Corporate India has undergone a sweeping transformation in governance expectations over the past decade. The Companies Act, 2013, along with SEBI’s Listing Obligations and Disclosure Requirements (LODR) Regulations, has significantly raised the bar for compliance. At the centre of this governance revolution lies a powerful tool: the Secretarial Audit.
Yet, for many promoters, directors, and management teams, secretarial audit remains an abstract obligation — something managed at year-end, signed off, and filed. This approach misses the forest for the trees. A properly conducted secretarial audit is not merely a compliance formality; it is a governance diagnostic that can protect the company, its directors, and its shareholders from serious legal and regulatory exposure.
What is a Secretarial Audit?
A secretarial audit is an independent verification process conducted by a practising Company Secretary (PCS) to assess whether a company has complied with all applicable laws, rules, regulations, and procedural requirements. It examines the legal and procedural compliance of a company from a secretarial and governance standpoint — going well beyond the financial audit conducted by a chartered accountant.
Under Section 204 of the Companies Act, 2013, secretarial audit is mandatory for listed companies, public companies with a paid-up capital of Rs. 50 crore or more, and public companies with a turnover of Rs. 250 crore or more. The audit is conducted in Form MR-3 and forms part of the Board’s Report.
For every other company, while not mandated by statute, a voluntary secretarial audit is rapidly becoming best practice among well-governed organisations — particularly those seeking investment, undergoing restructuring, or preparing for public listing.
What Does a Secretarial Audit Cover?
The scope of a secretarial audit is comprehensive. A practising Company Secretary examines compliance across multiple statutes and regulations, including the Companies Act, 2013 and its rules; the Securities Contracts (Regulation) Act, 1956; the Depositories Act, 1996; SEBI regulations including LODR, Takeover Code, Insider Trading Regulations, ESOP guidelines, and others; the Foreign Exchange Management Act (FEMA) relating to foreign investments and overseas transactions; sector-specific laws applicable to the company’s business; and all secretarial standards issued by the ICSI.
- Board and committee meeting compliance: notices, quorums, minutes, resolutions
- Annual General Meeting and Extraordinary General Meeting procedural compliance
- Directors’ appointment, cessation, and disclosure obligations
- Share capital changes: allotments, buybacks, rights issues, and ESOP
- Related party transactions: approvals, disclosures, and pricing
- Statutory registers and records maintenance
- Filing of returns and forms with MCA, SEBI, RBI, and other regulators
- Compliance with secretarial standards SS-1 and SS-2
The Strategic Value of Secretarial Audit
Beyond statutory obligation, a secretarial audit delivers significant strategic value to an organisation. It functions as an early warning system — identifying compliance gaps before they escalate into penalties, prosecutions, or regulatory action. For listed companies, compliance failures under LODR can result in trading suspensions, penalties, and public embarrassment. A well-conducted secretarial audit prevents such crises.
For unlisted companies eyeing public markets, private equity investment, or strategic partnerships, a clean secretarial audit trail is often a prerequisite for due diligence. Investors and acquirers routinely examine secretarial audit reports as part of legal due diligence — and gaps discovered at that stage can delay or derail transactions.
Directors benefit immensely from secretarial audits as well. Directors carry personal liability for compliance failures under the Companies Act and SEBI regulations. A secretarial audit report that identifies and addresses non-compliances provides a documented record of the company’s compliance posture — a vital shield in any subsequent proceedings.
Common Non-Compliances Identified in Secretarial Audits
In our experience of auditing hundreds of companies across India, certain compliance gaps recur with alarming frequency. These include delays in filing statutory forms with MCA beyond prescribed timelines; inadequate board meeting notices — particularly failure to provide the requisite clear days’ notice; non-compliance with secretarial standard SS-2 on general meetings; gaps in related party transaction disclosures and approvals; FEMA non-compliances relating to FDI filings and annual returns; failure to maintain updated statutory registers; and missing or delayed intimation to stock exchanges for listed companies.
- Late or defective MCA filings — a leading cause of compounding applications
- Board meeting notice deficiencies under SS-1
- AGM and EGM procedural lapses under SS-2
- Incomplete or delayed related party transaction disclosures
- FEMA filing defaults — FLA, ODI, and FC-GPR returns
- Statutory register maintenance lapses
- SEBI LODR deadline violations for listed entities
Choosing the Right Secretarial Auditor
A secretarial audit is only as good as the professional conducting it. The right PCS brings not just technical knowledge but sector experience, regulatory relationship depth, and practical judgment developed over years of practice. Sudhir Hulyalkar & Co. has been conducting secretarial audits since 2004, and our practice has been peer-reviewed by the Institute of Company Secretaries of India (ICSI) and successfully audited by the ICSI Quality Review Board — among the highest quality certifications available to a CS firm in India.
Our audit clients span listed blue-chip corporations, NBFCs, manufacturing companies, startups, and government-linked entities. Each engagement is handled with the depth and rigour that reflects our firm’s commitment to governance excellence.