Sec 204 of Companies act 2013
Companies (Appointment and Remuneration of Managerial Personnel)
Rules, 2014 (Chapter XIII)
Introduction:
Secretarial Audit can be considered as a regulatory
tool that helps to pool together all the compliance requirements under various
laws applicable to the respective companies accordingly. We would consider it to be an ambitious move
towards corporate governance And ensuring compliance and protection of the
companies, shareholders, customers and safeguarding public interest at large. It
appears as if the regulators have tried to bring in the “BIG PICTURE” by drafting
it in such a manner to encompass all compliance requirements and bring it in
line with the Listing Agreement.
In short Secretarial Audit:
-
Ensures compliance of all applicable laws.
-
Tries to bring it to the notice of the management
in case of any non-compliance or inadequate compliance.
Applicability:
Financial year:
From the FY 2014-15 onwards
Kinds of Companies:
- All Listed Companies
- Public Companies:
Paid up Capital > = 50 Crs
Turnover > = 250 Crs
Exemption:
Currently all Private Limited Companies are exempted.
Query:
Does the exemption cover Pvt
companies which are subsidiaries of Pub Co?
Secretarial Audit (SA) Procedure
Act
does not specify BM or GM
Query:
By when should
the Auditor be appointed? As the periodicity is not specified can we appoint
him before the approval of the Directors’ report of the respective financial
year from this year on wards. (Directors’ Report 2014-15 onwards)
Is it sufficient if SA is conducted
once in a year or should it be continuous exercise?
What “OTHER ACTS” Do we need
to ensure compliance of? Would it cover areas like Direct and Indirect
Taxation, covered under financial / tax audit / govt. audits like excise audit?
Can we look forward towards
the Auditors to provide a Complete Master checklist of all the acts that are
applicable to the respective companies?
What are the precautions that an Auditor needs to take to
protect him/her self from legacy issues/violations of company being construed
as professional misconduct?
Penalty:
Sec 204 (4): in case of contravention
Company, any person in default or PCS: Rs. 1 Lac – Rs. 5 Lac
Sec 447: in case of fraud: (Any failure or lapse on the part of Auditor)
Imprisonment for a term which shall not be less
than six months but which may extend to ten years and shall also be liable to
fine which shall not be less than the amount involved in the fraud, but which
may extend to three times the amount involved in the fraud: Provided that where
the fraud in question involves public interest, the term of imprisonment shall
not be less than three years
List of Acts covered in
Secretarial Act as per CA 2013
(i)
The Companies Act, 2013 (the Act) and
the rules made thereunder;
(ii)
The Securities Contracts (Regulation)
Act, 1956 (‘SCRA’) and the rules made thereunder;
(iii)
The Depositories Act, 1996 and the
Regulations and Bye-laws framed thereunder;
(iv)
Foreign Exchange Management Act, 1999
and the rules and regulations made thereunder to the extent of Foreign Direct
Investment, Overseas Direct Investment and External Commercial Borrowings;
(v)
The following Regulations and
Guidelines prescribed under the Securities and Exchange Board of India Act,
1992 (‘SEBI Act’):-
(a)
The Securities and Exchange Board of
India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;
(b)
The Securities and Exchange Board of
India (Prohibition of Insider Trading) Regulations, 1992;
(c)
The Securities and Exchange Board of
India (Issue of Capital and Disclosure Requirements) Regulations, 2009;
(d)
The Securities and Exchange Board of
India (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999;
(e)
The Securities and Exchange Board of
India (Issue and Listing of Debt Securities) Regulations, 2008;
(f)
The Securities and Exchange Board of
India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993
regarding the Companies Act and dealing with client;
(g)
The Securities and Exchange Board of
India (Delisting of Equity Shares) Regulations, 2009; and
(h) The Securities and Exchange Board of India (Buyback of
Securities) Regulations, 1998;
(i) Other acts as may be applicable.
(vi)
Secretarial Standards issued by The
Institute of Company Secretaries of India.
(vii) The Listing Agreements entered into by
the Company with ….. Stock Exchange(s), if applicable;
