Secretarial Audit: Benefits, Applicability and Process

In today’s regulatory environment, corporate governance is no longer optional — it is a necessity. A secretarial audit acts as a structured compliance check that ensures a company follows applicable corporate and securities laws. It strengthens transparency, protects management from penalties, and builds trust among stakeholders. Professional firms like ASC Group support organisations in maintaining strong secretarial compliance frameworks and avoiding regulatory risks.

What is a Secretarial Audit?

A secretarial audit is an independent verification process conducted by a qualified Company Secretary in Practice. It examines whether a company complies with key corporate laws, including the Companies Act, SEBI regulations, FEMA provisions, and other industry-specific legal requirements.

The audit does not focus on financial records but on legal and procedural compliance. It ensures that the company’s board processes, statutory filings, record maintenance, and governance practices align with regulatory expectations.

Secretarial Audit Applicability

Understanding secretarial audit applicability is essential for companies operating in India. As per the Companies Act, 2013 and related rules, secretarial audit is mandatory for:

• Listed companies

• Public companies with a paid-up share capital of ₹50 crore or more

• Public companies with a turnover of ₹250 crore or more

• Companies with outstanding loans or borrowings from banks or public financial institutions of ₹100 crore or more
  

Certain private companies may also fall under compliance review depending on regulatory exposure or investor requirements. Even when not mandatory, many organisations voluntarily opt for secretarial audits to strengthen governance standards.

Benefits of Secretarial Audit

A properly conducted secretarial audit provides multiple strategic and legal advantages:

1. Ensures Legal Compliance

It confirms adherence to corporate laws, SEBI norms, FEMA rules, and other regulations, reducing the risk of fines or legal actions.

2. Strengthens Corporate Governance

It improves board procedures, documentation, and internal controls, ensuring strong secretarial compliance practices.

3. Risk Identification

The audit helps identify non-compliance areas, procedural gaps, and potential legal exposures before they become serious issues.

4. Investor and Stakeholder Confidence

Transparent governance increases credibility with investors, lenders, and regulatory authorities.

5. Better Decision-Making

When management understands compliance risks clearly, strategic decisions become more secure and legally sound.

Secretarial Audit Process

The secretarial audit process is systematic and documentation-driven. It typically includes:

1. Appointment of Secretarial Auditor

A Board Resolution is passed to appoint a practicing Company Secretary as the auditor.

2. Collection of Documents

The auditor reviews statutory registers, minutes of board and committee meetings, resolutions, filings, policies, and agreements.

3. Compliance Verification

The auditor checks compliance with:

• Companies Act provisions

• SEBI regulations (if listed)

• FEMA and RBI guidelines

• Industry-specific laws
  

4. Interaction with Management

Discussions are held with directors and key managerial personnel to understand processes and clarify compliance matters.

5. Identification of Non-Compliances

Any deviations, delays, or procedural lapses are documented.

6. Issuance of Secretarial Audit Report

The final report (Form MR-3 for applicable companies) highlights observations, qualifications (if any), and recommendations.

Why Professional Support Matters

Secretarial laws frequently change, and non-compliance can attract severe penalties for directors and officers. Expert advisory firms like ASC Group help businesses manage ongoing secretarial compliance, prepare for audits, and establish strong governance systems that align with legal requirements.

Conclusion

A secretarial audit is more than a statutory requirement — it is a governance tool that protects companies and promotes ethical management. Understanding secretarial audit applicability and implementing a structured audit process helps organisations stay compliant, reduce risks, and maintain a strong reputation in the corporate ecosystem.