Compliance is one of the main components of a Applicability of secretarial audit. Regardless of their size or industry, businesses must abide by a number of laws and regulations. These include, among other things, corporate law, securities law, environmental laws, labor laws, and tax laws. Any of these broken can lead to harsh fines, legal issues, and reputational harm for a business. Secretarial audit carefully assesses a company’s compliance with these rules to make sure it runs within the law. Enquiry here
What is an applicability of secretarial audit?
Companies operating in India are required to abide by the laws and regulations outlined in the Companies Act, 2013 (the “Act”).
Implementing the provision in accordance with letter and spirit is vital to foster a good complaint corporate culture. Therefore, it becomes vital to examine company activities from the perspective of compliance adherence by Companies in order to ensure effective compliance and corporate governance practice.
In business, the statutory audit of companies, which is conducted by chartered accountants who submit their Audit Report on the financial performance of the Company, covers the compliance of accounting and finance of the Company. However, the statutory audit of the Companies did not assess the Company’s secretarial compliances.
For those businesses that are regulated by the Act, an audit that must be conducted independently and by a professional is required in order to maintain the same level of scrutiny over secretarial compliance.
Companies that are also registered with other regulatory bodies, such as SEBI, RBI, IRDA, etc., or to which other acts and laws, such as the factory act, securities act, or labor law, apply, must also abide by the rules and regulations set forth by their respective regulatory bodies.
The term “secretarial audit” accurately describes an audit in which all compliance related to the secretarial element, as well as other compliances under different Company statutes, are examined and evaluated. The Secretarial Auditor then submits a report to the Company. summary of the Company’s compliance situation.
Such audits reassure stakeholders in publicly traded corporations where their interests are typically put at greater risk since they accurately portray the company’s genuine compliance status and demonstrate the effectiveness of its internal control system. Additionally, using these secretarial audit reports of the Companies, authorities can evaluate the Company’s compliance status.
Which Companies are required to conduct Secretarial Audit?
The following firms must perform secretarial audits, according to Section 204 of the firms Act of 2013 and Rule 9 of the Companies (Appointment and Remuneration Personnel) Rules of 2014.
As of the most recent date of the most recent audited financial statement Secretarial audits must be conducted by Listed Companies and their significant unlisted subsidiaries that are formed in India, according to Regulation 24A of SEBI (LODR) 2015. A Secretarial Compliance Report must also be submitted by companies in accordance with SEBI Circular CIR/CFD/CMD1/27/2019, issued February 8, 2019.
Who will conduct Secretarial Audit?
Section 204(1) of the “Act” states that only a Company Secretary with a certificate of practice is permitted to undertake secretarial audits.
Members of the Institute of Company Secretaries of India (ICSI) are company secretaries. They are qualified professionals with knowledge in different fields, including secretarial work, and are allowed to carry out secretarial audits of the companies. In order to give a framework and outline how a Practicing Company Secretary can perform the audit, the ICSI has also released guidelines.
Scope of Secretarial Audit
Secretarial audits are primarily conducted to confirm that the Company is in conformity with internal controls and secretarial management. Therefore, the structure of MR-3 has captured numerous laws as applicable to the Company in order to follow the intent in true text and spirit.
The company’s secretarial auditor must check and report on the following compliance:
- The Securities Contracts (Regulation) Act of 1956 (the “SCRA”) and the rules made thereunder;
- The Companies Act of 2013 and the rules established thereunder;
- The Foreign Exchange Management Act, 1999 and the rules and regulations made
- thereunder to the extent of Foreign Direct Investment, Overseas Direct Investment, and External Commercial Borrowings Securities and Exchange Board of India.
- Securities and Exchange Board of India Act, 1992 (the “SEBI Act”), Direct Investment and External Commercial Borrowings:
- The 2015 Regulations of the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirement)
- Regulations from 2011 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers)
- Regulations from the Securities and Exchange Board of India (Prohibition of Insider Trading) in 1992 and The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) in 2009 prohibit insider trading.
- Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines of the Securities and Exchange Board of India, 1999
- Regulations for the 2008 Securities and Exchange Board of India (Issue and Listing of Debt Securities)
- The Companies Act and interacting with clients are covered by the Securities and Exchange Board of India (Registrars to a 12 Issue and Share Transfer Agents) Regulations, 1993.
- Regulations from the Securities and Exchange Board of India (Delisting of Equity Shares) of 2009
- the Securities and Exchange Board of India (Buyback of Securities) of 1998 are two examples.
6.The Institute of Company Secretaries of India has published secretarial standards. Additional topics the auditor must address in its report include:
- The auditor must provide information on adequate systems and procedures that are appropriate for the company’s size and operations.
- Mention concrete instances of specific acts or occurrences that had a significant impact on the company’s operations in accordance with the aforementioned laws, rules, regulations, guidelines, standards, etc.
- Indicate whether the Company’s board of directors has been properly formed and whether any changes to the board’s composition during the review period were made in accordance with the Act’s rules.
- All directors are provided sufficient notice, an agenda, and agenda notes prior to the board meetings.