A secretarial audit independently verifies a company’s compliance with laws, regulations and corporate governance standards. Conducted by a practising company secretary (PCS), it helps businesses identify non-compliance and take corrective action promptly.
In India, secretarial audit is governed by Section 204 of the Companies Act, 2013, and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.
Secretarial audit applicability
Secretarial audit applies to the following companies:
- All listed companies.
- Every public company with a paid-up share capital of ≥ ₹50 crore or a turnover of ≥ ₹250 crore.
- Any firm that has outstanding loans or borrowings from public financial institutions or banks, amounting to ₹100 crore or more.
Procedure to appoint a Secretarial Auditor
To engage a Practising Company Secretary (PCS) as a secretarial auditor, follow these steps:
- Board resolution for appointment: The Board of Directors approves the appointment of a PCS as the secretarial auditor based on their qualifications, experience and ability to conduct the audit according to applicable legal and professional standards.
- Issuing the engagement letter: After approval, the company provides a formal engagement letter outlining the scope, responsibilities and terms of the audit.
- Filing with the Registrar of Companies (ROC): Where applicable, the company files Form MGT-14 with the ROC within 30 days of passing the board resolution for the appointment.
Secretarial audit process
A secretarial audit is conducted in a structured manner. The process generally follows these steps:
- Initial discussion with management
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.
- 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.
- 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.
- 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.
- 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 a secretarial audit
Below is a comprehensive list of documents usually required for a secretarial audit. The exact requirements may vary depending on your company’s structure, industry and regulatory obligations.
- Incorporation and 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 and records
- Register of Members
- Register of Directors and Key Managerial Personnel (KMP)
- Register of Charges
- Register of Contracts and Arrangements in which directors are interested
- Register of Loans, Guarantees and Investments
- Register of Share Transfers and Share Allotments
- Board and shareholder meeting documents
- Notice and agenda of Board meetings
- Minutes of Board meetings
- Notice and agenda of General meetings (AGM/EGM)
- Minutes of General Meetings
- Attendance registers for Board and General meetings
- ROC filings and corporate compliance documents
- Annual Return (Form MGT-7 / MGT-7A)
- Financial statements (Form AOC-4)
- Board resolutions filed with ROC (Form MGT-14)
- Director appointment and resignation forms (DIR-12)
- Return of allotment (PAS-3)
- Charge creation/modification forms (CHG-1 / CHG-4)
- Share capital and securities records
- Share certificates issued
- Share transfer forms
- Allotment records and board resolutions
- ESOP / share option scheme documents (if applicable)
- Demat and depository records
- Director and KMP documents
- Director Identification Number (DIN) details
- Consent to act as director (DIR-2)
- Declaration of non-disqualification (DIR-8)
- Disclosure of interest by directors (MBP-1)
- KMP appointment documents and employment contracts
- Financial and transaction records
- Audited financial statements
- Related party transaction records
- Loan agreements and borrowing documents
- Investment records and approvals
- Regulatory and industry-specific compliance documents
- SEBI filings (for listed companies)
- Stock exchange filings and disclosures
- Secretarial Standards compliance records (SS-1 and SS-2)
- Industry-specific regulatory approvals or licences
- Policies and governance documents
- Corporate governance policies
- Code of conduct for directors and employees
- Vigil mechanism/whistleblower policy
- CSR policy and CSR committee records (if applicable)
- Other supporting documents
- Agreements with shareholders or investors
- Contracts and material agreements
- Internal compliance reports
- Any correspondence with regulatory authorities
Note: This list is indicative. The exact documents required depend on your company’s structure, industry, and regulatory requirements.
Conclusion
Under Section 204(4) of the Companies Act, 2013, a company, its officers or the practising company secretary (PCS) may face a monetary penalty for contravening provisions related to secretarial audit. The company, every officer in default and the PCS (if applicable) can be penalised up to ₹2 lakh for non-compliance.
Using accounting software like TallyPrime can help your business maintain accurate financial records, track transactions and organise data needed for audits and statutory filings. This supports smoother compliance and reduces the risk of errors or missed deadlines.
