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Company Law & MCA Compliance

Secretarial Audit

Secretarial Audit

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SCOPEConfirmed in writing
TYPICAL TIMELINE30 days
APPLICABLE TOCompany, Listed-Company

Regulatory Framework

Section 204 of the Companies Act, 2013 mandates secretarial audit for every listed company and for every public company having a paid-up share capital of ₹50 crore or more, or a turnover of ₹250 crore or more, per the thresholds prescribed in Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Rule 9 further extends the requirement to every company having outstanding loans or borrowings from banks or public financial institutions of ₹100 crore or more.

The secretarial audit must be conducted by a Company Secretary in practice, who examines the company's compliance with the Companies Act and rules made thereunder, the Securities Contracts (Regulation) Act, 1956 and its rules, the Depositories Act, 1996 and its regulations, FEMA to the extent of overseas direct investment/external commercial borrowings, applicable SEBI regulations (including LODR, Substantial Acquisition of Shares and Takeovers, and Insider Trading regulations for listed companies), and other laws specifically applicable to the company's sector. The findings are reported to the Board in Form MR-3, in the format prescribed under Rule 9, which the Board must annex to its report under Section 134(3).

Section 204(4) prescribes penal consequences for default by the company, every officer in default, and the practising Company Secretary, under the general penalty provisions applicable to Section 204 contraventions. Boards should engage the secretarial auditor early in the financial year, since MR-3 requires continuous, period-wide verification of compliance rather than a year-end snapshot.

Overview

Secretarial Audit under Section 204 of the Companies Act is mandatory for: listed companies; public companies with paid-up share capital ≥₹10 crore or turnover ≥₹250 crore; and companies with outstanding loans/borrowings ≥₹100 crore. The audit examines compliance with the Companies Act, SEBI regulations (for listed entities), FEMA, industry-specific laws, and secretarial standards. The output is a Secretarial Audit Report in Form MR-3 signed by a Practising Company Secretary (PCS), which is appended to the annual report and filed with the MCA. We coordinate with PCS professionals and handle the evidence collation, compliance checklist, and report preparation.

Frequently Asked Questions

Who is required to get a secretarial audit and when?
Section 204 of the Companies Act 2013: secretarial audit is mandatory for: (a) every listed company; (b) every public company with paid-up share capital ≥ ₹50 crore; (c) every public company with turnover ≥ ₹250 crore; (d) every company with outstanding loans ≥ ₹100 crore. For unlisted public companies meeting the threshold: secretarial audit is due along with the annual report. The MCA can extend the requirement to private companies by notification — currently not mandatory for private companies.
What does the secretarial audit cover?
The Secretarial Audit Report (Form MR-3) — issued by a Company Secretary in Practice — covers compliance with: Companies Act 2013 and rules, SEBI Act 1992 and regulations (for listed companies), FEMA, RBI regulations (for companies with foreign investment), Secretarial Standards (SS-1 for Board meetings, SS-2 for General meetings), and industry-specific regulations. The scope is substantially broader than a statutory audit — it covers all regulatory filings, not just financial statements.
Who can conduct a secretarial audit?
Only a Company Secretary in Practice (CS in Practice) — a member of the Institute of Company Secretaries of India (ICSI) holding a certificate of practice — can conduct and sign the secretarial audit report (Form MR-3). A CA cannot sign MR-3 — this is a CS-specific mandate under Section 204. However, CA firms often work alongside CS firms on large compliance mandates where both financial (CA) and secretarial (CS) audits are required for the same company.
What are the consequences of an adverse secretarial audit report?
An adverse or qualified secretarial audit report is disclosed in the company's annual report and filed with MCA as part of the MGT-7 annexure. For listed companies, SEBI LODR Regulation 24A requires the secretarial audit report to be disclosed to the stock exchange within 21 days of the AGM. Persistent qualifications signal regulatory non-compliance and can trigger SEBI/RBI/ROC enforcement action. Directors are personally liable for secretarial non-compliance under Section 204(4) — penalty up to ₹5 lakh.
What is the secretarial compliance report required for listed companies?
SEBI Circular dated 8 February 2019: every listed entity must submit an annual secretarial compliance report (separate from the secretarial audit under Section 204) to the stock exchanges within 60 days of the end of each financial year. The report must be from a PCS (CS in Practice) and covers all SEBI regulations applicable to the listed entity: LODR, Takeover Code, Insider Trading regulations, Buyback regulations, Issue of Capital regulations. This is in addition to, not a substitute for, the MR-3 secretarial audit.

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