Procedure for appointment of Secretarial Auditor

Secretarial auditor is one of the main pillar of any organization.  Helps in the orderly running of the organization by keeping a watchful eye on compliance with the prevailing laws and regulations.  In this article, we will try to know what is the secretarial auditor's appointment process?

 1. What are the responsibilities of Secretarial Auditor?

 2. Who can become a secretarial auditor?

 3. What is the main responsibility of Secretarial auditor?

 4. On what basis does the secretarial auditor conduct the investigation?

 5. What documents are required for secretarial audit?

 6. What are the benefits of serving as a Secretarial Auditor?

 7. What is the procedure for the appointment of a Secretarial Auditor?

 8. What is the tenure of the Secretarial Auditor?

 9. Who decides the remuneration of the Secretarial Auditor?

 10. Conclusion

What is Secretarial Audit?

Secretarial audit is a specific process of the corporate sector, in which the secretarial auditor keeps an eye on whether the laws, regulations prevailing in the organization are being properly complied with or not.  At the same time, he also sees whether healthy corporate practices are being properly followed in the organization.  The main objective of this process is to contribute to the orderly operation of the organization.  The secretarial audit needs to be signed by the secretarial auditor.  In case of more than one secretarial auditor, the signature of all is mandatory.

What are the responsibilities of Secretarial Auditor?

Secretarial auditor checks the compliance status of the rules and regulations in force in the organization.  The Secretarial Auditor is primarily a Company Secretary appointed by the Company under the Companies (Meetings of the Board and its Powers) Rules, 2014.  Which performs the work of secretarial audit as per Rule 24A of Securities and Exchange Board of India.  The audit report should be prepared by the Secretarial Auditor as per MR-3 format.

Who can become a secretarial auditor?

Only members of the Institute of Company Secretaries of India (ICSI) who have a valid certificate of practice for conducting secretarial audits can conduct secretarial audits and prepare secretarial audit reports for the company.

What are the responsibilities of Secretarial Auditor?

The main responsibility of the Secretarial auditor is to instill a sense of confidence in the organization's management, regulators and other stakeholders by conducting statutory compliance, systematic administration, systematic evaluation of processes and systems.  Secretarial auditor is aware of the organization's processes and suggests corrective measures and plays a very effective role in risk management.  The Secretarial Auditor provides vital support to the organization in fulfilling its objectives.  The Secretarial Auditor provides special support to the promoters, management, investors, other stakeholders of the company by properly discharging its responsibilities.  The secretarial auditor also has to take special care in the discharge of his responsibilities.  Because if a default is found in the filing, the secretarial auditor may have to pay a fine of Rs 1 lakh to Rs 5 lakh.

On what basis does the Secretarial Auditor conduct the investigation?

The secretarial auditor examines the company's documents and procedures based on specific laws and checks compliance at the company level.  Which includes Securities and Exchange Board of India Act (SEBi) 1992, SEBI (Prohibition of Insider Trading) Regulations, 2015, Foreign Exchange Management Act, 1999, Depository Act, 1996 etc.

What documents are required for secretarial audit?

Charter document, Statutory Register, Minutes and Notices of General Meeting, Previous Year's Audit Report, Annual Performance Report, Statement for Code of Conduct received from Directors, Statement of CSR amount, SAST Disclosure, Dividend to the Secretarial Auditor for conducting Secretarial Audit  Bank account details in respect, details of ECB returns if the company has any foreign borrowings, details of fees and remuneration paid to directors, details of filings with other statutory departments including RBI in case of foreign investments, as per labor laws  Created registers etc. are required.

What are the benefits of serving as a Secretarial Auditor?

 1. The Secretarial Auditor creates opportunities for improvement by uncovering the shortcomings of the organization.

 2. The Secretarial Auditor assures the stakeholders of the company that the company is being conducted on the basis of standard standards.

3. Secretarial auditor assures investors that his investments are low in risk.

 4. Secretarial auditor helps in self regulation and professional discipline of the organisation.

 5. The Secretarial Auditor presents a standard image of the organization to the investors by presenting the legal records of the company.

 6. The work of a secretarial auditor is also of special assistance to those who wish to take over the company or participate in the company in any other way.

What is the procedure for the appointment of a Secretarial Auditor?

 1. The intention to appoint the proposed secretarial auditor is informed and asked whether he is eligible to be appointed as the secretarial auditor of the company or not.

2. Obtaining consent and certificate from the proposed auditor.

3. To obtain the recommendation of that committee if it is necessary for the company to constitute an audit committee under section 177.

4. To convene a meeting of the Board of the Company.

5. To approve the appointment of Secretarial Auditor in the first meeting of the Board of the Company.

6. To formally inform the appointed Secretarial Auditor about the appointment.

7. Filing along with ROC Form ADT-1 (Enclose Form GNL-2 as per MCA circular 09/2014, dated 25th April, 2014) within 15 days.

What is the tenure of the Secretarial Auditor?

Every company at its first general meeting appoints a person or firm as the secretarial auditor who thereafter holds the secretarial auditor's term of five consecutive years until the conclusion of every sixth meeting, subject to the ratification of the shareholders.  A secretarial auditor may be re-appointed after five years on the basis of acceptance at the Annual General Meeting if for any reason he is not ineligible for reappointment.  It is mandatory to file ADT 1 again on reappointment.

Who decides the remuneration of the Secretarial Auditor?

The remuneration of the secretarial auditor of any company is fixed in the amount approved at the first general meeting or in the manner prescribed at the general meeting.

Secretarial auditor is especially necessary for any organization.  By keeping an eye on the system of following rules, regulations by the organization, it contributes significantly to the orderly operation of the organization.  By drawing attention to the needs of improvement in the organization, the secretarial auditor also enables the organization to meet the challenges in future.  Therefore, the secretarial auditor is considered to be an indicator of the vibrancy of any organization and also a major risk management tool.