Secretarial Audit Report
The Secretarial Audit is mandated by the provisions of the Companies Act, 2013. Every listed Companies and every public companies having paid-up share capital of Rs. 50 Crore or more; or turnover of Rs. 250 Crore or more, are required to appoint a Company Secretary in Practice as Secretarial Auditor.
Therefore, Private Companies are not required to appoint Secretarial Auditor at all and only a Company Secretary in Practice can be appointed as Secretarial Auditor.
The Board of Directors can appoint the Secretarial Auditor by the Board Resolution and no Shareholders’ Approval required. Such resolution required to be filed with the Registrar of Companies (RoC).
The Secretarial Auditor shall issue Secretarial Audit Report in form MR-3. The same will become part of the Board’s Report and the directors shall made full explanation in their report, the qualification or observations (if any) given by the Secretarial Auditor in his Report.
It is advisable to the Secretarial Auditor to take Management Representation Letter before issuing his In form MR-3.
Since, the advent of the Section 204 of the Companies Act, 2013 and the format of Form MR-3 as provided under the Companies (Appointment and Remuneration) Rules, 2015, there are anomalies on the Point No. VI of Form MR-3 which ask as “Mention the other laws as may be applicable specifically to the Company.”
It seems from the industry practice that the professionals are not sure about which laws should be included in Point No. VI.
It is hereby advisable with reference to the Guidance Note on Secretarial Audit issued by the Institute of Company Secretaries of India (ICSI), since it is written as ‘specifically to the Company’, it clears that here it requires industry specific laws. Eg. in case of Banking Companies, all the laws specifically apply to Banking Industry requires to be mentioned, In case of Petroleum Companies, all the laws specifically apply to Petroleum Industry requires to be mentioned, same with Insurance Companies, Media and Broadcasting Companies, Pharma Companies etc.
No need to mention the General Laws like Labour Laws, Competition Laws, etc.
The secretarial auditor shall have to examine the whether the system is in place to monitor the compliance of general laws like labour laws, environment laws etc.
It is to be noted that in case of incorrect audit report, the auditor shall be held responsible and penalised under Sections 448 and 447 of the Companies Act, 2013
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