Secretarial Audit
for bigger companies: A formality or Serious Audit
Due to Non Compliance by the
specific department or employees, Directors and Managing Directors are being
jailed and not even bailed because no proper secretarial Audit is performed in
big companies.
While adding Secretarial Audit
for bigger companies in the law, government thought to make it mandatory to
make sure that 13-15 Lakhs companies operating in India are enough compliant
that the stakeholders can trust their compliance function.
Monitoring these companies is
very important. Law is just because to protect the interests of stakeholders.
If companies do not follow law, the interests of stakeholders are infringed
So, there are below mentioned
companies which required Secretarial Audit to be done independently;
-
(1) Every
listed company
-
(2) Every
public company having a paid-up share capital of Fifty Crore rupees
or more; or
-
(3) Every
public company having a turnover of Two Hundred Fifty Crore rupees
or more.
-
Secretarial Audit is also mandatory to a private
company which is a subsidiary of a public company, and which falls under the
prescribed class of companies
Pls note
that if during the year company reduces the capital then also Secretarial Audit
is mandatory.
Secretarial
Audit of course is benefitting companies and therefore, companies are following
practice to opt for Secretarial Audit voluntarily, thereby reducing the risk of
closing down the factories, etc. So, basically promoter is more focused on running
the business and not compliance as a whole, to him and to the Board, and
Independent agency/ firm doing Secretarial Audit is of great help.
It is
important to note that when there is a default in a company, then, Executive Directors
who are generally Promoters are targeted first for the non Compliance while their
employees (If Professionals as Directors), and Non Executive Directors are wedged
later.
Now from
the angle of Investor, if Secretarial Audit has adverse remarks/
qualifications, then, he may choose to divest his investment and move out.
Even when
seen from the view of consumers, if it is well governed company, he gets
confidence in the company and accordingly whole society is benefited
Now, the
question from the company comes, how to select the Secretarial Auditors from
the list of so many Practicing Company Secretaries are concerned. Whether it
should be reference or send emails to PCS or the one who has proper knowledge
and have set detailed procedures on how to do Secretarial Audit.
There are
various factors upon which the Secretarial Auditors are been chosen;
-
Knowledge
of Corporate Laws
-
Big
Team
-
Manuals/
Checklists and Systems
-
Adherence
to timeline
-
A
person who is honest and unbiased.
After selecting the appropriate
team/ firm, now he is to be appointed by Board formally, all the appointments
goes through Audit Committee.
Scope of Laws;
As per the Secretarial
Report MR-3 there are some mentioned acts in it which are:
(i) The
Companies Act, 2013 (the Act) and the rules made there under;.
(ii) The
Securities Contracts (Regulation) Act, 1956 (‘SCRA’) and the rules made there
under;
(iii) The
Depositories Act, 1996 and the Regulations and Bye-laws Framed there under ;
(iv) Foreign
Exchange Management Act, 1999 and the rules and regulations made thereunder to
extent of Foreign Direct Investment, Overseas Direct Investment and External
Commercial borrowings
(v) The
following Regulations and Guidelines prescribed under the Securities and
Exchange Board of India Act, 1992 (‘SEBI Act’):-
(a) The Securities and
Exchange Board of India (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011;
(b) The Securities and
Exchange Board of India (Prohibition of Insider Trading) Regulations,
1992;
(c) The Securities and
Exchange Board of India (Issue of Capital and Disclosure Requirements)
Regulations, 2009;
(d) The Securities and
Exchange Board of India (Employee Stock Option Scheme and Employee Stock
Purchase Scheme) Guidelines, 1999;
(e) The Securities and
Exchange Board of India (Issue and Listing of Debt Securities) Regulations,
2008;
(f) The Securities and
Exchange Board of India (Registrars to an Issue and Share Transfer Agents)
Regulations, 1993 regarding the Companies Act and dealing with client;
(g) The Securities and
Exchange Board of India (Delisting of Equity Shares) Regulations, 2009;
and
(h) The Securities and
Exchange Board of India (Buyback of Securities) Regulations, 1998;
(vi)..............................................................
(Mention the other laws as may be applicable specifically to the company)
(i) Secretarial
Standards issued by The Institute of Company Secretaries of India.
(ii) The Listing
Agreements entered into by the Company with ….. Stock Exchange(s), if
applicable;
According to the point
(vi) we also have to compliance all other acts which are applicable to
that particular company.
So, it depends upon
the type of Company.
Company Specific laws applicable
on Company like Labour Laws, Environmental Laws, Factories Act applicable on
company, however, we have prepared certain list of Laws applicable on each
Industry.
After checking the Industry
specific Laws, we need to look upon Secretarial Standards issued by ICSI.
Further, it is very important to
fetch details from previous Annual Report and areas like;
-
Insider
Trading
-
Inter
Company Transactions
-
Inter
related Transactions
-
Loans
and advances given to companies
-
Use
of IPO funds
-
Donation
to Political parties
-
CSR
-
Board
processes
-
Managerial
Remuneration
Company role/ CS in employment
Role
-
To
provide the auditors with records/ information
-
Sec
204 provides duties of CS in company
-
And
also Secretarial Auditors are required to be invited in AGM
To know more, Contact CS Neha
Seth at csnehaseth@gmail.com , neha@steerabidance.com or call us at
9871903449
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