A Company Secretarial Audit ensures that a company complies with statutory obligations and regulatory frameworks. It is conducted by a qualified Company Secretary in practice. It is mandatory for listed companies and public companies with paid-up capital above ₹50 crore or turnover exceeding ₹250 crore. The audit examines compliance with:
The Companies Act, 2013
SEBI regulations
Other applicable laws and standards
The audit enhances transparency, accountability, and stakeholder confidence. It enforces compliance, ensures governance, and identifies risks.
As per Section 204 of the Companies Act, 2013, Company secretarial audit applies to all listed companies and specific public companies meeting the following thresholds:
(a) companies with a paid-up share capital of ₹50 crores or more, or
(b) companies with an annual turnover of ₹250 crores or more.
Section 204 mandates the submission of the Company secretarial audit Report in the prescribed format. According to Rule 9(2), the report must be in Form MR-3, issued exclusively by a Company Secretary in Practice.
The objectives of a Company Secretarial Audit are multi-dimensional, aimed at ensuring that an organization operates within the legal framework and follows sound governance practices. The audit not only verifies statutory and regulatory compliance but also enhances the effectiveness of corporate governance, thereby reducing legal and operational risks. This structured process supports the Board of Directors and management in adhering to key responsibilities and fulfilling stakeholder expectations.
1. Ensure Compliance with Corporate Laws and Regulations
A key objective is to verify compliance with multiple corporate laws including the Companies Act, 2013, SEBI Regulations, Secretarial Standards, and other applicable laws.
Companies Act, 2013
SEBI Regulations (for listed entities)
Secretarial Standards (SS-1 & SS-2) issued by ICSI
Other applicable corporate, environmental, labor, tax, and industry-specific laws
This audit ensures that the company has complied with all required provisions and maintained necessary filings, disclosures, and approvals.
2. Strengthen Corporate Governance Practices
The audit evaluates the governance structure of the company to ensure that statutory bodies and senior management comply with their roles. It promotes accountability and transparency within the organization.
Accountability and transparency
Adherence to best governance practices
Proper functioning of board processes, general meetings, and disclosures
3. Risk Identification and Mitigation
The audit identifies potential compliance risks, regulatory gaps, and internal control weaknesses. Early detection enables timely corrective action and better risk management.
Take corrective measures
Avoid penalties or legal disputes
Strengthen internal systems and documentation
This objective is crucial for risk management and legal assurance.
4. Verification of Records and Statutory Filings
It ensures accurate maintenance of records and timely filings with regulatory bodies, confirming the authenticity and reliability of corporate data.
Statutory registers (Members, Directors, KMPs, Charges, etc.)
Board and general meeting minutes
Shareholder and securities records
Timely and accurate ROC, SEBI, and tax filings
This also confirms the authenticity and reliability of corporate records.
5. Improve Stakeholder Confidence and Market Reputation
An effective secretarial audit builds confidence among key stakeholders by demonstrating legal and ethical corporate operations.
Investors
Regulators
Financial institutions
Employees
By demonstrating that the company operates ethically and legally, it improves corporate credibility and public trust.
6. Enhance Internal Controls and Operational Efficiency
The audit assesses and suggests improvements to internal processes, promoting better compliance and performance management.
Workflow compliance
Policy implementation
Overall operational governance
This leads to better resource utilization and performance management.
7. Legal Due Diligence for Mergers, Acquisitions & Funding
Secretarial Audit serves as a vital tool in ensuring transparency and compliance during corporate transactions and fundraising.
Due diligence reports for M&A
Equity and debt funding
Strategic partnerships
It assures external parties of the company’s regulatory standing and governance health.
8. Compliance Awareness Among Directors and Management
The audit nurtures a culture of compliance by educating and updating internal teams on regulatory responsibilities and consequences.
Educating stakeholders about governance requirements
Training internal teams on regulatory changes
Creating awareness about the consequences of non-compliance
9. Support for Regulatory Inspections and Litigation Readiness
The audit prepares the company for any form of regulatory scrutiny or legal evaluation by maintaining organized and compliant documentation.
Regulatory inquiries or inspections (from MCA, SEBI, etc.)
Internal or statutory investigations
Legal scrutiny and court proceedings
10. Facilitates Long-Term Sustainability and Ethical Growth
By upholding ethical standards and governance practices, the audit supports responsible business growth and CSR obligations.
Sustainable business practices
Corporate social responsibility (CSR) compliance
Long-term value creation for all stakeholders