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
The Objectives of Secretarial Audit go far beyond simple compliance checks—they are designed to ensure that every company, including a public company, private company, or listed company, adheres to applicable laws and follows sound corporate governance practices. Under Section 204 of the Companies Act, 2013, it is mandatory for certain companies to conduct this audit, which must be carried out by a Practising Company Secretary (PCS).
The audit findings are a critical input in the Board’s Report, guiding corporate decision-making and compliance strategy.
1. Ensure Compliance with Company Law and Applicable Laws
The primary objective is to verify compliance with various laws and regulations applicable to the company.
Companies Act, 2013
Company Law provisions and Secretarial Standards
Regulations under the Foreign Exchange Management Act, SEBI Act, Exchange Board of India Act, Securities Contracts (Regulation) Act, and Depositories Act
Other applicable laws, environmental laws, and general laws
This includes compliance in areas such as Foreign Direct Investment, Overseas Direct Investment, Issue of Capital, and filings with government authorities. The audit confirms that officers of the company and directors fulfill their legal duties, as reflected in the Board Report and annual report.
2. Assess Corporate Governance Practices
Secretarial Audit evaluates the company’s governance structure and corporate behavior.
Functions of the Board of Directors, Executive Directors, and board committees
Compliance with Remuneration of Managerial Personnel rules
Operation of board meetings, and adherence to Secretarial Standards (SS-1 and SS-2)
Implementation of schemes such as Employee Stock Purchase Plans
The goal is to strengthen corporate governance and ensure responsible behavior by the officers of the company.
3. Identify and Mitigate Compliance Risk
The audit helps identify compliance risks, lapses, and procedural issues.
Addresses false statements or inaccurate filings
Ensures readiness for regulatory scrutiny
Protects companies with outstanding loans from public financial institutions
This enhances the company’s effectiveness of risk management and shields it from potential legal actions.
4. Verify Statutory Records and Registers
The audit ensures proper documentation and form filing as per Company Law.
Statutory registers for Equity Shares, directors, related parties, and loans
Proper filing of forms such as e-form MGT, and disclosures under Buyback of Securities, Substantial Acquisition of Shares
Documentation in such form as required by the Companies Act
5. Define the Scope of Secretarial Audit and Ensure Strategic Alignment
The audit ensures that compliance scope is aligned with regulatory expectations and industry practices.
Evaluating compliance with sector-specific laws for the insurance company, Banking Industry, or companies with foreign investment
Ensuring compliance with the Listing of Debt Securities guidelines
Enhancing overall corporate compliance management
The audit ensures that the internal practices are in sync with external regulatory frameworks.
6. Strengthen Board Oversight and Risk Management
Secretarial Audit supports the Board in fulfilling oversight and risk management roles.
Monitoring governance in unlisted subsidiaries or joint ventures
Ensuring responsible financial practices involving External Commercial Borrowings
Improving oversight of day-to-day compliance obligations
7. Enhance Disclosure in Annual Report and Board’s Report
The audit validates the accuracy and timeliness of disclosures made in statutory reports.
Board’s Report
Annual Report
Filings with Registrar of Companies, Securities and Exchange Board of India, and other regulators
It also validates conformity with Disclosure Requirements under Company Law.
8. Monitor Appointment of Secretarial Auditor
The audit ensures proper appointment and review of the secretarial auditor.
Appointment of an eligible Practising Company Secretary with a valid certificate of practice
The appointment process follows regulatory norms
Performance reviews and possible reappointment are handled transparently
This process is part of the larger process of secretarial audit, carried out annually.
9. Build Confidence Among Stakeholders
The audit enhances transparency and accountability, boosting trust across all stakeholder groups.
Increase credibility among investors, regulators, and financial institutions
Prevent non-compliance that may lead to reputational damage
Strengthen stakeholder trust by ensuring transparency in operations
10. Realize the Benefits of Secretarial Audit
Secretarial Audit offers strategic, operational, and legal advantages.
Full legal compliance with various laws
Strengthening of internal systems
Protection of statutory auditors and company officers
Insights for operational improvements
Better preparation for M&A, IPOs, and funding
These benefits reinforce Secretarial Audit as an effective tool for both compliance and business growth.
The appointment of a Company Secretary plays a pivotal role in ensuring every company, especially a public company, private company, or listed company, complies with applicable Company Law provisions. Company Secretaries are essential to maintaining statutory registers, managing shareholder communications, and facilitating sound corporate governance practices.
The Secretarial Audit, mandated under Section 204 of the Companies Act, 2013, must be conducted by a Practising Company Secretary (PCS)—a professional member of the Institute of Company Secretaries of India (ICSI) holding a valid Certificate of Practice (COP). Only such an independent professional is authorized to carry out the audit and issue the report in Form MR-3.