Compliance Check – Secretarial Audit
Master Secretarial Audit
Comprehensive Compliance & Corporate Governance Guide for Indian Businesses
📌 What is Secretarial Audit?
A Secretarial Audit is an independent verification process conducted by a Practicing Company Secretary (PCS) to ensure a company complies with the complex web of corporate laws, regulatory requirements, and secretarial standards. It strengthens governance and detects non-compliance early.
Governing Law
Regulated under Section 204 of the Companies Act, 2013 and Rule 9 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014.
📋 Applicability of Secretarial Audit
| Category of Company | Threshold Criteria (Mandatory) |
|---|---|
| Listed Companies | All listed companies must undergo audit. |
| Public Companies | Paid-up capital ≥ ₹50 crore OR Turnover ≥ ₹250 crore. |
| Any Company | Outstanding Borrowings/Loans ≥ ₹100 crore. |
👉 Note: Even if only one of these conditions is satisfied, the audit becomes mandatory for the financial year.
🎯 Core Objectives
- Ensure compliance with all laws
- Identify legal risks early
- Protect stakeholder interests
- Strengthen corporate governance
✅ Key Benefits
- Compliance Assurance
- Investor Confidence
- Risk Reduction & Prevention
- Hassle-free Decision Making
🔍 Scope of Audit
The audit is comprehensive and covers both core corporate laws and industry-specific regulations:
Major Laws Covered:
- Companies Act, 2013 and rules made thereunder
- Securities Contracts (Regulation) Act, 1956 (SCRA)
- Depositories Act, 1996
- Foreign Exchange Management Act (FEMA), 1999
- SEBI Act, 1992 and related regulations
Compliance & Regulatory Areas:
- Secretarial Standards issued by ICSI (SS-1 & SS-2)
- Listing Agreement / SEBI LODR compliance
- Industry-specific laws (Banking, Insurance, Pharma, etc.)
- Labour laws, environmental laws, competition laws
Systems & Process Review:
- Verification of books, records, and statutory registers
- Review of corporate governance practices
- Evaluation of internal compliance systems
- Monitoring adequacy and efficiency of processes
Audit Reporting & Observations:
- Identification of non-compliance and corrective actions
- Reporting observations, qualifications, and adverse remarks
- Review of Board structure and decision-making processes
- Reliance on reports from statutory auditors and professionals
- Coverage of other laws such as Income Tax, GST, Customs
⚙️ The Audit Process
1. Initial Discussion
The secretarial auditor meets key management personnel to understand the company’s organisational structure, governance framework and business operations. During this stage, the auditor gathers information on policies, internal procedures, compliance systems and the roles of directors and key managerial personnel. This discussion helps identify applicable laws and regulations and plan the audit scope.
2. Review of main company records
The auditor examines corporate records to ensure they are properly maintained. These include statutory registers, minutes of board and shareholder meetings, resolutions passed by the board, filings made with the Registrar of Companies (ROC), shareholding records and other relevant documents. The goal is to verify that records comply with the prescribed formats and timelines required by law.
3. Verification of legal compliance
The auditor checks whether the company complies with key laws, including the Companies Act, 2013, Securities Contracts (Regulation) Act, 1956, Depositories Act, 1996, Foreign Exchange Management Act, 1999, and the SEBI Act, 1992, along with SEBI regulations applicable to the company (for example, SEBI LODR Regulations and Insider Trading Regulations for listed companies). Filings, approvals, disclosures and procedural requirements are verified to ensure legal compliance.
4. Sharing of preliminary observations )
If the auditor identifies gaps, irregularities or potential non-compliances during the review, these observations are discussed with management. The company can provide clarifications, supporting documents or corrective explanations before the audit report is finalised.
5. Submission of the final report (Form MR-3)
After completing the review and considering management responses, the auditor prepares the Secretarial Audit Report in Form MR-3. The report highlights the company’s compliance status, notes any non-compliances or observations and may include recommendations. This report is attached to the company’s Board Report and presented to shareholders.
📂 Documents Required for Secretarial Audit
Incorporation & Constitutional Documents:
- Certificate of Incorporation
- Memorandum of Association (MOA)
- Articles of Association (AOA)
- Certificate of Commencement of Business (if applicable)
- PAN, TAN and other registration certificates
Statutory Registers & Records:
- Register of Members
- Register of Directors and KMP
- Register of Charges
- Register of Contracts and Arrangements
- Register of Loans, Guarantees and Investments
- Register of Share Transfers & Allotments
Board & Shareholder Meetings:
- Notice & agenda of Board meetings
- Minutes of Board meetings
- Notice & agenda of General meetings (AGM/EGM)
- Minutes of General meetings
- Attendance registers
ROC Filings & Compliance:
- Annual Return (MGT-7 / MGT-7A)
- Financial Statements (AOC-4)
- Board Resolutions (MGT-14)
- Director Forms (DIR-12)
- Return of Allotment (PAS-3)
- Charge Forms (CHG-1 / CHG-4)
Share Capital & Securities:
- Share Certificates
- Share Transfer Forms
- Allotment Records
- ESOP Documents (if applicable)
- Demat & Depository Records
Director & KMP Documents:
- DIN Details
- DIR-2 Consent
- DIR-8 Declaration
- MBP-1 Disclosure
- KMP Appointment & Contracts
Financial & Transaction Records:
- Audited Financial Statements
- Related Party Transactions
- Loan Agreements & Borrowings
- Investment Records
Regulatory & Industry Compliance:
- SEBI Filings (if applicable)
- Stock Exchange Disclosures
- Secretarial Standards (SS-1 & SS-2)
- Industry-specific Licenses
Policies & Governance:
- Corporate Governance Policies
- Code of Conduct
- Whistleblower Policy
- CSR Records (if applicable)
Other Supporting Documents:
- Shareholder Agreements
- Contracts & Agreements
- Internal Compliance Reports
- Regulatory Correspondence
⚠️ Penal Provisions
Failure to comply with Secretarial Audit requirements can lead to severe consequences:
- Monetary Fine: ₹1 Lakh to ₹5 Lakh.
- Fraud Cases (Sec 447): Severe imprisonment and heavy penalties.
- False Statements (Sec 448): Punishable under fraud provisions.
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