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Scrutnizer- Secretarial auditor

A Secretarial Audit is an independent review of a company's compliance with legal and regulatory requirements under the Companies Act, 2013, and other applicable laws. It is a process of examining and verifying a company's books, records, and procedures to ensure that it is complying with various statutory and regulatory requirements related to corporate governance, disclosures, and reporting.

The secretarial audit is conducted by a qualified company secretary, who reviews and examines various documents and records of the company, including board resolutions, minutes of meetings, agreements, contracts, registers, and other statutory documents. The objective of a secretarial audit is to ensure that the company has complied with all the applicable laws and regulations, and to identify any non-compliances, violations, or discrepancies.

Secretarial Audit is applicable to certain categories of companies as per the Companies Act, 2013 and the Rules made thereunder. The following categories of companies are required to conduct a Secretarial Audit:

  1. Every public company having a paid-up share capital of Rs. 50 crores or more;
  2. Every public company having a turnover of Rs. 250 crores or more;
  3. Every company listed on a stock exchange;
  4. Every company that has outstanding loans or borrowings from banks or public financial institutions of Rs. 100 crores or more.

The scope of secretarial audit may include, but not limited to, the following areas:

  1. Compliance with the provisions of the Companies Act, 2013, and other applicable laws.
  2. Review of board meetings, annual general meetings, and other general meetings.
  3. Compliance with the provisions of the Listing Agreement, if applicable.
  4. Review of statutory registers, records, and documents.
  5. Examination of contracts, agreements, and other legal documents.
  6. Assessment of the company's corporate governance practices.
  7. Compliance with the provisions of the Securities and Exchange Board of India (SEBI) and other regulatory authorities.

After conducting the secretarial audit, the company secretary provides a secretarial audit report to the company's board of directors, highlighting any non-compliances, discrepancies, or violations identified during the audit. The board of directors is responsible for taking corrective action and ensuring compliance with the applicable laws and regulations.

 

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Advantage:

The benefits of secretarial audit are:

  1. Compliance: Secretarial audit helps to ensure that the company complies with all the applicable laws, regulations, and guidelines related to corporate governance, which include the Companies Act, 2013, and other laws and regulations.
  2. Avoid Penalties: The Secretarial audit helps companies to identify any non-compliance, and take corrective action before it results in any legal penalties or fines.
  3. Risk Management: The Secretarial audit helps the company to identify and mitigate risks associated with non-compliance with regulations and laws.
  4. Transparency: The Secretarial audit provides transparency in the company's operations, ensuring that the company follows the principles of good corporate governance.
  5. Reliable Financial Reporting: The Secretarial audit ensures that the financial statements are accurate and reliable and provide an accurate picture of the company's financial performance.
  6. Protecting Shareholders' Interests: Secretarial audit ensures that the shareholders' interests are protected by ensuring that the company follows the best practices of corporate governance.
  7. Better Reputation: Secretarial audit helps companies to improve their reputation and credibility in the eyes of the stakeholders, including customers, investors, regulators, and other stakeholders.
  8. Improved Efficiency: Secretarial audit helps companies to improve their efficiency by identifying areas where they can improve their operations, and by ensuring that the company follows the best practices of corporate governance.

In conclusion, secretarial audit plays a vital role in ensuring that companies comply with the legal and regulatory requirements, which helps to protect the interests of stakeholders and improve the company's overall performance.



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FAQs:

A. A qualified Company Secretary in Practice (CSP) is responsible for conducting Secretarial Audit.

A. As per the Companies Act, 2013, secretarial audit is mandatory for specific companies such as:

  • 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.

A. Non-compliance detected during secretarial audit may lead to legal implications, fines, penalties, and damage to the company's reputation. The company may also face restrictions on raising capital, inability to acquire or merge with other companies, and difficulty in obtaining necessary licenses and approvals.

A. The frequency of secretarial audit depends on the company's size, nature of business, and applicable laws and regulations. For example, companies covered under the mandatory provisions of secretarial audit are required to conduct it once in a year.

A. The Board of Directors is responsible for appointing a qualified Company Secretary in Practice (CSP) to conduct secretarial audit and ensure that the company complies with all the applicable laws and regulations. The Board is also responsible for taking necessary actions to address any non-compliances detected during the audit.

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