Ensuring Corporate Governance: A Guide to Secretarial Audit Services in India
In India’s evolving business environment, adhering to legal and regulatory norms is not just a requirement but a necessity for companies striving for credibility and trust. A secretarial audit serves as an independent assessment of a company’s compliance with corporate governance norms and statutory obligations under the Companies Act, 2013.
This article delves into the significance of secretarial audit services in India, their legal framework, benefits, and how professional expertise can help businesses stay compliant.
Why Are Secretarial Audits Important in India?
- Mandatory for Specific Companies
The Companies Act, 2013, mandates secretarial audits for the following entities:
- Listed Companies: To ensure transparency and public accountability.
- Public Companies: With a paid-up share capital of ₹50 crore or more, or a turnover of ₹250 crore or more.
- Benefits for All Companies
Even companies not required to undergo a secretarial audit can gain the following benefits:
- Early Detection of Non-Compliance: Proactively addresses any legal or regulatory lapses.
- Improved Corporate Governance: Encourages ethical and transparent decision-making practices.
- Enhanced Stakeholder Confidence: Demonstrates the company’s commitment to compliance and accountability, fostering trust among investors and stakeholders.
What Does a Secretarial Audit Entail?
A secretarial audit includes:
- Reviewing Statutory Filings: Verifies compliance with filing requirements, such as annual reports, board resolutions, and meeting minutes.
- Assessing Registers and Records: Ensures proper maintenance of statutory records as per legal mandates.
- Evaluating Governance Procedures: Checks adherence to proper procedures in board meetings, committee activities, and decision-making processes.
Only a practicing Company Secretary (CS) certified by the Institute of Company Secretaries of India (ICSI) is authorised to conduct this audit.
Regulatory Framework for Secretarial Audit in India
- Key Provisions
- Section 204 of the Companies Act, 2013: Mandates the appointment of a Company Secretary to conduct secretarial audits for listed companies and others meeting specific criteria.
- Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014: Specifies companies required to conduct secretarial audits, reinforcing the importance of regulatory adherence.
- Recent Case Law
In HPCL v. Registrar of Companies (2021), the NCLT emphasised the role of secretarial audits in ensuring corporate governance. The judgment highlighted that timely audits mitigate compliance risks and protect stakeholder interests.
Steps to Conduct a Secretarial Audit
- Appointment of a Practicing CS: Engage a qualified professional with expertise in governance.
- Verification of Compliance Records: Thoroughly examine legal filings, statutory registers, and company policies.
- Drafting the Audit Report: Prepare Form MR-3 for submission to the company’s board of directors.
- Address Non-Compliance Issues: Provide recommendations to rectify identified gaps.
Digital Transformation in Secretarial Audits
With the rise of technology, companies can streamline compliance monitoring through digital tools. Automation and real-time tracking can make secretarial audits more efficient and error-free.
Outlook: A Step Towards Governance Excellence
A secretarial audit is more than just a compliance requirement; it’s a strategic step towards building a transparent and sustainable business. Companies must prioritise robust governance and seek professional expertise to navigate the complexities of regulatory frameworks.
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