Secretarial Audit is a statutory compliance audit conducted by a Company Secretary in Practice (CS PCS), mandated under Section 204 of the Companies Act 2013. The audit covers the company's compliance with all applicable laws, governance processes, and board processes during the financial year.
Applicability
- Every listed company
- Every public company with paid-up share capital of Rs. 50 crore or more
- Every public company with turnover of Rs. 250 crore or more
- All material subsidiaries of listed companies (SEBI LODR requirement)
Scope of Secretarial Audit
The CS PCS examines compliance with:
- Companies Act 2013 and Rules
- SEBI regulations (for listed companies): LODR, ICDR, PIT, SAST, etc.
- FEMA (ECB, FDI, ODI if applicable)
- Labour laws (EPF, ESI, Gratuity)
- Environmental laws if applicable
- Secretarial Standards (SS-1, SS-2)
- Industry-specific laws
Form MR-3 — Secretarial Audit Report
The audit report is submitted in Form MR-3, annexed to the Board's Report. Contents:
- Examination period and applicable laws
- Systems and mechanism for compliance
- Specific observations on non-compliances
- Qualifications, reservations, adverse remarks
- Recommendations for better governance
Scope of Examination
- Statutory registers maintenance (members, charges, directors, KMP)
- Board/committee meeting procedures (notice, quorum, minutes)
- Annual filings (AOC-4, MGT-7) and timeliness
- Share capital changes (allotment, buy-back, bonus)
- Related party transactions approval
- Dividend declarations and IEPF compliance
Due Date for Secretarial Audit Report
MR-3 must be attached to the Board's Report for the AGM. Since the Board's Report accompanies the annual financial statements, the secretarial audit report is effectively due by the AGM date (September 30 for March year-end companies).
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Frequently Asked Questions
Which companies need secretarial audit?
Listed companies, and public companies with paid-up capital Rs. 50 crore+ or turnover Rs. 250 crore+. Also material subsidiaries of listed companies under SEBI LODR.
What is Form MR-3?
The Secretarial Audit Report form submitted by a Company Secretary in Practice, annexed to the Board's Report, covering compliance with all applicable laws.
Who conducts secretarial audit?
A Company Secretary in Practice (CS PCS) — a CS who holds a certificate of practice from ICSI.
When is the secretarial audit report due?
Before the AGM — it must be annexed to the Board's Report. For companies with March year-end, this means by September 30.
What laws are covered in secretarial audit?
Companies Act, SEBI regulations, FEMA, labour laws, environmental laws, Secretarial Standards, and all other applicable laws specific to the company.
What penalty applies if secretarial audit is not done?
Company faces fine of Rs. 1 lakh to Rs. 5 lakh. Officers in default also face penalties.
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