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Benefits and Beneficiaries of Secretarial Audit

Benefits and Beneficiaries of Secretarial Audit

The Secretarial Audit is an effective tool for faultless corporate law compliance management. The benefits of Secretarial Audit are manifold, and its beneficiaries are many. They include, the promoters, directors, investors, lenders, employees, Government and government agencies, and last but not the least, the public at large. Ever-increasing complexities of laws and the widening role of directors (especially, part-time or independent directors) makes it imperative that an independent professional expert agency goes through the company’s books and records to verify whether various requirements under the applicable laws have been complied with or not and whether there is a need for corrective action or system improvement.

Scope of Secretarial Audit

The Concept Paper has indicated the compliance of the following statues to be covered by the independent professional as part of the Secretarial Audit:

The Companies Act, 1956 and the Rules made under that Act;

The Depositories Act, 1996 and the Regulations and Bye-laws framed under that Act;

The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997;

The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992;

The Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000;

The Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and

The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008;

The Securities Contracts (Regulation) Act, 1956 (‘SCRA’) and the Rules made under that Act; and

The Listing Agreement.

While the above scope is limited to only Company’s Act, SEBI regulations and listing compliance, a corporate compliance audit can have a far wider scope and also cover compliance of other statutes such as

  • Factories Act
  • Provident Fund Act
  • Employee State Insurance Act
  • Bonus Act
  • Other applicable Labor Laws
  • STPI Regulations
  • Foreign Exchange Management Act and RBI guidelines
  • SEZ regulations
  • Pollution Control Laws
  • Economic Laws
  • Other Industrial Laws

The concept of Secretarial Audit is not to burden the corporate sector with another audit but to provide the following benefits:

  1. Ensure due compliance of legislations other than financial or costing aspects.
  2. An assurance to the board of directors that the company is compliant with various laws.
  3. Enable the Company to have eminent personalities on the Board as Non-executive Directors thereby enhancing their brand value.
  4. A strong internal control mechanism and compliance management system.
  5. It can relieve the company and their directors from consequences of unintended non compliance of law.
  6. Independent Directors and Nominee Directors can be assured that the affairs of the company are being conducted as per law.
  7. Ensures timely correction and rectification of any lapses in the compliance of the provisions of various statutes.
  8. It is salutary as it instills professional discipline and signifies law abiding nature of the promoters.
  9. It gives a necessary confidence to the investors with respect to proper disclosures in regard to the business and conduct of the affairs of the company

 Benefits and Beneficiaries of Secretarial Audit

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