Company Secretarial Audit

The Secretarial Audit (SA) is a part of Legal compliance reporting system. Government of India will be able to conceive and recognize the requirement for Secretarial Audit India only by giving the due statutory recognition to such an Audit. It will onus on the company to conduct a secretarial audit on its own.

Secretarial audit makes Board of Directors assured about compliance of different provisions affecting corporate entities and thus justify their bonafide objective of not being a party, directly or indirectly, to any technical error, commission or omission, violation or contravention, breaches and non- compliance. This will also enable the directors to adopt measures to mitigate the consequences of any offenses they might have committed unknowingly. With multiplicity of laws dealing with corporate functions and the alarming increment in the implications thereof, secretarial auditor will act as a catalyst and would be able to support the Board of Directors and the Government of India.

The section 383 A(1) specifies that, every company which is not required to employ a whole time secretary and has a paid up share capital of Rs 10 lakhs or more shall file with the ROC a certificate from a secretary in whole time practice. The Compliance Certificate was made mandatory under the Companies (Amendment) Act, 2000, w.e.f. 13-12-2000, which inserted a provision in section 383A(1) of the Companies Act making it mandatory for every company not required to employ a whole-time secretary under sub-section (1) and having a paid-up share capital of Rs. 10 lakhs or more shall file with the Registrar a certificate from a secretary in whole-time practice in such form and within such time and subject to such conditions as may be prescribed, as to whether the company has complied with all provisions of this Act and a copy of such certificate shall be attached with Board’s report referred to in section 217. But before issuing such certificate a company secretary has to audit the relevant documents of the company to conclude about the position of the company. The scope, content and criteria of the audit and of the compliance certificate are framed by the Central Government of India and the rules and regulations are made in this regard. The Central Government of India has framed Companies (Compliance Certificate) Rules, 2001 regarding this which specifies a 33-item formula for Compliance Certificate. The secretarial Audit is always in the better interest of every corporate management as; an independent professional will approve that the company has carried out the compliances under the Act. This will also serve the larger interest of the shareholders, creditors and employees. The secretarial audit also help the department of company affairs and the office of the registrar, as the documents filed by the small and medium companies covered by this provision will assure proper compliance. This will even be helpful in reducing work of the inspection department. The inherent objectives of secretarial Audit are:

  • Protection of Top Management from undesirable hassles,
  • Compliance of statutory regulations by the company.
  • These services are for investor, shareholder, lender protection so as to mitigate the level of scam and grievances.

SECRETARIAL AUDIT ADVANTAGE: -

The following are the advantages of the secretarial audit.

  • It ensures the owners that management and affairs of the company are being conducted in accordance with statutory requirements, and that the owners’ stake is not being exposed to excessive risk.
  • Ensures the Management of a company that those who are charged with the duty and responsibility of compliance with the legislation requirements are performing their duties competently, effectively and efficiently, so that the people in-charge of the day-to-day management of the company are not likely to be exposed to penal or other liability (and consequential risk and embarrassment) on account of non-compliance with law.
  • Assures them that they have done everything required under law.
  • Ensures them that the company has complied with the laws and, therefore, they are not likely to be exposed to action by law enforcement agencies for non-compliance by the company.
  • The secretarial audit being pro-active measure for compliance with a plethora of laws, it will have a salutary effect of substantially reducing the burden of the law-enforcement authorities
  • The secretarial audit provides assistance to bodies like SEBI, Stock Exchanges, Financial Institutions, Banks, etc. to gauge or measure the levels of compliance and non-compliance by the companies with whom they are concerned
  • The Secretarial Audit can be an effective due diligence exercise for the prospective acquirer of a company or controlling interest or a joint venture partner.
  • To provide comfort to investors that the company has been conducting its affairs following laws and, thus, their investment is safe and being taken due care of. SA will help unearth and check these practices and also enable law-enforcing agencies take well-timed corrective action by brining to book the guilty. In the era of Corporate Governance, SA will provide comfort to shareholders regarding the compliance as also to feel secured about their investments

What Rajput Jain & Associates Offers

Rajput Jain & Associates provides its clients with the following types of Secretarial Audit.

  • SECRETARIAL AUDIT FOR LISTED COMPANIES: - The Securities and Exchange Board of India (SEBI) has directed all listed companies to subject themselves to a secretarial audit undertaken by a qualified chartered accountant or company secretary. The move aims at reconciliation of total shares held in CSDL, NSDL and in physical form with the admitted, issued and listed capital of companies, says a SEBI release. Following this audit, SEBI has also asked companies to submit a quarterly audit report to the stock exchanges where their original shares are listed. Any differences observed are required to be brought to the notice of SEBI and depositories instantaneously.
  • SECRETARIAL AUDIT FOR PUBLIC UNLISTED COMPANIES:- Every Public Unlisted Company is needed to conduct auditing by a professional preferably, Company Secretaries India only if any notice is delivered from ROC or any other authority. Such an audit comments and presents Auditors view on the proceedings of the company; also it states compliance with all the provisions of companies Act, 1956, SEBI and other relevant acts by the Company and presents its unfavorable comments on the same, if any.
  • SECRETARIAL AUDIT FOR PRIVATE LIMITED COMPANIES: - Every Public Unlisted Company is required to conduct auditing by a professional preferably, Company Secretary on annual basis. Such an audit comments and presents Auditors view on the proceedings of the company, also it mentions whether the company has complied with all the statutory provisions of companies Act, 1956, SEBI and other relevant acts and presents its adverse comments on the same, if any.
  • SECRETARIAL AUDIT – CORPORATE GOVERNANCE AUDIT OF CENTRAL PUBLIC SECTOR UNDERTAKING:- Ministry of Heavy Industries and Public Enterprise has formulated guidelines on Corporate Governance for Central Public Sector Enterprises. These guidelines have evolved through a consultation process where the stakeholders had participated. These Guidelines are prepared keeping in view the provisions in the relevant laws, rules and instructions. These guidelines on corporate governance are formulated with the motive that the Central Public Sector Enterprises follow the guidelines in their functioning. Proper implementation of these guidelines would protect the interest of shareholders and relevant stakeholders.
  • DUE DILIGENCE REPORT FOR BANKS- PUBLIC AND PRIVATE LIMITED COMPANIES AS PER RBI COMPLIANCE: - The reserve bank of India vide its circular no. DBOD NO. BP. BC.46/08.12.001/2008-09 dated September 19,2008 advised all to scheduled commercial banks(excluding RRBs and LABs) to procure regular certificate by professional, preferably by a Company Secretary, about compliance of different statutory prescription that are in vogue, as per specimen given in the notification.The practicing Company Secretary is required to approve compliance in respect of matters prescribed in the RBI Circular No. NO. BP. BC.46/08.12.001/2008-09 dated September 19, 2008. Para (2) (iii) of the RBI Circular specifies that the Due diligence Report shall be in the format provided in the Annexure III thereto. The format has been subsequently revised and streamlined by RBI.
  • STOCK BROKERS AUDIT: - SEBI (Security and Exchange board of India) vide its Circular Number 20091016-5 as on 16th October, 2009 has directed to carry out complete Internal Audit on half yearly basis by chartered accountants, Company Secretaries India and cost and management accountant who are in practice and who do not have any conflict of interest.

To make the audit effective certain additional areas such as provisions associated to Prevention of Money Laundering Act, Investor Grievances, Handling Mechanism, Power of Attorney received from investors, status of compliance of last audit/inspection are to be covered.

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Private Limited Companies are those types of companies where minimum number of members is two and maximum number is two hundred. A private limited company has the limited liability of members but at the same time it has many characteristics as those of a partnership firm. A private limited company has all the advantages of partnership namely flexibility, greater capital combination of different and diversified abilities, etc., and at the same time it has advantages of limited liability, greater stability and legal entity. In this sense, a private limited company stands between partnership and widely owned public company. Identifying marks of a private limited company are name, number of members, shares, formation, management, directors and meetings, etc., The maximum number of directors shall have to be mentioned in the Articles of Association. In the grand of privileges and exemptions, the Companies Act has drawn a distinction between an independent private company and other private company which is a subsidiary to the other public company.

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