Secretarial compliance

Secretarial compliance are such declarations, disclosure, submission etc, to be made by a company secretary in practice or working in house for an organization. On behalf of the company to make sure that the company is working as per the provisions of companies act and other governing statutes to control, check and make efficient corporate governance for its operation.

Maintenance of secretarial compliance

Maintenance of secretarial compliance is advisable on the part of the organization, so that the particular organization can operate freely without any legal disputes with any of its stakeholders like government, investors, share holders, creditors etc. and earn respect, faith and good image in the eyes of general public to move towards higher milestones for productivity.

The primary reason for implementing the secretarial compliance is to make sure that a company is following corporate governance guidelines prescribed by the government in the country for economic health of the country and the organization at large. Following are the important elements of secretarial compliance:

• Maintenance of statutory registers

Every company is required to maintain registers as prescribed by the companies act and these registered must be kept at the registered office of the company or any other authorized premises where the officers, directors or any legal representative of the company may have their office.

1. Members register
2. Register for directors
3. Contracts register
4. Charges register
5. Register for debenture holders

• Annual filings:

A number of annual forms and documents are required to be filed by every company with the registrar of companies. These includes filing of annual return in the prescribed manner, annual financial statements etc. all these firms are required to be certified by a qualified chartered accountant or a practicing company secretary.

• Informing to registrar of company on occurrence of certain events.

1. Change in statutory auditors
2. Appointment of managing director/whole time director
3. Appointment and resignation of independent director
4. Change in the bank signatories
5. Alteration of main object of the company.
6. Change in the registered office of a company
7. Alteration of memorandum of association/article of association of the company.

• Mode of intimation:

Every company and its officer, director or independent director must ensure timely and precise filing of statutory return as prescribed in the companies act with the registrar of companies. Such a filing should be in a strict manner without deviating from the prescribed time period with the various requirements of Security Exchange Board of India (SEBI), Ministry of corporate affairs (MCA), Reserve Bank of India (RBI) and Registrar of companies. The company, every director, officer or secretary will be held liable for any contravention of provision of companies act will be held liable to penalty and prosecution.

• SEBI regulations:

The secretarial compliance also requires to comply with various regulations and guidelines issued by the security exchange board of India regarding the listing agreement of the company with the stock exchange following rules regarding the issuance of share warrants by prior approval and at the time of raising the money from capital market providing return on charged property and assets of the company.

Secretarial Audit

is to be on the principle of “Prevention is better than cure” rather than post mortem exercise and to find faults. Broadly, the need for Secretarial Audit is:

• Effective mechanism to ensure that the legal and procedural requirements are duly complied with.
• Provides a level of confidence to the directors, officers in default, Key Managerial Personnel etc.
• Directors can concentrate on important business matters as Secretarial Audit ensures legal and procedural requirements.
• Strengthen the image and goodwill of a company in the minds of regulators and stakeholders
• It is an effective compliance risk management tool.
• It helps the investor in analyzing the compliance level of companies, thereby increases the reputation.
• Audit is an effective governance tool.

The benefits of secretarial audit includes the following:

• It can be an effective due diligence exercise for the prospective acquirer of a company or controlling interest or a joint venture partner.
• assures the owners that management and affairs of the company are being conducted in accordance with requirements of laws, and that the owners 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.
• It ensures the Management that the company has complied with the laws and, therefore, they are not likely to be exposed to penal or other liability or to action by law enforcement agencies for noncompliance by the company.
• Secretarial Audit being proactive measure for compliance with a plethora of laws, it will have a salutary effect of substantially lessening the burden of the law-enforcement authorities.
• Instilling professional discipline and self-regulations.

Section 204 of the Companies Act

Section 204 of the Companies Act, 2013 provides for mandatory secretarial audit for every listed company and companies belonging to other prescribed class of companies. Such companies are required to annex a secretarial audit report with its Board’s report. As per rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the prescribed class of companies is as under:

(a)          every public company having a paid-up share capital of fifty crore rupees or more; or

(b)          every public company having a turnover of two hundred fifty crore rupees or more.

Company Secretary in practice

Company Secretary in practice has been exclusively recognised for conducting secretarial audit. The section further provides that Secretarial Audit Report is to be submitted in a format prescribed under rules. As per sub-rule (2) of Rule 9, the format of the Secretarial Audit Report shall be in Form No. MR.3 (Annexure A). Section 134 and Sub-section (3) of section 204 provides that the Board of Directors, in its report, shall explain in full any qualification or observation or other remarks made by the company secretary in practice in the secretarial audit report.