, knowing it to be material

Shall be a liability to penalty as per section 447 of companies Act, 2013 which is an amount of at least ten lakh rupees or one percent of the turnover of the company, whichever is lower.

A Person Shall also is punishable with the punishment which shall be less than six months with imprisonment but which may not be extended to more than ten years and shall also involves the fine which shall not be less than the amount involve in fraud, nut can be extended up to three months.

Where the fraud involves public interest, the tenure of imprisonment shall not be less than three year.

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