SECRETARIAL

AUDIT


SECRETARIAL AUDIT

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

The Secretarial Audit can be an effective due diligence exercise for the prospective acquirer of a company or controlling interest or a joint venture partner.
It assures the owners that management and affairs of the company are being conducted in accordance with requirements of laws and that the owner's stake is not being exposed to undue risk.

Ensures the Management of a company that those who are charged with the duty and responsibility of compliance with the requirements of law are performing their duties competently, effectively and efficiently, so that the people in-charge of the day-to-day management of the company are not likely to be exposed to penal or other liability (and consequential risk and embarrassment) on account of non-compliance with law.

Ensures them that they have done everything required under law.

Ensures them that the company has complied with the laws and, therefore, they are not likely to be exposed to action by law enforcement agencies for non-compliance by the company.

The secretarial audit being pro-active measure for compliance with a plethora of laws, it will have a salutary effect of substantially lessening the burden of the law-enforcement authorities.

The secretarial audit can assist bodies like SEBI, Stock Exchanges, Financial Institutions, Banks, etc. to gauge or measure the levels of compliance and non-compliance by the companies with whom they are concerned.

To provide comfort to investors that the company has been conducting its affairs in accordance with laws and, therefore, their investment is safe and being taken due care of. SA will help unearth and check these practices and also enable law-enforcing agencies to take timely corrective action by bringing to book the guilty. In the era of Corporate Governance, SA will provide comfort to shareholders about the compliance as also to feel secure about their investments.