Mercy Daviz Project Report Secretarial Audit Revised

PROJECT REPORT
ON
SECRETARIAL AUDIT
SUBMITTED BY
Mercy Daviz
ICSI Student Registration No: 320000138/01/2013
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INDEX
SL. Title Page

No. No.
1 Acknowledgement 3
2 Presumptions 4
3 Introduction 5
4 Chapter 1: Evolution of Secretarial Audit 6
5 Chapter 2: Legislative Framework of Secretarial Audit 9
6 Chapter 3: Concept, Need, Objective and Scope of Secretarial Audit 11
7 Chapter 4: Secretarial Audit in relation to Company Law Compliance 14
8 Chapter 5: Secretarial Audit and Capital Market Related Laws, Rules 19

and Regulations.
9 Chapter 6: Auditing Standards by ICSI and its Impact on Secretarial 32

Audit
10 Chapter 7: Secretarial Standards by ICSI in relation to Secretarial 35

Audit.
11 Chapter 8: Role of Practicing Company Secretary in Secretarial Audit. 47
12 Chapter 9: Secretarial Audit and Corporate Governance 51
13 Chapter 10: Emerging Trends in Secretarial Audit – The Way Ahead 56
14 Conclusion 57
15 Bibliography 58
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Acknowledgement
I am thrilled and deeply satisfied to present my Project Report associated with my

Articleship Training under the Institute of Company Secretaries of India. The success of this
project owes its gratitude to a group of individuals whose collective efforts made it
achievable.
This project is a culmination of the constant endeavor to learn while pursuing a professional
course such as the Company Secretaryship Course. At the outset, I would like to express my
deep sense of gratitude to my mentor and trainer CS Deepa Raj, FCS, Practicing Company
Secretary, for imparting the training. Her invaluable guidance, unwavering support,
constructive suggestions, and positive demeanor were pivotal at every stage of my studies
and training. Without her continuous encouragement, completing both my training and this
project would not have been possible.
I would also like to convey my gratitude to the seniors at my firm, whose mentorship
enabled me to identify and improve upon my abilities and shortcomings, fostering my
continual growth. Further, I owe my wholehearted thanks to all my colleagues at work who
have always helped me while I was pursuing my apprenticeship training.
Lastly, I express profound thanks to my family whose unwavering support and belief in me
sustained me throughout this demanding journey.
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Presumption
SECRETARIAL AUDIT, the dream child of ICSI came into existence after decades-long policy
advocacy and hustle by the Institute. Once came to existence it grew and developed very
fast adding prestige to the CS fraternity and its professional caliber. Secretarial Audit has
emerged as the best among other recognitions the Institute attracted in its lifetime. With
privilege came more responsibility and professional challenges. Observing the multi-faceted
challenges, the area of Secretarial Audit has evolved and matured into a sophisticated
professional assignment and many CS professionals have become seasoned professionals
(Experts) in this field.
Conducting a project on this topic is also stimulating but challenging. Observing the vastness
and depth of the topic, I tried my best to do justice to the assignment.
The Secretarial side of the profession includes huge procedural compliances. Though
Secretarial Audit includes checking the correctness of all these compliances, the Experts in
the profession are of the wisdom that the Secretarial Auditor should anchor himself or
herself into the ‘substantive’ dimension while auditing procedures and other secretarial
filings, etc.
A reasonable effort has been put to adequately correlate the different areas in the
Secretarial Audit arena. Proper emphasis is given to the Corporate Law compliance and
compliances with SEBI Regulations.
General Law and Company Specific Law dimension is covered only briefly.
This project report is part of my Articled Apprentice Training of 21 months as mandated by

the New Training Structure by ICSI.
Thank You.
Mercy Daviz
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Introduction
Secretarial Audit has evolved in a phased manner over the past two decades. It is well
recognized that Secretarial Audit is an important and effective tool for Corporate Law
Compliance Management. Secretarial Audits introduced by the Companies Act 2013 have
proved to form the cornerstone of corporate governance. The principle of corporate
governance in India has progressed from being based on a ‘comply or explain’ model to
defined mandatory provisions overtime to boost investor confidence and stakeholder
relationships. It has expanded beyond numbers and financials.
As India is emerging as a global economic leader, the businesses and functioning of

companies are getting more complex and dynamic. Adherence to compliance is a strategic
need from the nation’s point of view. Secretarial Audit is ideally expected to ensure that the
entities are highly compliant and future- proof. Beginning with limited coverage of securities-
related compliances across a number of ‘transactions’ of listed companies, a Secretarial
Audit now encompasses a review of compliances across a number of transactions and a
whole host of laws applicable to companies.
Secretarial Audit has been upgraded from being a tool in ensuring corporate governance to
being the end word of governance itself. Professionals are getting specialized in this field by
skill updation and continuous learning. Secretarial Audit as one among the Compliance
Management tool, encourages flawless compliance to all laws related to the composition,
business and financial activities of the Company and also ensures timely corrective actions
when any non-compliance is discovered.
Secretarial Audit is now required even for specified private companies. Fraud reporting is
also one of the responsibilities of the Secretarial Auditor in line with Statutory Auditor and
Cost Auditor. The very objective of Secretarial Audit is to have a basis to express the opinion
as to what extent a Company has complied with the laws of the land, comprising various
statutes, rules and regulations. The exercise of issuing a Secretarial Audit Report (SAR) has
to be done by a Practicing Company Secretary (PCS) with absolute specificity without any
ambiguity and vagueness.
Secretarial Audit Report (SAR) which is issued by a Practicing Company Secretary (PCS) in
Form -MR 3 would form part of the Board Report in the Annual Return. Thus, Secretarial
Audit has become very significant from corporate and stakeholders’ perspective and is more
a governance and compliance audit.
The Secretarial Audit Report is required to be issued by the Practicing Company Secretary by
making sound analysis of the corporate conduct and governance of the company with due
diligence and care considering the future consequences and their magnitude, in order to
protect the interests of all stakeholders.
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Chapter -1
Evolution Of Secretarial Audit
During the mid-seventies, due to the complexities of business and its growth coupled with
compliance of various laws, rules and regulations, the Government of India considered and
introduced the concept of appointment of a ‘whole-time Secretary in employment’. On the
enactment of the Companies (Amendment) Act 1974, for the first time, it was mandated
that every company having paid up capital or rupees twenty-five lakhs (25,00,000) or more
to employ a whole time Secretary so as to ensure better compliance of applicable laws, rules
and regulations in such companies.
Signing of Annual Return
Sachar Committee, a high-powered Expert Committee headed by Justice Rajinder Sachar,

was constituted by the Government to review the working of the Companies Act 1956. The
foundation for the practicing side of the profession was firmly established on 15 th June 1988.
This was the Golden Day in the history of growth of company secretaries when the
Companies (Amendment) Act 1988 was introduced.
Introduction of one new definition ‘Secretary in whole-time-practice’, substitution of existing

definition ‘secretary’ and insertion of a provisio in section 161(1) of the Companies Act 1956
for listed companies was another milestone for the growth of profession of Company
Secretaries. Twin benefits emerged from this amendment. One being the introduction of
definition of PCS and the other being the recognition for PCS to sign the Annual Return of
listed companies along with other signatories.
Most importantly, this amendment became the starting point for ensuring ‘Corporate
Compliance Management’ and to improve the level of compliances in the corporate sector.
Onerous responsibility was given to PCS not to simply stamp and sign but more importantly
to ensure that all the required compliances of the Companies Act 1956 and the Rules made
thereunder and also the listing regulations were complied with for the contents forming part
of the Annual Return. Seven major level of compliances were to be ensured starting from
Registered Office Address till indebtedness of the Company. This milestone made inroads for
acceptance of Company Secretary by the corporate sector and the level of compliances
improved drastically.
Introduction of Secretarial Compliance Certificate
In 1990s, the Government of India recognized that many provisions of the Companies Act
1956 had become erroneous in date and were not opportune to the growth of the Indian
corporate sector. Consequently, an attempt was made to recast the Companies Act 1956
and after several attempts the Companies (Amendment) Act 2000 was introduced.
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Accordingly with effect from 13-12-2000, a new proviso was introduced in section 383A of
Companies Act 1956, with requirement on certain companies not required to employ a
whole-time secretary under sub-section (1) and having a paid up share capital of
ten lakh (10,00,000) rupees or more to have compliance certificate signed by Practicing
Company Secretary.
This was an exclusive assignment to Practicing Company Secretary. PCS was given the
powers to access registers, books, papers, documents and other records. The certificate was
required to be filed with Registrar of Companies (ROC). The certificate was required to be
addressed to the members of the Company and shall be laid at the Annual General Meeting
(AGM).
The requirement of Secretarial Compliance Certificate enlarged the scope of compliance.

This not only improved the level of compliance but also protected companies from any un-
intended non-compliance. This also gave big relief to the ROCs and other statutory
authorities. Overall, it was a win-win situation to the entrepreneurs, regulators, lenders and
other stakeholders.
Secretarial Compliance Certificate covered extensively the level of compliance of the

Companies Act 1956 and Rules made thereunder but was limited to only companies
statutorily not required to employ whole time Company Secretaries.
The signing of Annual Return by listed companies by a Practicing Company Secretary (PCS)
was also limited and did not cover important areas in connection with the functioning of the
company namely
compliance with respect to loans, investments, related party transactions(RPT), public
deposits and other areas having financial as well as compliance implications.
The above two limitations prompted the Ministry of Corporate Affairs (MCA) to consider and
introduce Secretarial Audit for all listed companies and to certain classes of bigger
companies.
In 2009, the Ministry of Corporate Affairs (MCA) proposed the ‘Corporate Governance –
Voluntary Guidelines 2009” based on the recommendations of the Task force set up by
Confederation of Indian Industries (CII) under the chairmanship of Shri. Naresh Chandra to
recommend ways to improve corporate governance standards and practices. As per these
guidelines Secretarial Audit was recommended to be followed by corporates voluntarily and
report to shareholders through Annual Report. A few listed companies voluntarily adopted
the practice of having Secretarial Audit Conducted and circulated the Secretarial Audit
Report (SAR) as part of the Annual Report.
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Introduction of Secretarial Audit for bigger companies
The Ministry of Corporate Affairs (MCA) first tested the professional competence of
Practicing Company Secretaries (PCS) in 1988 by introducing the signing of Annual Return
for listed companies followed with Secretarial Compliance Certificate in 2000.
Then Companies Act 1956 has completely been re-written and came out with a new version
as Companies Act 2013. Section 204 was introduced as a new section and not having any
corresponding section to Companies Act 1956. Accordingly Secretarial Audit became
mandatory for all listed companies and other specified classes of companies in India with
effect from 01-April-2014.
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Chapter 2
Legal Framework of Secretarial Audit
The Companies Act 2013 introduced the concept of “Secretarial Audit” as a new class
of audit in addition to statutory audit, internal audit and cost audit prescribed in the
Act. Realizing the need to ensure compliance of laws in letter and spirit on a
continuous basis by an independent professional namely the Practicing Company
Secretary (PCS), the Companies Act 2013 mandated the carrying out of secretarial
audit for specified companies.
Companies Act 2013 under section 204, mandated secretarial audit for listed
companies and other companies specified in Rule 9 of Companies (Appointment and
Remuneration of Managerial Personnel) Rules 2014.
From financial year 2014-15, the following companies were required to have
secretarial audit conducted by PCS.
a. Every Listed Company
b. Every public company
a. Having a paid up share capital of fifty (50) crore rupees or more
(reckoned as at the end of the previous financial year); or
b. Having a turnover of two hundred fifty (250) crore rupees or more
(reckoned for the previous financial year)
By Ministry of Corporate Affairs (MCA) notification dated 3 rd Jan 2020, secretarial

audit has also been made applicable to every company having outstanding loans or
borrowings from banks or public financial institutions (PFI) of rupees one hundred
(100) crore or more. This is applicable for financial year commencing from 1 st April
2020
Overall, now Secretarial Audit is covered for all bigger companies and companies
having borrowings of one hundred (100) crore rupees or more. In terms of threshold
of borrowings, private companies are also covered.
Section 92(2) of Companies Act 2013 read with Rule 11 of the Companies
(Management and Administration Rules 2014 also mandated Annual Return
certification of
a. Listed companies, and

b. Companies having paid up share capital of Rs 10 crore more; or
c. Companies having turnover of Rs 50 crore or more.
Securities Exchange Board of India (SEBI) added Regulation 24A to the SEBI
(Listing Obligations and Disclosure Requirements -LODR0 Regulations 2015
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mandating secretarial audit by Practicing Company Secretary (PCS) for every listed
entity and its material unlisted subsidiaries incorporated in India and the Secretarial
Audit Report (SAR) was required to be annexed to the Annual Report. This
requirement was effective from the financial year ended 31 st march 2019.
The Secretarial Audit Report by Practicing Company Secretary (PCS) is issued in

Form MR-3 and is annexed along with Board of Directors Report in the Annual
Report. Directors in their report required to explain in full for any qualification or
observation or other remarks made by the Practicing Company Secretary in his/her
report.
Secretarial Auditor
A Practicing Company Secretary (PCS) has been assigned the role of Secretarial
Auditor under section 2(2)(c )(v) of the Company Secretaries Act 1980. A significant
area of competence of PCS is ‘Corporate Laws’ owing to intensive and rigorous
coaching, examinations, training and conducting education programs. PCS is a highly
specialized professional in matters of statutory, procedural and practical aspects
involved in proper compliances under corporate laws. Strong knowledge base makes
PCS a competent professional to conduct Secretarial Audit. The Company, acting
through its Board of Directors appoints Secretarial Auditor.
Right of Secretarial Auditor
According to subsection (2) of section 204 it shall be the duty of the company to give
all assistance and facilities to the company secretary in practice for auditing
secretarial and related records of the company. This is a statutory duty cast by the
above provision on the companies. All the records, documents and books which
contain the information and details of the transactions and actions concerning
compliances under the Acts, Rules, Regulations etc. relating to the financial year in
respect of which the secretarial auditor is supposed to give secretarial audit report,
falling within the purview of the secretarial audit report as listed on the prescribed
form (MR-3) must be made available to secretarial auditor for verification.
Powers and Duties of Auditor
Sec 143(14) of the Companies Act clarifies that the Practicing Company Secretary
(PCS) conducting secretarial audit under section 204(15) shall have the same powers
as a Statutory Auditor.
Similarly the duties and responsibilities under sections 447 and 448 of Companies Act
2013 in relation to Reporting of Fraud and consequences of any failure on fulfilling
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those duties are also applicable mutatis mutandis to PCS conducting secretarial audit
u/s 204(15) of Companies Act.
Chapter 3
Concept, Need, Objective and Scope of Secretarial Audit
The Concept of Secretarial Audit
The Secretarial Audit is a process where a Secretarial Auditor (A Practicing Company

Secretary -PCS) checks whether the company complies with applicable laws and regulations.
It is an independent evaluation of the company’s compliance with the law. This helps in
providing unbiased view of the companies compliance condition. It provides objective
assurance intended to add value and improve a companies legal compliance and indirectly
helping achieve corporate governance objectives and thus leading the company to
sustainability. It helps to recognize the events of non-compliance and facilitates taking
corrective measures thereby avoiding legal and financial penalties and reputational risks. In
India, Secretarial Audit is made mandatory to specific companies by Companies Act 2013.
Secretarial Audits, Governance Audits and CSR Audits are extremely vital to measure the
general well-being and sustainability of the companies and render comfort beyond financials
to the stakeholders. Any form of Audit should not be undertaken with the sheer intention of
ensuring compliances with the mandatory requirements. Audits to be meaningful should be
able to render comfort, confidence and assurance to all stakeholders.
Need of Secretarial Audit.
The adequacy of corporate legal compliance lies more on the implementation rather than
the enactment of various legislations. Governments, Financial Institutions, Banks and
companies are all aware of this reality. It is a known fact that the implementation of
statutory provisions lack in its standard in underdeveloped and developing countries because
of various ground realities. India as being emerging as an economic super power, need to
gear up its legal compliances in the global standard to catch up with the developed
countries.
The frauds and scams, which have been detrimental not only to growth of financial market
but have been a set back to the economy as a whole, have occurred in the past despite
having in place a plethora of legislations.
Realizing the need to ensure compliance of laws in letter and spirit on a continuous basis by
an independent professional, the Companies Act 2013 mandated the carrying out of
secretarial audit for specified companies. The legislature has entrusted Company Secretaries
in Practice with this onerous responsibility of conducting secretarial audit. The powers and
duties of statutory auditors are mutatis mutandis applicable to the company secretary in
practice conducting secretarial audit
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Objectives of Secretarial Audit
The following are the broad objectives of Secretarial Audit.

- To express an opinion, based on the inspection of a company’s records and other
documents and information.
- To report to the company’s management as to whether, and if so, to what extent the
company has complied with the Laws compraising various statutes, rules, regulations
etc.
- To warn and protect the top management from undesirable hassles.
- A compliance check of the statutory requirements by the company.
- An important tool to check into the insight of the company and can be used by the
investor, shareholder and lender so as to mitigate the level of risk and non-
compliance.
Scope of Secretarial Audit.
The scope of a Secretarial Audit includes reporting compliance of following six specific laws
and other laws:
1. The Companies Act 2013 and the rules made thereunder.
2. The Securities Contract (Regulation) Act 1956 and rules made thereunder.
3. The Depositories Act 1996 and the Regulation and Bye-Laws framed thereunder.
4. Foreign Exchange Management Act (FEMA) 1999 and the rules and regulation made
thereunder to the extent of Foreign Direct Investment (FDI), Overseas Direct
Investments (ODI) and External Commercial Borrowing (ECB).
5. Securities Exchange Board of India Act 1992
6. Competition Act 2002 and the rules and regulations made under that Act.
The following are the SEBI Regulations and Guidelines prescribed under SEBI Act 1992
which come under the purview of Secretarial Audit.
1. SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 2011.
2. SEBI (Prohibition of Insider Trading) Regulations 2015
3. SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018
4. SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines 2014.
5. SEBI (Issue and Listing of Debt Securities) Regulations 2008.
6. SEBI (Registrar to Issue and Share Transfer Agents) Regulations 1993 regarding the
Companies Act and Dealing with Client.
7. SEBI (Delisting of Equity Shares) Regulations 2009.
8. SEBI (Buyback of Securities) Regulations 2018.
In addition to the above, other laws as may be applicable specifically to the company will
also come under the ambit of Secretarial Audit. Such ‘other laws’ shall include all the laws
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which are applicable to specific industry. Banking, Insurance, Pharma, Information
Technology etc. sectors will have their own dedicated statutes. Secretarial Auditor should
check the compliances on all those relevant laws and regulations.
Further, the scope of secretarial audit covers the following :
1. Reporting on compliance of Secretarial Standards issued by the Institute of Company
Secretaries of India (ICSI).
2. Reporting of compliances with listing regulations.
3. Examining and reporting whether the adequate systems and processes are in place
to monitor and ensure compliance with all laws applicable to the company including
general laws like labour laws, environment law etc.
4. Examining and reporting specific observations / qualification, reservation or adverse
remarks in respect of the Board Structures/System and processes relating to the
audit period.
5. Secretarial Standards Issued by the Institute of Company Secretaries of India and
approved by the Central Government.
6. In case of financial laws like tax laws and Customs Act etc, Secretarial Auditor many
rely on the Reports given by statutory auditors or other designated professionals
handling those functions.
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Chapter 4
Secretarial Audit in relation to Company Law Compliance
Companies are expected to create an environment which ensures the protection of interest
of all the stakeholders. A company will be failing in its duty and commitment to be a
responsible and good Corporate Citizen, if it does not comply with the provisions of the laws
of the land which are made with an intention to safeguard the public interest at large. The
Companies Act 2013 and rules made thereunder are the first legislation covered under the
scope of the Secretarial Audit. The Companies Act 2013 is the key statute, which a Company
has to comply in letter and spirit for ensuring the betterment of all stakeholders.
General Compliance Requirements
As per section 204 of the Companies Act 2013, read with rule 9 of the Companies
(Appointment and Remuneration of Managerial Personnel) Rules 2014, Every Listed
Company and a company belonging to the following classes ;
a. Every public company having a paid up share capital of 50 crore rupees or more; or
b. Every public company having a turnover of 250 crore rupees or more; or
c. Every Company having outstanding loans or borrowings from banks or public
financial institutions of 100 crore or more
Are required to annex to its Board’s Report the Secretarial Audit Report (SAR), given by a
Company Secretary in Practice. The Secretarial Audit Report gives thrust on various statutes,
systems, processes which provides an assurance to the investors and regulatory authorities
on governance practices of the company.
The Companies Act 2013 recognizes the Secretarial Standards (SS-1 & SS-2) specified by
Institute of Company Secretaries of India (ICSI). It is the beginning of a new era incorporate
governance, where not only financial standards but also non-financial standards have been
prioritized and given statutory recognition.
Section 118(10) of the Companies Act 2013 requires every company to observe secretarial
standards with respect to General meeting and Board Meetings. Also, as per Sec 205(1) (b),
it is the duty of the Company secretary to ensure that the company complies with the
applicable secretarial standards. The ICSI has issued Secretarial Standard on Meetings of
the Board of Directors (SS-1) and Secretarial Standard on General Meetings (SS-2) after the
approval of Central Government. With effect from 1 st July 2015, it has become mandatory
for Companies to observe Secretarial Standards issued by ICSI (SS-1 and SS-2)
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List of Documents which a Secretarial Auditor required to inspect in relation to
Companies Act 2013.
1. Memorandum and Articles of Association (MoA & AoA)
2. Forms filed with the Registrar Of Companies (ROC) with challans.
3. Notes and agenda of the Board, Committee and General Meetings.
4. Index of Meetings held during the Financial Year.
5. Minutes of the Board, its committees and General Meeting.
6. Proof of Circulation of Notice and Agenda of Board Meetings, Committee meetings
and the General meeting.
7. Proof of circulation of Draft Minutes and Final Minutes of meeting of Board and its
committees.
8. Attendance Register of Board and committee meetings.
9. All statutory Registers
10. Copy of Financial Statement along with notes to accounts and Auditor report.
11. Report of Internal Auditor.
12. Notices of Annual and event-based disclosure of Director’s interests.
13. Copies of Contracts made between the company and any of the related parties
14. Shareholder list, details of Share Transfers which have taken place during the
financial year.
15. Copy of Share Transfer Deeds.
16. Instruments creating, modifying or satisfying charge.
17. Forms relating to Disclosures from Directors.
18. Certificate from RTA stating the number of shareholders as on the close of the
financial year.
19. Certified true Board Resolution for any type of corporate actions taken by the
company.
20. Details of the holding and subsidiary companies.
21. Complete details of shares and debentures issued during the year.
22. Details of change in shareholding of the promoters and top ten shareholders of the
Company under section 93.
23. Details with respect to maintenance of cost records and appointment of cost auditor.
24. Details of appointment of Auditor and Internal Auditor.
25. The list of Related Party Transactions (RPT).
26. Indebtedness Certificates signed by Company Secretary/CFO of the company.
27. Listing and Trading Approval(s) from Stock Exchanges.
28. Intimation to Stock Exchanges, Confirmation from national Securities Depository
Limited (NSDL) and Central Depository Services Limited (CDSL) for change of name
of the company, change in the face value of equity share etc.
29. Change of name of the company, change in the face value of the company, new
ISIN of the Company in respect of the allotment or as a result of any change in
capital structure due to any corporate action taken by the Company during the
financial year under audit.
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30. Corporate Action forms filed by the Company with Depositories.
31. Equity Shareholding pattern and its break up as at the close of the financial year.
32. Any orders received by the company from the High Court/Tribunal or from any other
regulatory body.
33. Compliance record under FEMA with respect to FDI, ECB and ODI as applicable.
34. Copies of Shareholders and joint ventures agreement(s), if any
35. Copies of Declaration(s) received from Independent Director(s) u/s 149(7).
36. Corporate Social Responsibility (CSR)
37. Directors and Key Managerial Personnel (KMP)
38. Bank Statements relating to transfer of dividend to separate bank account, proof of
dispatch of dividend within 30 days of Declaration of Dividend.
39. Advertisement/Circular relating to Deposits: Credit rating certificate, deposit
insurance, if any.
40. Such other documents as required for the purpose of audit.
The following points must be kept in mind by the Secretarial Auditor while conducting
Secretarial Audit under Companies Act 2013.
1. Checking of MCA web portal for the maximum number of directorship’s held by the
directors of the Company.
2. Public announcements made by the company for certain prescribed events like
approval of financial statements, dividend and Board Meetings must be checked.
3. Events occurred after the date of balance sheet.
4. Allotments made during the year.
5. Verify Directors of the company with the list of disqualified directors by the ROC from
time to time.
6. Verify the intimations of any approvals obtained from any statutory authorities which
is required to be disclosed as per SEBI regulations.
7. Updation of Company’s website, if any, from time to time.
8. Letters/ show cause notices received from the RBI (in case of Banking/NBFC
Companies)
9. RBI website for the list of willful defaulters from time to time.
10. Delays /Non compliances of quarterly filings viz shareholding pattern, Corporate
Governance Report etc.
11. Website of CBI for any cases filed against the directors of the company.
12. Website of Enforcement Directorate (ED) for counter checking towards the financial
crimes committed by any of the Directors of the Company.
List of Various Events Checklists under the Companies Act 2013 used during
Secretarial Audit
1. Incorporation of Company
2. Alteration of Memorandum of Association (MOA)
3. Alteration of Articles of Association (AOA)
4. Change in name of the company
5. Shifting of Registered office
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6. Change of Objects in MOA
7. Alteration of Authorized Capital
8. Conversion of Private Company into Public Company
9. Conversion of Public Company into Private Company
10. Initial Public Offer (IPO)
11. Further Public Offer (FPO)
12. Employee Stock Option Plan (ESOP)
13. Employee Stock Purchase Scheme (ESOS)
14. Issue of Sweat Equity Shares.
15. Bonus Issue
16. Rights Issue of Securities
17. Private Placement of Securities
18. Preferential Allotment of Securities
19. Issue of Securities by Depository Receipts (DR) – ADR / GDR / FCCB
20. Transfer and Transmission of Shares
21. Issue of Share Certificates and other securities
22. Reduction of Share Capital
23. Consolidation and splitting of shares
24. Buyback of shares and securities
25. Rectification of register of shares
26. Issue and Redemption of Debentures.
27. Acceptance of Deposits
28. Repayment of Deposits
29. Registration, modification, satisfaction and rectification of charges
30. Register of members
31. Significant beneficial ownership
32. General Meeting
33. Annual Return
34. Declaration and payment of Dividend
35. IEPF Compliances
36. Books of Accounts
37. Board Report
38. Corporate Social Responsibility (CSR)
39. Internal Audit
40. Appointment, Removal, Resignation of Auditors
41. Check CARO Rules Applicability
42. Check Auditor Prohibited Services u/s 144
43. Appointment of Directors
44. Appointment and Reappointment of Independent Directors
45. Vacation, Resignation and Removal Of Directors
46. Appointment of Additional Director, Alternate Director, Casual Vacancy of Directors.
47. Register of Directors and KMP and their shareholding.
48. Loan to Directors
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49. Loans and Investments by the Company
50. Related Party Transactions (RPT)
51. Board and Committee Meetings
52. Mandatory Committees and its functional compliance.
53. Contribution to Charitable Funds
54. Political Contributions
55. Appointment of Managing Director (MD) and Whole Time Director (WTD)
56. Managerial Remuneration
57. Appointment of Key Managerial Personnel.
58. Mergers
59. Acquisition by way of scheme of arrangement/merger
60. Takeover by way of scheme of arrangement/merger
61. Compromise and Arrangements
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Chapter 5
Secretarial Audit and Capital Market Related Laws, Rules and Regulations.
1. Securities Contract (Regulation)Act 1956, and Rules made thereunder.

The Central Government promulgated the Securities Contract Regulation Act 1956 to
prevent undesirable Transactions in securities by regulating the business of dealing
therein, by providing for certain other matters connected with. This Act defines
various terms in relation to securities and provides the procedure for the stock
exchanges to get recognition from Government/SEBI, Procedure for listing of
securities of companies and operations of the brokers in relation to purchase and
sale of securities on behalf of investors. The Central Government promulgated the
securities Contracts (Regulation)Rules 1957 (SCRR) for carrying into effect the
objects of the SCRA 1956. A company listed on a stock exchange is required to
comply with the provisions of SCRA and SCRR.
The following are the main scenarios the Secretarial Auditor checks wile conducting
the Secretarial Audit of a listed company in relation to this Act.
a. Conditions for Listing
b. Public Issue and listing of Securities
c. Procedural Compliance of Listing in Stock Exchanges
d. Checking on an Contravention of provisions of this Act.
e. Checking whether the Company has been granted immunity by Central
Government on any provisions of this Act.
f. Delisting
Depositories Act 1996
The objective of the Depositories Act is to provide for regulation of depositories in securities
and for matters connected therewith or incidental there to. The Depository holds electronic
custody of securities and also arranges for transfer of ownership of securities on the
settlement dates.
Chapter II of SEBI (Issue of Capital and Disclosure Requirements) Regulations 2009 states
that no issuer shall make a public issue or rights issue of specified securities unless it has
entered into an agreement with a depository for dematerialization of specified securities
already issued or proposed to be issued.
Section 29 of Companies Act 2013 also mandates that every company making public offer
and such other class of companies as may be prescribed, shall issue the securities only in
dematerialized form by complying with the provisions of the Depositories Act 1996 and
regulations made thereunder.
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Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules 2014 provides that
every unlisted public company shall issue the securities only in dematerialized form; and
Facilitate dematerialization of all its existing securities in accordance with provisions of the
Depositories Act 1996 and regulations made thereunder.
Every unlisted public company making any offer for issue of any securities or buy back of
securities or issue of bonus shares or rights offer shall ensure that before making such offer,
entire holding of securities of its promoters, directors, and Key Managerial Personnel has
been dematerialized in accordance with provisions of the Depositories Act 1996 and
regulations made thereunder.
Any company, other than public company mentioned above may convert its securities into
dematerialized form or issue its securities in physical form in accordance with the provisions
of Companies Act 2013 or in dematerialized form in accordance with the provisions of the
Depositories Act and the regulations made there under.
Rule 9 of the companies (Prospectus and Allotment of Securities)Rules 2014 provides that
the promoters of every company making a public offer of any convertible securities may
hold such securities only in dematerialized form. Also the entire holding of convertible
securities of the company by the promoters held in physical form up to the date of the initial
public offer shall be converted into dematerialized form before such offer is made and
thereafter such promoter shareholding shall be held in dematerialized form only.
Scenarios to be Checked by the Secretarial Auditor in relation to the compliance with

Depositories Act 1996
1. Agreement between Depository and Depository Participant.

2. Public offer of Securities to be in Dematerialized form
3. Reconciliation and Share Capital Audit.
4. Penal Provisions in case of contravention
5. Any immunity received from Central Government.
REGULATION FRAMED UNDER THE SEBI ACT 1992
1. SEBI (Substantial Acquisition of Shares and Takeover) Regulations 2011
The SAST Regulation prescribe a systematic framework for acquisition of stake in

listed companies. BY these regulations, the regulatory system ensures that the
interests of the shareholders of listed companies are not compromised in case of an
acquisition or takeover. They also aim at protecting the interests of the minority
shareholders, which is a fundamental attribute of corporate governance principle.
Various scenarios to be checked in relation to this regulation are the following
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a. Substantial Acquisition of Shares or Voting Rights.
b. Voting Rights and public announcement.
c. Agreement to acquire shares or voting rights
d. Acquisition in pursuant to a resolution plan approved
e. Acquisition of Control
f. Indirect acquisition of shares or control
g. Delisting offer
h. Voluntary open offer for acquiring shares.
i. Public announcement on voluntary open offer
j. Offer size, Offer Price, Mode of Payment
k. Inter-se Transfers
a. General Exemptions
b. Report
c. Submission of Report with fee
d. Acquisition price per share
e. Disclosure of acquisition and disposal
f. Disclosure by transferor and transferee
g. Disclosure of encumbered shares
h. Disclosure in Specified Form
i. Yearly Disclosure from the promotor.
2. SEBI (Prohibition of Insider Trading) Regulations 2015
This regulation is popularly known as SEBI-PIT Regulations 2015 casts several

compliance obligations on Insiders including Key Managerial Personnel, Company
Secretary Etc.
The obligation relates to making of certain disclosures, dealing with unpublished

price sensitive information, formulation and disclosure of trading plans, complying
with code of fair disclosure etc. These regulations have also brought several controls
in establishing the act of Insider Trading, eg., the onus of establishing is on
connected persons that they were not in possession of unpublished price sensitive
information.
a. Communication or procurement of unpublished price sensitive information.

b. Policy for determination of “legitimate purposes”
c. Notice to Insiders to maintain confidentiality
d. Contract for confidentiality and non-disclosure obligations
e. Maintenance of Structured Digital Database.
f. Preservation of structured digital database
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g. Trading when in possession of unpublished price sensitive information
h. Trading plans
i. General Provisions on Disclosures of Trading by Insiders
j. Disclosures by Certain persons (Director / KMP etc)
k. Informant Reward
l. Public Dissemination and incentivization of informant
m. Code of Fair Disclosure and conduct
n. Intimation of code of practices and procedures for fair disclosure
o. Code of conduct
p. Designated Compliance Officer
q. Designated persons to be covered by the Code of Conduct
r. Institutional Mechanism for Prevention of Insider Trading
s. Review oy Audit Committee
t. Written policies for inquiry in case of leak of unpublished price sensitive
information
u. Whistle Blower policy
v. Co-operation in Inquiry
w. Any other prevention mode
x. Grey list
y. Disclosure
3. SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018

SEBI ICDR Regulations were notified with the objective to bring more clarity to the
provisions of the rescinded SEBI Disclosure and Investor Protection (DIP) Guidelines
by removing the redundant provisions and amending certain provisions in order to
cope with the dynamics of Capital Market.
 Eligibility requirements for an Initial Public Offer

 Appointment of Merchant Banker
 Appointment of Syndicate member
 Draft Offer Document
 Utilization of proceeds for General Corporate Purpose limit
 Submission of documents with SEBI
 Monitoring Agency for monitoring utilization of issue proceeds
 Issue – Related advertisements
 Minimum Subscription
 Allotment, Refund and payment of Interest
 Post – issue advertisements
 Post -Issue reports
 Ensuring no defaults on repayments due.
 Appointment of Debenture trustee for issue of debenture
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 Debenture Redemption Reserve
 Charge on Security
 Rollover
 Issue of Debt securities
 Issue of Warrants
 Post-listing exit opportunity for dissenting shareholders
 Aggregate value of the specified securities in Rights Issue
 Resolution for approving the proposed Rights Issue
 Further issue of share capital
 Entities not eligible to make rights issue
 Conditions for SR Equity shares
 Record Date and Intimation to Stock Exchange
 Bonus Issues
 Conditions for Bonus Issue
 Restrictions on Bonus Issue
 Filing of Form FC-GPR with RBI
 Preferential Issue
 Conditions for Preferential Issue
 Disclosures to shareholders
 Payment of Consideration
 Allotment in Dematerialized form
 Eligibility conditions for Qualified Institutional Placement
 Conditions for offer for sale by promoters for compliance with minimum public
shareholding requirements specified in SCRR 1957.
 Appointment of Lead Managers
 Placement Document
 Application and allotment
4. SEBI (Share Based Employee Benefits Scheme and Sweat Equity)

Regulations 2021
o The provisions of this regulation apply to the following :

o Employee Stock Option Scheme (ESOS)
o Employee Stock Purchase Scheme (ESPS)
o Stock Appreciation Scheme
o General Employee Benefit Schemes
o Retirement Benefit Schemes ; and
o Sweat Equity Shares
The provisions of these regulations shall apply to any company whose equity shares
are listed on a recognized stock exchange in India and who seeks to issue sweat
equity shares or has schemes :-
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a. For Direct or Indirect benefits of employees
b. Involving dealing in or subscribing to or purchasing securities of the
company, directly or indirectly and
c. Satisfying, directly or indirectly any one of the following conditions:-
i. The scheme is set up by the company or any other company in its
group.
ii. The scheme is funded or guaranteed by the company or any other
company in the group.
iii. The scheme is controlled or managed by the company or any other
company in its group.
The provisions pertaining to issue as specified in SEBI (Issue of Capital and
Disclosure Requirement) Regulations 2018 shall not be applicable in case of a company
issuing new shares in pursuance and compliance of these regulations wherever specifically
provided for in these regulations.
- Implementation of schemes
- Provisions to be included in the Trust Deed
- Appointment of a Trustee
- Voting Right
- Approval From shareholders
- Restriction in dealing in Derivatives
- Disclosure as non-promoter and non-public shareholding
- Limit for secondary acquisition
- Adjustment in the limit of shareholding of the Trust.
- Period for Secondary Acquisition
- Restriction on selling shares in secondary market
- Compensation Committee
- Shareholders Approval
- Variation of terms of the scheme
- Utilization of fund / shares held by trust in case of winding up of the scheme.
- Listing
- Compliance and conditions
- Appointment of Merchant Banker
- Certificates from Auditors
- Disclosures
- Administration and implementation
- Pricing of the scheme
- Vesting period
- Forfeiture of amount
- Refund
- Pricing and Lock in requirements in ESPS
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- Issue of Sweat Equity Shares
- Maximum quantum of sweat equity shares
- Special Resolution
- Pricing of Sweat Equity Shares
- Valuation report and certificate
- Accounting Treatment
- Placing of Auditor’s certificate before AGM
- Lock-in of Sweat Equity shares
5. SEBI (Issue and listing of Non-Convertible Securities)Regulations 2021
This regulation provides simplified regulatory framework for issuance and listing of
debt securities and non-convertible redeemable preference shares by an issuer by
way of public issuance and listing of non-convertible securities by an issuer issued in
private placement basis which are proposed to be listed; and listing of Commercial
Paper (CP) issued by an issuer in compliance with the guidelines framed by the RBI.
a. In principle approval from various authorities
b. Arrangements with depositories
c. Appointment of Debenture Trustee
d. Appointment of Registrar to the Issue
e. Credit Ratings
f. Creation of Recovery Expense Fund
g. Right to recall or redeem prior to maturity
h. Debenture Redemption Reserve / Capital Redemption Reserve
i. Trust Deed
j. Other Conditions of Public Issue
k. Filing of Draft Offer Document
l. Advertisements for Public Issues
m. Mandatory Listing of a public issue of debt securities and non-convertible
preference shares.
n. Due Diligence by Debenture Trustee
o. Creation of Security for secured debt securities
p. Listing Application
q. Filing of Shelf placement memorandum
r. Consolidation and Reissuance
s. General Conditions on Issuance and listing of perpetual debt instruments,
perpetual non-cumulative preference shares and similar instruments.
t. Listing of Commercial Paper
u. Inspection By SEBI (Procedure for action in case of violation of regulations)
6. SEBI (Registrar To an Issue and Share Transfer Agents) Regulations 1993
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All the work related to share registry in terms of both physical and electronic is
maintained at a single point, either in-house by the company or by a SEBI registered
R & T Agent. The Registrar and Share Transfer Agents are required to maintain
records of all the shares dematerialized, rematerialized and details of all securities
declared to be eligible for dematerialization in the depositories and ensure that
dematerialization of shares shall be confirmed /created only after an in-principle
approval of the stock exchange/s where the shares are listed and the admission of
the said share with the depositories have been granted.
While conducting Secretarial Audit, check whether the company has appointed an
RTA in accordance with SEBI regulations, or is handling the share transfer in-house.
In case the number of shareholders are more than 100000 in number the in-house
facility has registered itself as a Share Transfer Agent with SEBI. Documents to be
checked in this regard include Minutes of Board Meeting and Tripartite Agreement.
7. SEBI (Delisting of Equity Shares) Regulations 2021
These regulations apply to delisting of equity shares of a company including equity

shares of superior voting rights from all or any of the recognized stock exchanges
where such shares are listed.
a. Conditions of delisting
b. Delisting where no exit opportunity was required
c. Delisting from all the stock exchanges
d. Initial public announcement
e. Appointment of the Manager to the offer
f. Approval by the Board of Directors
g. Approval by shareholders
h. In-Principle approval of the stock exchange
i. Exit opportunity Escrow Account
j. Detailed public announcement
k. Letter of offer
l. Bidding Mechanism
m. Right of shareholders to participate in the reverse book building process
n. Option to accept or reject the discovered price or counter offer
o. Failure of the offer
p. Payment upon success of the offer
q. Final application to the stock exchange after successful delisting
r. Obligations of the company
s. Compulsory delisting by a stock exchange
t. Consequences of compulsory delisting
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u. Delisting of equity shares of small companies
v. Delisting of equity shares of companies listed on Innovators Growth platform
after making Initial public Offer.
w. Delisting of equity shares of a subsidiary company pursuant to a scheme of
arrangement.
x. Delisting in case of winding up of a company and de-recognition of a stock
exchange
8. SEBI (Buy-back of securities) Regulations 2018
Buy back of securities is a corporate financial strategy which involves capital

restructuring and is resorted by companies to achieve the varied objectives of
increasing earnings per share, averting hostile takeovers, improving returns to
stakeholders and realigning the capital structure.
- Maximum limit of buy back

- Debt equity ratio post buy back
- Financial Statements of all subsidiaries to be excluded
- Secured and unsecured debts
- Fully paid up shares
- Method of buy back
- Any default in repayments due
- Buy back from open market
- Authorization in Articles of Association
- Special Resolution
- Board Resolution
- Time limit for completion of buy back
- Filing of Return
- Statement to be annexed to notice
- Filing of Return
- Board Resolution specifying the maximum price
- Disclosure and filing with SEBI
- Unpublished price sensitive information
- Public Announcement
- Filing of Draft letter of Offer with SEBI
- Filing of Form SH-9 with SEBI
- Payment of Fees
- Comments in letter of offer
- Record date
- Dispatch of letter of offer
- Unregistered shareholder
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- Date of opening of the offer
- Duration of opening of the offer
- Facility of settlement of the same through the stock exchange mechanism
- Acceptance on the basis of entitlement as on record date
- Deposit amount in Escrow Account
- Verification of Bank Balances with other documents
- Extinguishment and physically destroying the share certificates
- Check whether share certificates destroyed as per the manner provided
- Certificate of Compliance from Statutory Auditor and RTA Certificate.
- Disclosure related to extinguished and destroyed shares
- Register of shares
- Utilization of funds from buy back
- Buy back through stock exchange
- Order matching mechanism
- Display own name as purchaser
- Duration of opening and closing of buy back
- Disclosure on daily basis
- Procedure in case of securities in physical form
- Escrow Account
- Forfeit the Escrow Account
- Deposit of amount in IEPF
- Extinguishment or physically destroyed
- Destroyed with in timeline provided
- Resolution in case of buy back through book building
- Appointment of Merchant banker and public announcement
- Deposit before the date of public announcement
- Filing of copy of public announcement with SEBI
- Detailed methodology in public announcement
- Book building made through an electronically linked transparent facility
- No of bidding centers
- Duration of the open offer
- Determination of the Buy back price
- Final buy back price
- Compliances on opening of special account and payment for consideration
- True, factual and material information on advertisements and brochures, websites
etc.
- Restriction on issue of securities till the date of expiry of buy back period.
- Consideration only by way of cash
- Dealing in shares by promoter/promoters or his/their associates
- Raising of further capital
- Announcement of by back during the pendency of any scheme of amalgamation or
compromise or arrangement.
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- Locked-in shares
- Advertisement in the national daily news paper
- Comply of obligations as specified under regulation 25
9. SEBI (Listing Obligations and Disclosure Requirements) LODR 2015
The SEBI has launched numerous policy initiatives not only to strengthen the
regulatory framework of the Indian Capital Market but also align the role of Capital
Market with the International best practices and more importantly to the investing
and funding needs of the inspirational Indian population. Broadly the regulatory
framework in India is in compliance with the OECD Principles, an international
benchmark worldwide. A step further in this direction was envisaged through the
policy measures taken when SEBI notified LODR Regulations in 2015.
The SEBI LODR lay down the broad principles for periodic disclosures to be given by
the listed entities operating in different segments of the capital markets. The LODR
was structured to provide ease of reference by consolidating provisions of the then
ongoing Listing Agreements into one single document across various types of
securities listed on the stock exchanges.
 Compliance officer and his/her obligations

 Share transfer agent appointment and duties
 Appointment of RTA or handling in-house
 Compliance certificate
 Change or appointment of new share transfer agent
 Intimation to the stock exchanges (various)
 Cooperation with intermediaries
 Preservation of Documents
 Filing of Information
 Scheme of Arrangement
 Payment of Dividend or Interest or redemption or repayment
 Grievance Redressal Mechanism
 Register to handle investor complaints
 Filing of Investor Complaints pending
 Statement before Board of Directors
 Fees and Other Charges
 Independent Directors and Criterion for Independency
 Board of Directors and Composition of the Board
 Chairperson
 Number of Directors
 SR Equity Shares
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 Age of Director beyond 75 years
 Shareholders’ Approval
 Appointment of person who has been once rejected.
 Frequency of Meetings
 Quorum
 Periodical Review
 Plans for Succession
 Code of Conduct of all Members of Board of Directors and Senior Management
 Non-Executive Directors composition and Disclosures
 Stock Options
 Remuneration to Directors
 Stock Options to Independent Director
 Compensation Payable to Executive Directors
 Information to be placed in Board Meeting
 Compliance Certificate from CEO, CFO
 Risk Management Policy
 Evaluation of Independent Directors
 Board Recommendation in Notice calling General Meeting
 Maximum number of Directorships
 Audit Committee
 Nomination and Remuneration Committee
 Risk Management Committee
 Stakeholders Relationship committee
 Vigil Mechanism
 Related Party Transactions
 Related Party Transaction Policy Review
 Criteria For Materiality
 RPT – Approval and Omnibus Approval
 Treatment of Transactions prior to LODR
 Stock Exchange Disclosures
 Review of Financial Statements
 Review of Minutes
 Review of significant transactions
 Non-disposal of shares /no divestment
 Selling , disposing and leasing of assets
 Secretarial Audit and Secretarial Compliance Report
 No Alternate Director for Independent Director
 Independent Director’s Meeting
 Programs for Independent Directors
 D and O Insurance
 Corporate Governance Report
 Material Events and adherence to guidelines on materiality
 Determination of Materiality
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 KMP authorized for determining Materiality
 Disclosure to stock exchange
 Web site Disclosures
 Separate disclosure for promotor holding
 Quarterly Reporting Deviations
 Submission of financial results / Consolidated financial Results
 Annual Report
 Compliance with SCR Rules 1957
 Transfer and Transmission
 PCS Certificate
 Dividends
 AGM
 Compliance with Accounting Standards
 Debenture Trustee
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Chapter 6
Auditing Standards by ICSI and its Impact on Secretarial Audit
The Institute of Company Secretaries of India (ICSI) has issued 4 auditing standards namely
1. CSAS-1 - Auditing Standard on Audit Engagement
a. The auditor shall intimate in writing to the predecessor or previous auditor, if

any, before accepting the Audit engagement.
b. Audit engagements undertaken should be within the specified limits
c. Auditor should not have been in the employment of the auditee company, its
holding or subsidiary company at least for prior 2 years.
2. CSAS-2 – Auditing Standard on Audit Process and Documentation
a. Obtaining relevant information about the auditee to conduct the audit and to
form an opinion and expression.
b. Obtain third party confirmation if required.
c. Retain the audit documentation for at least 8 years from the date of signing
the Secretarial Audit Report (SAR)
3. CSAS -3 – Auditing Standard on Forming of Opinion
a. The Auditor’s report shall include a section with the heading “Auditor’s
Responsibility” and contain the statements specified in the standard.
b. While signing the audit report, auditor shall mention the name of the audit
firm along with the registration number, if any, the name of the auditor,
certificate of practice number, the membership number of the auditor,
specifying whether associate or fellow member. Date and place of signing the
report shall also be clearly mentioned.
c. As per the Peer Review Guidelines of the ICSI, it is mandatory to mention the
Peer Review Certificate Number in Secretarial Audit Report (SAR).
4. CSAS 4 – Auditing Standard on Secretarial Audit.
CSAS -4 is concerned with Secretarial Audit. It deals with the responsibilities of the auditor
while carrying out Secretarial Audit under section 204 of the Companies Act 2013 and rules
made thereunder. The standard deals with the basis and manner of carrying out the
secretarial audit.
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The objective of the Standard is to lay down the principles for evaluation of statutory
compliances and corporate conduct in relation thereto.
Requirements under CSAS -4
1. The Auditor shall take note of various laws applicable to the company as identified
by the Board of Directors of the Company in addition to the laws stipulated in the
prescribed format of the Secretarial Audit Report.
2. The Auditor shall identify the basic details like key financial parameters, location of
registered office, status of company, type/class of company, number, class and
category of employees/workers etc.
3. The auditor shall make the segregation of the same based on the understanding of
the Company and application of trigger test.
4. The Auditor shall verify corporate conduct, compliance of law and summarizing non-
compliances.
5. The Auditor shall verify the following:
a. Minimum and maximum limit on number of Directors on the Board.
b. Optimum combination of Board
c. Eligibility Requirements of Directors
d. Board Committees.
e. Board Process
6. The Auditor also needs to check as to whether there is clear demarcation of
responsibility for ensuring various compliances to be done by the Company. He or
she is also required to perform an assessment of compliance tracker to identify the
non-compliance and instances of show-cause notices, if any received by the
company.
An overall assessment of system and process shall be performed by the auditor
based on verification from the point of view of their adequacy thereof, considering
the size, no of units/branches, and complexity of compliances.
Fraud Reporting
Sections 143(12) and 143(14 of Companies Act require that, if the secretarial auditor
comes across any offence of fraud that has been or is being committed in the
company, by its officers or employees, depending on the amount involved, the
auditor is required to report the matter to the Audit Committee or the Board or the
Central Government. The response and action taken by the Audit Committee and / or
the Board is required to be reported in the Directors’ report. Reporting of fraud,
requires the PCS to go beyond financials and compliance.
7. It shall be the duty of the Auditor to identify and report all events/actions having
major bearing on the Company’s affairs in pursuance of the applicable laws, rules,
regulations, guidelines, standards etc.
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The above standards are applicable for Secretarial Audit undertaken by the Auditor on or
after 1st July 2019 and mandatory for Secretarial Audit accepted by the Auditor on or after
1st Oct 2020.
SECRETARIAL AUDIT REPORT (SAR) -FORM-MR 3
Form MR 3 is the format in which the Secretarial Audit Report (SAR) is to be issued by PCS.
To be useful to the company as well as its stakeholders, the Secretarial Audit Report (SAR)
must be a ‘speaking report’ and should provide additional information on some items or
processes or transactions. Keeping the standard format, the PCS can elaborate on needed
items. Elaborating on the implications of events and transactions will be of much help to the
stakeholders. Secretarial Audit Report would also provide the auditee companies assurance
that the transactions have been done in due compliance with all applicable provisions of law.
Form MR 3 requires reporting not only on compliance with the provisions of Companies Act
2013, but also compliance with the listing agreements entered into by the company with
stock exchanges; FEMA 1999 to the extent of Overseas Direct Investments (ODI), Foreign
Direct Investment (FDI), and External Commercial Borrowings (ECB); a whole host of
securities laws and guidelines prescribed by SEBI and reporting on compliance with other
laws that are specifically applicable to companies.
Approach in Secretarial Audit
Audit is an onerous task, which requires not only professional competence and adherence to
technical standards but also ethical conduct on the part of the secretarial auditor and the
audit team. Ethical conduct would include :
1. Independence
2. Integrity
3. Honesty
4. Objective approach
5. Maintaining confidentiality of client information
6. Avoidance of conflict of interest.
Liability in Connection with Secretarial Audit
Section 204(4) of Companies Act 2013 provides that if the company or PCS contravenes the
provisions regarding secretarial audit, the company, every officer of the company or the
PCS, who is in default, shall be liable to a penalty of Two lakh rupees. Notwithstanding,
the provisions of Sec 204(4), the ICSI may take disciplinary action against any PCS who
does not comply with the code of conduct or the auditing standards of the ICSI.
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Chapter 7
Secretarial Standards in relation to Secretarial Audit
Introduction
Companies follow diverse secretarial practices evolved over a period of time through varied
usages and as a response to differing business cultures. Therefore, a need was felt to
integrate, consolidate, harmonize and standardize all the prevalent diverse secretarial
practices, so as to ensure that uniform practices are followed by the companies throughout
the country.
The Institute of Company Secretaries of India (ICSI), recognizing the need for integration,
harmonization and standardization of diverse secretarial practices, has constituted the
Secretarial Standards Committee (SSC) with the objective of formulating Secretarial
Standards Guidance Notes. To support and facilitate Secretarial Standards Committee, an
“Expert Group on Secretarial Standards” is also formed comprising of eminent members of
ICSI representing Industry as well as practicing side of the profession and nominated
members of major industry associations, regulations, stock exchanges and professional
bodies.
Secretarial Standards are formulated taking into consideration the applicable laws, business
environment and the prevalent best secretarial practices. Secretarial Standards are
developed in a transparent manner after extensive deliberations, analysis, research and
after taking views of corporates, regulators and the public at large.
By following the Secretarial Standards in letter and spirit, companies will be able to ensure
adoption of uniform, consistent and best secretarial practices. Such uniformity of best
practices, consistently applied, will result in furthering the shareholders’ democracy by laying
down principles of better corporate disclosures thus adding value to the general endeavor to
strive for good corporate governance.
While, the Secretarial Standards have been introduced under the legal umbrella of
Companies Act 2013, which is first of this kind in the world. It is a great recognition to the
profession of Company Secretaries and the ICSI, as the Company Secretaries in employment
as well as in practice are entrusted to ensure the compliance of the applicable secretarial
standards.
While the basic principles of Board and general meetings are articulated under the
Companies Act 2013, the Secretarial Standards act as extended tone of these principles by
giving clarity and standardizing the diverse practices. Secretarial Standards play
indispensable role in enhancing the corporate culture and governance standards.
In the Secretarial Standards, standard practices are articulated and comprehensively made
available at one place. Incidentally, many litigations are on account of non-following of
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proper procedures and non-availability of proper records, improper maintenance/
manipulation and tampering of Minutes, agenda, papers etc. The Standards addresses all
these issues and facilitate ease of doing business, improved governance, confidence building
in minds of investors, improved compliance etc.
Applicability and scope of secretarial Standards
Sec 118(10) of the Companies Act 2013 requires every company to observe the Secretarial
Standards with respect to Board and General Meetings specified by the ICSI and approved
as such by the Central Government.
Secretarial Standards on Meetings of the Board of Directors (SS-1) and Secretarial Standards
on General Meetings (SS-2) issued by the ICSI are applicable to all companies with effect
from 1st July 2015 (except One Person Company where there is one director and class or
classes of companies which are exempted through any notification of the Central
Government).
Since then, the SS-1 and SS-2 have been revised by the ICSI and approved by the Central
Government under section 118(10) of the Companies Act 2013 which are applicable with
effect from 1st October 2017.
The revised version of SS-1 and SS-2 applies to Board and General meetings respectively, in
respect of which notices are issued on or after 1 st October 2017.
Secretarial Standards are in conformity with the Companies Act 2013 and rules made
thereunder. However, if due to subsequent changes in the Act, a particular standard or any
part thereof becomes inconsistent with the Act, the provisions of the Act shall prevail.
The secretarial Standards do not seek to substitute or supplant any existing laws or the rules
and regulations framed thereunder but, in fact, seek to supplement such laws, rules and
regulations.
CHECKLIST -Secretarial Standards on Meeting of the Board of Directors -SS 1
Convening of a Meeting.
1. Check whether the Meeting has been convened by the authorized person in
accordance with the Standards.
2. Check whether notice of the Meeting (Original/Adjourned) was given in writing to all
directors at least 7 days before the Meeting through one of the stipulated modes in
accordance with the Standards or within such longer period as provided in the
Articles of Association.
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3. Check whether the notice has specified the serial number, day, date, time and full
address of the venue of the Meeting.
4. Check whether the notice has contained all necessary information to enable the
Directors to avail the facility of participation through Electronic Mode.
5. Check whether Agenda and Notes on Agenda for the Meeting were given to all
directors at least 7 days before the Meeting through one of the stipulated modes in
accordance with the Standards or within such longer period as provided in the
Articles of Association.
6. Check whether the procedure as per Standards was followed in case of a Meeting
called at shorter notice/sending agenda in respect of Unpublished Price Sensitive
Information at shorter notice.
7. Check whether the proof of sending Notices, Agenda and Notes thereon and their
delivery have been retained in accordance with the Standards.
8. Check whether any other item not included in the agenda was taken up for
consideration and approved in accordance with the Standards.
Frequency of Meetings
1. Check whether 01st Meeting of the Board was held within 30 days of incorporation.
2. Check whether the specified numbers of Meetings were held in a year (Calendar
Year) and the gaps between two consecutive Meetings did not exceed the specified
period
3. Check whether Meetings of the committees were held as prescribed by any law or
authority or as stipulated by the Board.
4. Check whether Meeting of the Independent Directors was held in accordance with
the Standards.
Quorum
1. Check whether the requisite quorum of dis-interested directors was present

throughout the Meeting of the Board/Committees and no business was transacted
when the required quorum in accordance with the Standards was not present.
2. Check whether the directors participated through electronic mode in a Meeting were
counted for the quorum except in case of restricted items of business as specified
under law. (This provision is amended)
3. Check whether the Board was properly constituted at the time of Meeting and no
business was transacted if the number of directors reduced below the quorum fixed
by the Articles / Act except those permissible under the Act.
Attendance at Meetings.
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1. Check whether the Attendance Register for the Board and Committee Meetings were
duly maintained and signed in accordance with the Standards and kept in the
custody of the Company Secretary or any other person authorized by the Board.
2. Check whether the attendance registers have been preserved for a period of at least
8 financial years from the date of last entry made therein and destruction thereof, if
any, during the year was made with the approval of the Board.
3. Check whether leave of absence was granted to a director in accordance with the
Standards, if requested for.
Chairman
1. Check whether the Chairman of the Company or any other director duly elected as
Chairman of the Board in accordance with the Standards.
2. Check whether the Chairman of the committee as appointed by the Board or duly
elected by the committee members in case of committees, has conducted the
Meetings of the Committee in accordance with the standards.
Passing of Resolution by Circulation
1. Check whether the decision/approval of competent authority was obtained before a

particular business by means of a resolution by circulation had been circulated in
2. Check whether the items required to be transacted only at a Meeting of the Board
have passed by conducting meeting only.
3. Check whether the matter was placed for consideration at a meeting of the Board
where requisite number of Directors have requested the matter to be taken up at a
Board Meeting.
4. Check whether the draft of the resolution proposed to be passed by circulation along
with necessary papers including explanatory note had been circulated to all the
Directors of the Company through the specified modes of delivery
5. Check whether the explanatory note indicated the last date by which the directors
had to respond with their assent/dissent and manner thereof.
6. Check whether the resolution, if approved by the requisite majority had been taken
on record in accordance with the Standards.
7. Check whether the resolutions passed by circulation had been noted at the next
Board Meeting and the text thereof with dissent or abstention, if any, were recorded
in the minutes of such Meeting including the fact that the interested Director, if any,
did not vote on the resolution.
Minutes
1. Check whether the Minutes of the Board/Committee Meetings were signed by the
respective chairman of that Meeting or the next Meeing
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2. Check whether :
a. Minutes were recorded in the books maintained for that purpose.
b. Distinct Minutes book was maintained in respect of Board and Committee
Meeting.
c. Minutes maintained in electronic form, if any, with Timestamp.
d. The pages of the Minutes book were consecutively numbered.
3. Check whether minutes have not if maintained in loose-leaf form, have bounded
periodically in accordance with the Standards.
4. Check whether minutes have not pasted or attached to the Minutes Book, altered or
tampered with in any manner.
5. Check whether the Minutes Books have kept at the registered office of the company
or at a place approved by the Board.
Contents of Minutes
1. Check whether
a. Minutes stated the number and type of the Meeting, name of the
company, day, date, venue and time of commencement and conclusion of
the Meeting.
b. Minutes record the names of the directors present physically or through
electronic mode, the Company Secretary in attendance at the Meeting
and invitees, if any.
c. Minutes contain a record of all appointments made at the Meeting.
d. Minutes include other specific contents in accordance with the Standards.
2. Check whether the Minutes have mentioned the brief background of all proposals
and summarize the deliberations thereof. In case of major decisions, the
rationale thereof was also mentioned.
3. Check whether the Minutes have recorded the fact about the resolution passed
pursuant to the casting vote (if any) of the Chairman of the Meeting.
Recording of the Minutes
1. Check whether the unsigned documents tabled or presented at the Meeting, which
were not part of the Notes on Agenda and referred to in the minutes were suitably
identified by initialing in accordance with the Standards.
2. Check whether the Minutes contain a specific reference to such earlier
resolution/decision or state that the Resolution was in supersession of all earlier
Resolutions passed in that regard, where a decision was superseded or modified
subsequently by the Board.
3. Check whether the Minutes of the proceeding Meeting were noted at the next
Meeting of the Board held immediately following the date of entry of such minutes in
the Minutes book.
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Finalization and Entry in the Minutes Book
1. Check whether the draft minutes were circulated to all directors/committee members
within 15 days from the date of conclusion of the Meeting in accordance with the
standards.
2. Check whether the minutes were finalized and entered in the Minutes Book within 30
days from the date of conclusion of the original adjourned Meeting in accordance
with the Standards.
3. Check whether the Alteration in the Minutes, if any was made with the express
approval of the Board at its subsequent Meeting at which the minutes were noted by
the Board and the fact of such alteration was recorded in the Minutes of such
subsequent meeting.
Signing and Dating of Minutes
1. Check whether the Minutes were initialed, dated and signed by the Chairman in
2. Check whether a certified copy was circulated to all the Directors in accordance with
the Standards within 15 days of signing of Minutes.
Inspection & Extracts
1. Check whether the inspection of Minutes was allowed and extracts thereof were
provided in accordance with the Standards.
Preservation of Minutes
1. Check whether the minutes of all Meetings have been preserved permanently in
physical / electronic form in accordance with the standards and kept in the custody
of Company Secretary or any Director duly authorized for the purpose by the Board,
if there was no Company Secretary.
2. Check whether the office copies of Notices, Agenda, Notes on Agenda and other
related papers have been preserved in good order in physical or electronic form in
3. Check whether the Minutes of all Meetings of the transferor company as handed over
to the transferee company, if any, have been duly preserved permanently.
4. Check whether the office copies of Notices, Agenda, Nots on Agenda and other
related papers of the transferor company as handed over to the transferee company,
if any, have been duly preserved in accordance with the Standards.
5. Check whether the requisite approval of the Board/Central Government has been
obtained, wherever necessary to destroy any document in accordance with the
Standards.
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6. Check whether the Report of the Board of Directors included a statement on
Compliances of applicable Secretarial Standards.
CHECKLIST – SECRETAIAL STANDARD ON GENERAL MEETINGS (SS-2)
Convening a Meeting
1. Check whether the General Meetings during the year have been convened by or
under the authority of the Board in accordance with the Standards.
2. Check whether Annual General Meeting (AGM) and the Requisitioned Meeting, if any,
called by the Board of Directors/Requisitionists convened between 9am and 6 pm on
a day other than National Holiday in accordance with the standards.
3. Check whether the notice along with accompanying documents were given in writing
to all Members, Directors, Auditors, Secretarial Auditors, Debenture Trustees and to
other persons entitled to receive notice through one of the specified modes at least
21 days in advance of the Meeting.
4. Check whether Proof of sending of the notice and accompanying document was
retained by the company in accordance with Standards.
5. Check whether the notice has clearly specified the day, date, time and full address of
the venue of the Meeting including the route map and prominent landmark wherever
required besides clearly specifying the nature of the Meeting and the business to be
transacted thereat. In case of AGM, the serial number of the Meeting was mentioned
in the notice.
6. Check whether the Notice was also hosted in the website of the company, if any.
7. Check whether the Notice was accompanied by attendance slip and a Proxy form
with clear instructions for filing, stamping, signing and/or depositing the Proxy form.
8. Check whether the notice was provided all necessary information to enable the
Members to access facility of e-voting in accordance with the Standards.
9. Check whether in all cases relating to the appointment or reappointment and/or
fixation of remuneration of Directors the details in accordance with the Standards
has been provided in the explanatory statement.
10. Check whether the nature of the concern or interest (financial or otherwise), if any,
of the prescribed person, in any item of business or in a proposed Resolution, was
disclosed in the explanatory statement.
11. Check whether in case of Meetings held at shorter notice, due procedure as per the
Standard was followed.
12. Check whether no items of business other than those specified in the Notice and
those specifically permitted under law were taken up for consideration at the
Meeting.
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13. Check whether a Meeting convened upon due Notice had not been postponed or
cancelled, except for reasons beyond the control of the Board in such case, check
whether it had been duly reconvened.
14. Check whether no business was transacted at a Meeting, if the Notice was not given
in accordance with the Standards.
Frequency of Meetings
1. Check whether the Annual General Meeting was held during the year in accordance
with the Requirement of the Act and Standards.
2. Check whether items of business other than Ordinary Business have been considered
at an
3. Extra-Ordinary General Meeting or by means of a postal ballot, if thought fit by the
Board.
Quorum
1. Check whether the requisite quorum was present throughout the Meeting in
Presence of Directors and Auditors
1. Check whether all the directors of the company had attended the General Meetings
of the Company. If any Director was unable to attend the Meeting, the reasons
thereof were explained by the Chairman at the Meeting.
2. Check whether the Auditors, unless exempted by the company, attended the General
Meetings of the company either by themselves or through their Authorized
Representative.
3. Check whether the Secretarial Auditor, unless exempted by the company, attended
the Annual General Meeting, either by himself or through this authorized
representative.
Chairman
1. Check whether Meetings were conducted either by Chairman of the Board or any
other Director so designated or any other elected Chairman in accordance with the
Articles of Company or the Standards, as the case may be.
2. Check whether the objectives and implications of the Resolutions were explained by
the Chairman before the same were put to vote the Meeting.
3. Check whether incase of a public company, the Chairman entrusted the conduct of
the proceedings in respect of an item in which he was concerned or interested to any
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Non-interested Director/Member and resumed the Chair after that item of business
has been transacted at the Meeting.
Proxies
1. Check whether Requirements of the Standards relating to Notice of Right to Appoint

proxies, Form of Proxy, Stamping of Proxies, Execution of Proxies, Proxies in blank
and incomplete proxies, Deposit, Revocation, Inspection and Record of Proxies have
been duly complied with.
Voting.
1. Check whether every resolution except a Resolution which has been put to vote
through Remote e-Voting or on which a poll has been demanded, was duly proposed
by a member and seconded by another member.
2. Check whether the e-voting facility was provided to its members to exercise their
voting rights and also every resolution was put to vote through a ballot process at
the Meeting, in case of a company having its equity shares listed on a recognized
stock exchange and other companies as prescribed (except the exempted
companies)
3. Check whether every resolution except those placed for voting through remote e-
Voting, in the first instance was put to vote on a show of hands, unless a poll was
validly demanded.
4. Check whether Voting at the Meeting was in accordance with the law and the
Standards.
Conduct of E-Voting
1. Check whether Company provided e-Voting facility to its members in compliance with
applicable provisions.
2. Check whether the Board has appointed an agency to provide electronic platform for
e-voting.
3. Check whether the Board has appointed scrutinizer(s), who was not an officer or
employee of the company for the e-voting/ballot process.
4. Check whether the report of the Scrutinizer was submitted to the Chairman, or any
other person authorized by the chairman for this purpose.
5. Check whether the requirements of Standards with reference to conduct of e-Voting,
declaration /publishing of results, custody of Scrutinizer’s Report & Related papers
had been duly complied with.
Conduct of Poll
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1. Check whether the demand/conduct of poll, if any, at the Meeting was in accordance
with the Law and the Standards.
2. Check whether in case of a poll not taken forthwith, the Chairman had announced
the date, venue and time of taking the poll to enable Members to have adequate and
convenient opportunity to exercise their vote.
3. Check whether each resolution put to vote by poll was put to vote separately.
4. Check whether the Chairman has appointed such number of scrutinizers in
accordance with the Standard to ensure scrutiny of votes cast on poll in a fair and
transparent manner.
5. Check whether the requirements of Standards with reference to declaration /
publishing of results had been duly complied with.
Prohibition of Withdrawal of Resolutions.
1. Check whether no Resolution was withdrawn with reference to items of business

likely to affect market price of securities of the company or proposed for
consideration through e-Voting.
Rescinding of Resolutions
1. Check whether no resolution passed at a Meeting has been rescinded otherwise than
by a Resolution passed at a subsequent Meeting.
Modification to Resolutions.
1. Check whether no material modification to text of the Resolution, as set out in the
notice, was made at the Meeting which alters the substance of the Resolution.
2. Check whether no modification was made to any Resolution which has already been
put to vote by Remote e-Voting before the Meeting.
Reading Reports
1. Check whether the qualifications or comments on the financial statements or matters

which have any adverse/material adverse effect on the functioning of the company,
if any, mentioned in the Auditor’s report / Secretarial Audit Report were read at the
Annual General Meeting along with explanations / comments given by the Board of
Directors in their report to such qualification / observation and comments of the
Auditors / Secretarial Auditors.
Distribution of Gifts
1. Check whether no gifts, gift coupons or cash in lieu of gifts were distributed to any
member at or in connection with the Meeting.
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Adjournment of Meetings
1. Check whether the adjournment of Meeting was in accordance with the Standards.
2. Check whether notice of the adjourned Meeting was given in accordance with the
Standards.
3. Check whether quorum requirements were fulfilled in adjourned Meeting.
4. Check whether only the unfinished business of the original Meeting was taken up at
an adjourned Meeting.
Passing of Resolutions by Postal Ballot
1. Check whether passing of resolution by Postal Ballot, if any, was in accordance with
the Standard.
2. Check whether the Board has appointed scrutinizer and an agency for the remote e-
Voting in case of postal ballot.
3. Check whether the Report of the Scrutinizer was submitted to the Chairman/ any
other person authorized by the Chairman for this purpose.
4. Check whether the requirements of Standards with reference to Notice of Postal
ballot, declaration / publishing of results, custody of Scrutinizer’s Report & Related
papers, rescinding / modification of resolutions had been duly complied with.
Minutes
1. Check whether minutes of the General Meetings were entered in the minutes book
and signed within 30 days of conclusion of the Meeting. The date of entry of minutes
in the books was recorded by the Company Secretary / any other person authorized
for this purpose in accordance with the Standards.
2. Check whether :
a. Minutes were recorded in books maintained for that purpose
b. Distinct Minute book was maintained in respect of Meetings of Members,
Creditors etc.
c. Minutes maintained in electronic form, if any, with Timestamp.
d. The pages of the Minutes book were consecutively numbered.
3. Check whether Minutes were not pasted or attached to Minutes Book, altered or
tampered with in any manner.
4. Check whether Minutes if maintained in loose-leaf form were bound periodically in
5. Check whether the Minutes books were kept at the Registered Office of the
Company.
Contents and Recording of Minutes
1. Check whether :
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a. Minutes stated the name of Meeting, name of the Company, day , date,
venue and time of commencement and conclusion of the Meeting. Minutes of
Annual General Meeting, also stated the serial number of the Meeting.
b. Minutes recorded the names of the Directors and Company Secretary present
at the Meeting alphabetical order or in any other logical manner, starting with
the name of the person in the Chair.
c. Minutes included the other specific contents, wherever applicable, in
accordance with the standards.
2. Check whether the summary / brief report on e-voting or postal ballot including the
summary of scrutinizers report in respect of resolutions passed through e-Voting /
postal ballot has been recorded in the minutes book.
3. Check whether each item of business taken up at the Meeting was numbered to
enable ease of reference or cross reference.
Signing and Dating
1. Check whether minutes were initialed, dated, and signed in accordance with the
standards.
Inspection and Extracts of Minutes
1. Check whether the requirements of the Standards in respect of inspection of Minutes

and providing extracts thereof were duly complied with.
Preservation of Minutes and Other Records
1. Check whether Minutes of all Meetings have been preserved permanently in physical
or in electronic form with Timestamp in the custody of Company Secretary or any
Director duly authorized by the Board.
2. Check whether Minutes of all meetings of the transferor company as handed over to
the transferee company, if any , were preserved permanently.
3. Check whether office copies of notices, scrutinizer’s report and other related papers
have been preserved in good order in physical or electronic form in accordance with
Standards.
4. Check whether office copies of Notices, scrutinizer’s report and related papers of the
transferor company, as handed over to the transferee company, were preserved in
Report on Annual General Meeting
1. Check whether in case of listed public company, a report on the Annual General
Meeting (AGM), including a confirmation that the Meeting was convened, held and
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conducted as per the provisions of the Act was prepared in the prescribed form and
filed with the Registrar of Companies with in 30 days of the conclusion of the AGM.
Disclosure
1. Check whether the Annual Return of the Company has disclosed the date of Annual
General Meeting held during the financial year.
Chapter 8
Role of Practicing Company Secretary In Secretarial Audit
Secretarial Audit is considered to be the icing in the cake among other assignments and
recognitions available for Company Secretaries in Practice. Secretarial Audit should be
perceived as a quality job. It creates challenges and greater responsibility for company
secretaries. It also poses a great challenge to justify fully, the faith and confidence reposed
in PCS. Secretarial Audit is a very responsible job and the PCS cannot afford to have a
casual approach towards audit.
Initially there was no limit proposed on the maximum number of secretarial audits which a
PCS could conduct. But from the financial year 2016-17, the council of the institute at its
235th meeting held on 11th February 2016 reviewed the existing limits for the issue of
Secretarial Audit Reports and decided limits on number of Audits for a PCS or Firm.
1. 10 Secretarial Audits per partner/PCS and

2. An additional limit of 5 secretarial audits per partner/PCS in case the unit if peer
reviewed.
At present, only peer reviewed firm can conduct Secretarial Audit of Companies. Practicing
professionals should not take on more assignments than they can manage. It becomes
imperative for PCS that he/she exercises great care and caution :
a. When accepting a secretarial audit

b. While carrying out the secretarial audit
c. When framing an opinion on various issues
d. When issuing the Secretarial Audit Report.
e.
In all these matters, the Secretarial Auditor is expected to adhere to the highest standards
of Corporate ethics, governance and excellence in providing his/her service. The PCS has to
perform that skill, care and caution which is reasonably expected from a competent, careful
and cautious person.
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Irrespective of the amount of fee charged, a PCS is required to do his job meticulously
without compromising the quality and to the best of his/her abilities. Secretarial Auditor
should report all non-compliances without exception. PCS should maintain an Audit Diary
and keep various checklists on record which would justify giving his report in a particular
manner.
Use of Materiality Concept
In the context of Secretarial Audit, it is advisable to classify the impact of non-compliance

into A,B and C categories. A Category signifies major non-compliance which has significant
amount of penalties and will have major bearing. B Category signifies moderate non-
compliance which has moderate amount of penalties. C category signifies non-compliance
which are of technical nature and has very less amount of penalties. Applying principle of
materiality, the PCS can discount reporting of C category events. PCS need to understand
the magnitude and future consequences of non-compliance before concluding.
An Auditor is not bound to be a detective or approach his/her work with suspicion or with a
foregone conclusion that there is something wrong. The Secretarial Auditor while
remembering that he is a watchdog and not a bloodhound, is expected to display skepticism
in the work.
Prevention is better than cure and Secretarial Audit is an effective tool that helps
management and all stakeholders to understand the Compliance level and effectiveness of
the systems. PCS has to do his job in good faith with due care and diligence.
Skills and Systems Required by a Secretarial Auditor
The PCS conducting the secretarial audit needs an understanding of the corporate laws and
other related laws applicable to the company. Thus for conducting Secretarial Audit, the PCS
should have proficient knowledge of all corporate laws. TO be able to give a useful report, a
company secretary in practice is expectd to have the following skills and systems.
1. Knowledge
a. About the nature and activities of the company

b. About the operations and the laws that are relevant to the company
c. About the existing compliance system, board process and procedures,
selection and evaluation process of the Board.
2. Team
An appropriately trained team of staff who can provide the necessary inputs
which go towards the preparation of the report is an inevitable support
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system required by a PCS to effectively conduct secretarial audit. The team
should be informed of the basic audit requirements and ethics. Relevant
legislative and administrative updates should be shared and there should be
frequent interactions with the audit team to build and keep the expertise.
3. Documents and Backup
The Secretarial Auditor is expected to develop checklists that will help in the
evaluation process. PCS is expected to keep proper records of documents and
checklists filed through the course of the audit.
4. Reliance upon Management Representation and declaration
The Secretarial Auditor may rely upon the authority representation letter or
declaration letter or declaration up to a specific extent.
5. Third party supporting and evidence
It would perpetually be helpful to check filing made by the company at MCA

and other authorities separately. Confirmation and enquiries can also be
made with statutory auditors, internal auditors, consultants and advisors
engaged by the company and the Independent Directors of the company.
6. Adhering to the timelines
The plan set to conduct the audit process should be stringently adhered to in
order to gain the confidence of the client and raise the expertise level of the
team.
7. Honesty and Fairness
PCS has the professional responsibility to provide a fair and objective view,
PCS should be independent of the company being audited. He or she need to
assure that activities of the client company are in accordance with the
applicable procedures and that backing evidence kept by the company is
certified.
8. Maintaining Audit Diary and Working Papers
The Audit exercise needs to be planned and performed professionally and

verifications done by the team members should be recorded daily. Such
keeping of diary would help in keeping audit trail that would come in
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beneficial to assure the quality of audit. Working papers with respect to the
audits should be indexed and preserved properly.
PROCESS OF SECRETARIAL AUDIT.
a. Discussion
Discuss with management regarding the scope of his/her work and professional fees
to be rendered for the conduct of such audit
b. Identify Scope and Objective
Once the primary objects are set, identification of scope and activities to be carried
shall be listed.
c. Obtain Formal Engagement Letter
After the discussion and finalizing the PCS, the company shall issue an engagement
letter consisting of terms and condition of his appointment.
d. Meeting with Team
The work plan involves briefing the audit staff as to allotment of work, filed work
responsibilities and other roles.
e. Planning for Audit
PCS shall plan ahead of the procedure for audit such as areas of laws it will cover
first, date of visits for conducting an audit, approximate months or days required to
be taken to complete audit etc.
f. Preparation of Working papers
Working papers are a vital tool of the audit profession. They are the support of the
audit opinion. They connect the management’s records and financials to the auditor’s
opinions.
g. Observation and Summary Finding
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Conducting the audit and jotting down the entire observation and finding made
throughout the audit.
h. Audit Report
Once the audit is completed, PCS shall submit the final audit report in Format MR-3
duly signed and stamped by Company Secretary in Practice.
Chapter 9
Secretarial Audit and Corporate Governance
Introduction
With growing complexities of business and regulatory framework, Secretarial Audit is
expected to be the mainstay in Corporate Governance.
In India, we adopted the globally followed principles of Corporate Governance. To what

extent they are in sync with the business models commonly found in India is a question on a
practical level that has to be answered. In simple words, something that has not been
grown organically needs to be implemented keeping in mind its practicality.
The scope of governance and self-regulation had to be raised from being a ‘box ticking
exercise’ to a dynamic roadmap including the establishment of structures and processes with
appropriate checks and balances to ensure that the management is on track to discharge
their current duties, without losing sight of the long-term growth of the organization.
The concept of ‘governance’ is different from compliance.
The underlying idea of governance is that of being an internal source to set up an ethical
tone in the company through a set of rules, policies, and processes established by the
management.
Compliance is an external source that must be met by the company to stay within the
boundaries of the law.
This is where the importance of Secretarial audit comes in.
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The fundamentals of Secretarial Audit, inter alia, are to ensure that the company has
adopted the principles of good governance laid down by various laws that apply to it, both
in letter and spirit.
The Audit provides for a mechanism to identify non-compliance at the grassroots, thus
providing the management in a timely manner to take corrective action before the interests
of its stakeholders are compromised.
Factors of Corporate Governance
1. Composition and Diversity of BOD
The Companies Act 1013 and SEBI Regulations have clearly laid down the optimal
composition of the Board compraising of Executive, Non-Executive, Independent and
Women Directors, based on different criteria met by a company. This is critical for
the autonomy, skill sets and diverse thought process and reinforces the fine line
between management and governance.
Secretarial Audit covers in detail the disclosures made by the company in its
statutory records like Agendas and Minutes book of the Board and Committee
meetings.
The agenda notes reveal how much information is shared with the Directors before
an issue is been discussed, and could give clarity whether the decisions taken are on
an informed basis. How well in advance have the agenda notes been circulated to
the Board members before each meeting also to be considered. The Minutes books
are to provide ample proof of the course of discussion of Directors, the brainstorming
process, the dissenting opinions and the way Board addresses such dissent.
2. Process of Selection, on-boarding and training of new members of the

Board.
The policy established by the company for selection of new members, especially
independent directors, to its Board is of utmost importance in ensuring Board Quality
and adequacy. The co-dependence of strategic priorities and boardroom skills should
be a primary factor while considering the suitability of a potential candidate. These
are not mutually exclusive and are equally responsible for the successful contribution
of an otherwise eligible person towards the responsibilities of the Board.
Once a candidate is identified and appointed on the Board, the induction on the
Board and Training is equally essential. It is important to educate them on
company’s business model, industry, competitive landscape, unique legal and
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regulatory compliance issues facing the company and its industry as well as recent
history of successes or problems with financial reporting.
One method is to provide the director with a manual containing a broad overview of
Board’s oversight policies as well as company’s critical financial, operational and
other risks. Another method is to involve meetings of the newly inducted Board
member with the Chairperson, CEO, CFO, Secretarial Auditor, Legal Counsel etc.
While both the above methods are helpful in getting new Board Members up to
speed quickly and enabling them to contribute sooner, its effectiveness would largely
depend upon the extent of customization of the programme to the individual needs
of the newly appointed director considering his or her current expertise and role
expectations.
3. Ensuring that complete disclosures as required by its governing laws have been
made by the company on an event-driven basis to all stakeholders is another prime
area of focus of Secretarial Audit. This include:
a. Adequate policy disclosures on company website for the public.
b. Educational qualifications, expertise, suitability and justification for
appointment of new Directors in Annual Report to shareholders etc.
c. A thorough verification of the policies set in place by the NRC and its
adherence thereto, especially to the fit and proper criteria adopted as
stipulated by various authorities including SEBI, RIBI, IRDAI, or any other
regulatory authority as far as applicable to the company.
All the above could signal the management of what to expect from the Board or
Committee meetings and what measures could be taken to improve the same.
Note:- A secretarial Audit Report shall also act as a summary of corporate legal
compliances ensured by the company during a particular period, which provides the
new Directors with a confidence and clarity on the current position and general
approach of the company towards legal compliances and governance.
4. Evaluation of Board Performance
While evaluating the performance of the Directors, whether on an individual level or

as the Board (Committee) in light of corporate governance, quality should be given
paramount importance over quantity.
Secretarial Audit considers the policy adopted by the company for Board Assessment
and analyses whether it is being undertaken keeping in mind the purpose and
benefits that accrues from it. This can be identified from the minutes of the NRC. It
can also be used as a tool to identify whether the post evaluation changes have been
effective or implemented.
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The basis for an effective Board of Directors is its capability to respond promptly to a
dynamic business environment. To ensure continuity of this trait in the Board, a
periodic evaluation or performance assessment is mandatory and it has the potential
to enhance effectiveness, maximize strength, identify and minimize weakness and be
proactive in its overall responsibilities on an individual as well as collective level. It
improves the spirit of leadership, teamwork, accountability, decision making and
effective communication, both external and internal. It encourages more active
participation, self introspection of the skill gaps and the identification and
acknowledgment of the room for improvement with professional and business needs
in mind.
5. Succession Planning
Developing an ideal succession plan can lead to a less fractional transition on the
event of any sudden or unplanned gap in leadership. Such a succession plan or
transition plan should ideally include a timeline, clear definition of required skills in
the potential candidate, identification of such candidates and objective analysis of
their strengths and weakness in light of the changing requirements from time to time
etc. A defined succession plan is a crucial element in good governance practices and
the Secretarial Auditor could have a look into whether there is a practical succession
policy in place and advise the Board on its effectiveness and methods to stay up-to-
date with current practices in the industry.
6. Balancing the Interests of the stakeholders.
There exist mainly two types of business models in India

1. Professionally Managed Companies
2. Companies Managed by Promotor Group.
In promotor group managed entities, minority shareholders worry about decisions

that could impact their position or wealth. Other stakeholders like creditors, business
partners, governing authorities etc. have their own interests in the way in which a
company is run.
The BOD has to ensure that the needs of all the stakeholders of the company are
balanced and met without affecting one another. Good corporate governance is a
tool for reconciling possibly diverging interests.
Through secretarial audit, various aspects of stakeholder interests are thoroughly

scrutinized.
For example:
55 | P a g e
a. Disclosing promoter and director shareholding (both direct and indirect) to the
public
b. keeping a check on the limits of permissible remuneration that can be paid to

Directors.
c. abstaining from the activities of insider trading
d. keeping tab of the related party transactions entered by the company.
Discrepancies can be brought to the notice of the stakeholders through a

qualification in the Secretarial Audit Report and such a qualification warrants
response from the Directors in the Annual Report for the year pertaining to which the
Audit is being conducted.
The scrutiny of minutes and conduct of Audit Committee meetings also play a major
role in defining the importance given by the company to investor protection and
stakeholder confidence.
Thus, Secretarial Audit provides an assurance to the stakeholders of a company that
the actions taken by the company are being reviewed from an independent and
external point of view, which enhances their confidence in the persons entrusted
with the management of the company affairs.
7. Risk Management and Crisis Management
Risk Management is a Proactive mechanism enabling the company to face minimal

damage as contingency measures are already in place to face and address the
potential threats if and when they materialize.
Crisis management is the reactive approach to an unforeseen contingency that is

capable of causing significant damage to the company in terms of profits, market
share, reputation and goodwill, employee turnover etc. The impact of the crisis is
determined by how quickly the company responds to the crisis and acts to mitigate
the damage. More the delay in action, more will be the loss.
The primary concern is the effectiveness and capability of the Board to foresee/
respond to these situations. This capability of the Board goes a long way in ensuring
the long-term sustenance and survival of the company in its chosen business
environment and that way, this preparedness is closely connected to the principles of
Corporate Governance.
56 | P a g e
A secretarial Auditor can review the policies set up in place for risk management and
crisis mitigation and comment on its scope and effectiveness from an outsider
perspective.
8. Vigil Mechanism and Whistle blowing.
Secretarial Audit reviews the effectiveness of the Vigil mechanism policy in place,
complaint received and actions taken thereon by the authorities entrusted under the
mechanism. If there are any discrepancies or improper treatment found in the way
the complaint is being dealt with, or loopholes in the policy devised, the secretarial
auditor shall requie a representation from the Directors in this connection.
9. Transparency & Operational Confidentiality
In depth verification of minute books of meetings of the company is undertaken in

Secretarial Audit. Minutes are expected to contain a fair and accurate summary of
the proceedings of the meeting including the discussion and deliberation of the
directors before making a decision, facts and information presented before the Board
to enable them to take an informed decision or follow-up of the outcome of previous
meetings and actions taken thereon.
Chapter 10
Emerging Trends in Secretarial Audit – The Way Ahead.
Moving on from secretarial audit to Governance and Compliance Audit
Considering the format of Form MR 3 and the broad coverage envisaged for a secretarial
audit, it is more of a governance audit and compliance audit.
With the CS of a company being termed as KMP, Secretarial Audit has gained lot of
prominence and is extremely important for the company and all its stakeholders.
With prominence is attached responsibility and accountability.
Looking at the increase in the number of laws, regulations and compliances, compliance
audits would become necessary for companies to be done even where it is not mandatorily
required.
While numbers are the ones that make the first impression, other aspects reflecting
governance and compliance go into making a lasting impression.
Industry-specific entrenchments to the principles of Corporate Governance
57 | P a g e
Existing laws on Corporate Governance should be seen as a basic, bare minimum
compliance required by an entity. In order to fully tap the potential of self-governance,
regulators of specific industries/sectors may ideally enforce stricter norms of Corporate
Governance in addition to the existing principles, after due contemplation on the areas that
require focus in the particular industry. Sec Audit wll emerge as the compliance wing of the
corporate governance by providing sector wise customized report on entities, giving
additional stress to the aspects of governance that actually matters to that particular
industry.
58 | P a g e
Conclusion
The implementation of Secretarial Audit stands as a fundamental practice that serves the
best interests of corporate management. This entails the certification by an impartial
professional verifying the company's adherence to regulatory requirements. Such scrutiny
not only benefits the company itself but also significantly caters to the wider concerns of
shareholders, creditors, and employees.
The significance of Secretarial audit extends to aiding sectoral regulators, the Ministry of
Corporate Affairs (MCA), and other law enforcement agencies. Comprehensive compliance
among all Companies Act-covered entities becomes ensured, thereby fostering a culture of
adherence to regulations.
One of its pivotal roles lies in curbing fraudulent activities. This proactive measure
substantially diminishes government prosecutions and subsequent legal entanglements
arising from non-compliance with corporate and securities laws. Consequently, it alleviates
the burden on courts and the national treasury.
Its essence lies in prevention rather than a retrospective analysis of faults. By fortifying the
Board's processes and compliance mechanisms, it instills confidence among shareholders,
creditors, and other stakeholders. This, in turn, encourages self-regulation and upholds
professional discipline within companies.
The guiding principle here is "Prevention is better than cure," aiming not to merely unearth
faults but to preemptively fortify corporate frameworks. Such a proactive approach bolsters
the company's image and goodwill within the regulatory sphere and among stakeholders. In
essence, it stands as an effective tool for managing compliance risks and enhancing
governance practices.
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Bibliography
1. CS : A Preferred Professional
https://www.icsi.edu/media/webmodules/17112022_CSA_Preferred_Professional_Final.pdf
2. Manual on Secretarial Audit
https://www.icsi.edu/media/webmodules/09092022_ManualonSecretarialAudit_Complete.pdf
3. Secretarial Audit-Two Decades and Beyond (Shashikala Rao, FCS)
https://www.icsi.edu/media/webmodules/linksofweeks/ICSI-September_2020.pdf
4. Secretarial Audit as emerging factor in Governance (P.Sivakumar FCS & Anju Panicker, ACS)
5. Secretarial Audit Report – An attempt to simplify complexities
(Mahesh A Athavale FCS & Hrishikesh Wagh FCS)
6. Journey from Annual Return to Secretarial Audit – Way Forward
(Dr.S.Chandrasekaran FCS)
7. Secretarial Audit of Sector Regulated Companies -NBFC in Perspective
(Dr. C.V Madhusudhanan,FCS & Shilpa Vishwanathan, FCS)
8. Compliance Audits using Artificial Intelligence – Concept, Construct and Challenges
(Suresh Viswanathan, FCS)
9. Secretarial Audit and Annual Secretarial Compliance Report – An Overview
(Ishan Jain, FCS)
10. Secretarial Audit in BFSI Sector (Vinita Nair, FCS)
11. Secretarial Audit -A Game Changer (Umesh Harjivandas Ved, FCS)
12. Companies Act 2013, Rules and Regulations.
60 | P a g e

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PROJECT REPORT

SL. Title Page

4 Chapter 1: Evolution of Secretarial Audit 6

5 Chapter 2: Legislative Framework of Secretarial Audit 9

6 Chapter 3: Concept, Need, Objective and Scope of Secretarial Audit 11

7 Chapter 4: Secretarial Audit in relation to Company Law Compliance 14

8 Chapter 5: Secretarial Audit and Capital Market Related Laws, Rules 19

9 Chapter 6: Auditing Standards by ICSI and its Impact on Secretarial 32

10 Chapter 7: Secretarial Standards by ICSI in relation to Secretarial 35

11 Chapter 8: Role of Practicing Company Secretary in Secretarial Audit. 47

12 Chapter 9: Secretarial Audit and Corporate Governance 51

13 Chapter 10: Emerging Trends in Secretarial Audit – The Way Ahead 56

I am thrilled and deeply satisfied to present my Project Report associated with my

This project report is part of my Articled Apprentice Training of 21 months as mandated by

As India is emerging as a global economic leader, the businesses and functioning of

Signing of Annual Return

Sachar Committee, a high-powered Expert Committee headed by Justice Rajinder Sachar,

Introduction of one new definition ‘Secretary in whole-time-practice’, substitution of existing

Introduction of Secretarial Compliance Certificate

The requirement of Secretarial Compliance Certificate enlarged the scope of compliance.

Secretarial Compliance Certificate covered extensively the level of compliance of the

By Ministry of Corporate Affairs (MCA) notification dated 3 rd Jan 2020, secretarial

a. Listed companies, and

The Secretarial Audit Report by Practicing Company Secretary (PCS) is issued in

Right of Secretarial Auditor

Powers and Duties of Auditor

The Concept of Secretarial Audit

The Secretarial Audit is a process where a Secretarial Auditor (A Practicing Company

Need of Secretarial Audit.

The following are the broad objectives of Secretarial Audit.

Scope of Secretarial Audit.

General Compliance Requirements

1. Securities Contract (Regulation)Act 1956, and Rules made thereunder.

Depositories Act 1996

Scenarios to be Checked by the Secretarial Auditor in relation to the compliance with

1. Agreement between Depository and Depository Participant.

REGULATION FRAMED UNDER THE SEBI ACT 1992

1. SEBI (Substantial Acquisition of Shares and Takeover) Regulations 2011

The SAST Regulation prescribe a systematic framework for acquisition of stake in

Various scenarios to be checked in relation to this regulation are the following

2. SEBI (Prohibition of Insider Trading) Regulations 2015

This regulation is popularly known as SEBI-PIT Regulations 2015 casts several

The obligation relates to making of certain disclosures, dealing with unpublished

Various scenarios to be checked in relation to this regulation are the following

a. Communication or procurement of unpublished price sensitive information.

3. SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018

 Eligibility requirements for an Initial Public Offer

4. SEBI (Share Based Employee Benefits Scheme and Sweat Equity)

o The provisions of this regulation apply to the following :

5. SEBI (Issue and listing of Non-Convertible Securities)Regulations 2021

6. SEBI (Registrar To an Issue and Share Transfer Agents) Regulations 1993

7. SEBI (Delisting of Equity Shares) Regulations 2021

These regulations apply to delisting of equity shares of a company including equity

Various scenarios to be checked in relation to this regulation are the following

8. SEBI (Buy-back of securities) Regulations 2018

Buy back of securities is a corporate financial strategy which involves capital

Various scenarios to be checked in relation to this regulation are the following

- Maximum limit of buy back

9. SEBI (Listing Obligations and Disclosure Requirements) LODR 2015

Various scenarios to be checked in relation to this regulation are the following

 Compliance officer and his/her obligations

1. CSAS-1 - Auditing Standard on Audit Engagement

a. The auditor shall intimate in writing to the predecessor or previous auditor, if

2. CSAS-2 – Auditing Standard on Audit Process and Documentation