Secretarial Audit: A Path Towards The Corportate Governance

Secretarial Audit In India

Secretarial Audit: A Path Towards The Corportate Governance
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Secretial audit is the way of checking various company compliances that are made by the Company such as rules and regulations. In this article we will discuss secretial audit in detail.

Sometime back I met one promoter of X Co. while discussing each other’s business, I got to know that the Company has a good vision and continually achieving desired results. I congratulate the founder and I asked him whether his business has some policies in place or not. The answer was obviously negative as they were busy in making money and preparation of Human resource (HR) policies was secondary for them.

As we all know that the awareness towards the company’s policies and procedures are essential for each person who has joined or will join the company. In absence of such policies, no employee would be able to contribute towards the long-term vision or mission of the organizations even their development will be short-term. Keeping in mind the Corporate Governance, I asked the founder to get the defined policies in place as doing business is crucial but doing business in a defined way is the recipe to success.

Being a professional consultant, I even ask the founder to get a small audit or due-diligence done as the company is growing and it’s been more than five years of existence.

Although there was no statutory requirement of audit as per the Indian Statutes but to maintain accountability of the Board of Directors to all stakeholders of the corporation i.e. shareholders, employees, suppliers, customers and society in general. While discussing the provisions, I got a phone call and the person on the other side was asking about the requirement of a Secretarial audit in India. I could not explain the whole matter on call so I asked him if I could send a short note on the same over email, he agreed and asked me to send the same ASAP.

As soon as the call disconnected, the founder asked the same question about the Secretarial Audit and its statutory requirement in India. I explained him as “Secretarial Audit is an audit to check compliance of various legislation including the Companies Act and other corporate and economic laws applicable to the company. It helps to detect the instances of non-compliance and simplifies taking corrective measures.

As far as statutory requirement is concerned, Section 204 of Companies Act, 2013 need to be complied with which states that the following companies are required to obtain Secretarial Audit Report:

  • Every listed company;

  • Every public company having a paid-up share capital of fifty crore rupees or more; or

  • Every public company having a turnover of two hundred fifty crore rupees or more.

It is also a tool of risk mitigation and allows companies to address effectively compliance risk issues and protect their corporate image. Hence, it is advisable that the Audit should carry out periodically and adverse finding if any, is reported on interim basis to the Board immediately.

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