compliance-check-secretarial-audit

COMPLIANCE CHECK- SECRETARIAL AUDIT

DEFINITION

A secretarial audit is an important part of the organization’s compliance management system. The secretarial audit acts as a very important and effective tool in the corporate world for compliance management. It also helps in the detection any kind of noncompliance and helps a company to take the respective measures. The secretarial audit is a process which helps to check the company compliance with the laws/ rules/ regulations/procedures/ records/ accounts/maintenance of books etc. The secretarial audit is usually conducted by a certified independent professional and is done to ensure that all legal and procedural specifications are followed and observed by the said company/organization. The secretarial audit always follows the due process. It is primarily a method to monitor the compliance concerning the requirements of stated laws.

COMPANIES THAT NEED SECRETARIAL AUDIT

It is compulsory for the below mentioned companies to get a secretarial audit.

  • Every single listed company
  • Each and every public company. Certain conditions are applicable which are as follows. It has to be a public company with a paid-up share capital in excess of INR 50 crore or a company with a turnover that is in excess of INR 250 crore. If any of the above-mentioned criteria are met, then a secretarial audit is compulsory for such a company. The company then gets in touch with a practicing and qualified company secretary to conduct a secretarial audit.

INDIVIDUALS WHO CAN BE APPOINTED FOR A SECRETARIAL AUDIT

Any member of the Institute of Company Secretaries of India, who is a certificate holder is qualified and eligible to perform a secretarial audit and provide the secretarial audit report to the said company/organization.

SECRETARIAL AUDIT REPORT

The secretarial audit report must fulfil the below mentioned conditions:

  • It should be prepared by a certified company secretary.
  • The secretarial audit report should be prepared in Form M-3R
  • Considering how important corporate governance is in today’s business environment, the secretarial audit has annexed the Board’s Report.

SERVICES PROVIDED UNDER SECRETERAIAL AUDIT

A secretarial audit report checks the compliance of various rules & regulations under the Companies Act as well other corporate and economic laws which are applicable to the company. A secretarial audit is enacted via section 204 of the 2013 Companies Act. Under this section, a regulator monitors a company/organization for compliances which are required by the stated laws/processes. Each and every company has to comply with government rules/regulations and laws. Any non-adherence to the compliances can be dangerous for the company. Companies/organizations need to conduct a periodical examination of their work to point out the errors and to maintain a strong compliance mechanism system in any organization.

A detailed secretarial audit consists of the following points:

  • It checks the reports on compliances
  • It helps protect the interest of employees/customers/society, etc.
  • A secretarial audit helps in avoiding any unnecessary legal actions by the law enforcement agencies
  • It helps to point out the poor compliances and non-compliances practices of the company
  • It helps to ensure that the procedural and legal requirements are complied.
  • A secretarial audit also helps in maintaining the image and the goodwill of a company.

BENEFITS OF SECRETARIAL AUDIT

  • A secretarial audit helps a company/organization with the legal and procedural requirements to make sure the compliances are handled properly.
  • A secretarial audit helps to spread a level of confidence to the directors/key management personnel (KMP) of a company
  • A secretarial audit helps directors of a company directors focus on important business activities and meetings, while keeping the company safe and compliant of important legal and procedural matters
  • A secretarial audit helps reduce the workload of law enforcement authorities. It also showcases the right path to the company’s investors by keeping the records compliant of all legal requirements

SALIENT DETAILS OF COMPANIES ACT 2013

  • The reviews of charter documents/ alterations if any and related compliances
  • Share capital and debentures rules, compliance related to ICDR, pre and post Issue compliances
  • The pre/post borrowing compliances, any compliances in regards to borrowing limit
  • Any pre or post compliances of public deposit if any
  • Notices/agenda/minutes of board/general meetings
  • Declaration and payment of dividend/pre/post Compliances
  • The appointment/resignation of board of directors
  • Internal Audit and Internal Audit Report
  • The tenure of appointment/rotation/auditor appointment
  • Any kind of CSR compliances in regards to committee formation/limit of contribution
  • Anything related to party transactions & its compliances
  • Inter corporate loan/investments/corporate guarantee
  • Pre and post compliances in regards to buy-back of shares
  • Annual return & annual compliances
  • The member register and any changes in shareholding pattern
  • The 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, 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, 1961
  • The Child Labour (Prohibition and Regulation Act), 1986
  • The Employees’ Compensation Act, 1923
  • The Apprentices Act, 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
  • The previous year 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)
  • The Child Labor (Prohibition and Regulation Act), 1986
  • The Employees’ Compensation Act, 1923
  • The Apprentices Act, 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 and Control of Pollution) Act,1974
  • The Air (Prevention and Control of Pollution) Act, 1981
  • Tax deducted at Source
  • Advance Tax
  • GST
  • Professional, Property and Dividend Tax
  • The registers which are maintained under labour laws
  • The disclosure and declaration for code of conduct which have been received from the directors
  • The details of the sitting fees and remuneration details paid to the directors of the said company
  • The evidence and proof of CSR amount spending by the said company
  • SAST Disclosures
  • The bank account details of dividend issues

SECURITIES CONTRACTS (REGULATION) ACT, 1956 (‘SCRA’)

DEPOSITIRIES ACT 1996

  • Labor, Fiscal, and Other laws that are restricted to the material assets of the Company
  • The filings with the RBI in the situation if there is any kind of unfamiliar speculation

RECENT UPDATES & NEWS

25-MAR-2020: MORE UNLISTED COMPANIES TO COME UNDER SECRETARIAL AUDIT

With effect from 1st April 2020, all unlisted companies/private firms with outstanding loans on or above INR 1 billion will come under the ambit of the secretarial audit. Such companies will have to submit the findings of the mandatory audit to the MCA, without fail.

20-MAR-2020: ICSI SETS UP NEW SECRETARIAL AUDIT STANDARDS

The Institute of Company Secretaries India (ICSI) has published new guidelines for Secretarial Auditing standards for the upcoming financial year. This is in adherence to the audit provisions mentioned in Section 204 of the Companies Act, 2013.

Our team of tax and legal experts at ACE ALLIANCE will help you address all your issues and queries in regards to secretarial audit laws.