Slide 1
Companies Act, 2013
By CS Mamta BinaniPast Chairperson (Year 2010), EIRC of
ICSIPractising Company Secretary
At ACAEFor Chartered [email protected] :
16.11.2013
Room No.6, 4th Floor, Commerce House2A, Ganesh Chandra Avenue,
Kolkata 700013
Connect me @ : (033) 3028 8955-57; (033) 3002 5630-33; 98310
[email protected] me @ :
www.mamtabinani.com1SECRETARIAL AUDITUNDER THE COMPANIES ACT,
2013(Sections 134, 143, 204)Room No.6, 4th Floor, Commerce House2A,
Ganesh Chandra Avenue, Kolkata 700013
Connect me @ : (033) 3028 8955-57; (033) 3002 5630-33; 98310
[email protected] me @ : www.mamtabinani.comSection
134134(1): Every financial statement, including consolidated
financial statement, if any, shall be approved by the Board of
Directors before they are signed on behalf of the Board, as laid in
the section and then submitted to the auditor for his report
thereon.134(2): The auditors report shall be attached to every
financial statement.134(3): There shall be attached to statements
laid before a company in general meeting, a report by its Board of
Directors, which shall include :
Secretarial AuditInter-alia:Explanations or comments by the
Board on every qualification, reservation or adverse remark or
disclaimer made (i) by the auditor in his report; and (ii) by the
company secretary in practice in his/her secretarial audit report
Comments: Quite a lot of emphasis is laid by the GovernmentPowers
& Duties of AuditorsSection 143(14): Mentions that the
provisions of section 143 will apply mutatis-mutandis to: 1. the
cost accountant in practice conducting cost audit under section 148
or 2.the company secretary in practice conducting secretarial audit
under section 204Very Critical ProvisionSection 143(12):
Notwithstanding anything contained in this section, if an auditor
of a company, in the course of the performance of his duties as
auditor, has reason to believe that an offence involving fraud is
being or has been committed against the company by officers or
employees of the companyhe shall immediately report the matter to
the Central Government within such time and in such manner as may
be prescribedLook at the Penal ProvisionsSection 143(15): If any
auditor, cost accountant or company secretary in practice do not
comply with the provisions of sub-section (12)he shall be
punishable with fine which shall not be less than Rs.1.00 lakh but
which may extend to Rs.25.00 lakhsSection 143(13): No duty to which
an auditor of a company may be subject to shall be regarded as
having been contravened by reason of his reporting the matter
referred to in sub-section (12), if it is done in good faithWhat
are the Powers & Duties143(1): Right of access at all times to
the books of account whether kept at registered office or
elsewhereRequire information from the officers of the company, as
may be necessary for the performance of his duty as an
auditor143(2): The auditor to make a report to the members about
the true and fair view of the financial statements143(3): The
information that the auditors report has to also state etc.Enabling
Provision-Section 204Section 204(1): Every listed company and a
company belonging to other class of companies shall annex with its
Boards report made in terms of section 134(3), a secretarial audit
report, given by a company secretary in practice, in such form as
may be prescribedSection 204(2): It shall be the duty of the
company to give all assistance and facilities to the company
secretary in practice, for auditing the secretarial and related
records of the companySection 204(3): BOD to explain in their
report-any qualification or observation or other remarks made by
the CS in PracticePenalty ProvisionSection 204(4): If a company or
any officer of the company or the company secretary in practice,
contravenes the provisions of this sectionthe company, every
officer of the company or the company secretary in practice, who is
in defaultshall be punishable with fine which shall not be less
than Rs.1.00 lakh but which may extend to Rs.5.00 lakhsAs per Draft
Rules Prescribed in Chapter XIIISECRETARIAL AUDIT Rule 13.7 (1):
For the purposes of section 204(1), the other class of companies
shall be as under: (a) Every public company having a paid-up share
capital of Rs.100.00 crores or more.
The format of the Secretarial Audit Report shall be in Form
No.13.3Specimen of draft Form no.13.3To The Board of
Directors/Members ______________(Name and Address of the Company)I
have examined the registers, records and documents of _____________
(the Company) for the financial year ended on March ___________
according to the provisions of (i) the Companies Act, 2013 and the
Rules made under that Act;(ii) the Memorandum and Articles of
Association of the Company; (iii) the Securities and Exchange Board
of India Act, 1992 and the rules/regulations made under that Act;
(where applicable)
Contd(iv) the Reserve Bank of India Act, 1934 and the
rules/regulations/directions made under that Act; (where
applicable) (v) the Securities Contracts (Regulation) Act, 1956 and
the Rules made under that Act; (where applicable) (vi) the
Depositories Act, 1996 and the Regulations and Bye-laws framed
under that Act; (where applicable) (vii) the Foreign Exchange
Management Act, 1999 and the Rules and Regulations made under that
Act; (where applicable)(viii) the Competition Act, 2002 and the
rules and regulations made under that Act;(where applicable)Contd2.
Based on my examination and verification of the registers, records
and documents produced to me and according to the information and
explanations given to me by the Company, I report that the Company
has, in my opinion, complied with the provisions of the Companies
Act, 2013 (the Act) and the Rules made under the Act and the
Memorandum and Articles of Association of the Company, with regard
to: (a) maintenance of various statutory registers and documents
and making necessary entries therein; (b) closure of the Register
of Members / Debenture holders/other security holders;Contd.(c)
forms, returns, documents and resolutions required to be filed with
the Registrar of Companies and the Central Government; (d) service
of documents by the Company on its Members, Debenture holders,
Other security holders, Debenture Trustees, Auditors, Cost auditors
(where applicable), Secretarial auditor (where applicable), the
Registrar of Companies and the Stock exchange (where
applicable);(e) contents and service of notice of Board meetings
and Committee meetings of Directors;(f) convening and holding the
meetings of Directors and Committees of Directors including passing
of resolutions by circulation;Contd.(g)the Annual General
Meeting/Extraordinary General meetings of the company; (h) minutes
of proceedings of General Meetings and of the Board and its
Committee meetings; (i) approvals of the Members including through
postal ballot (wherever required), the Board of Directors, the
Committees of Directors and the government authorities, wherever
required; (j)constitution of the BOD/ Committee(s) of Directors,
appointment, retirement and re-appointment of Directors including
the Managing Director and Whole-time Directors, and Key managerial
personnel;Contd.(k) payment of remuneration to Directors including
the Managing Director and Whole-time Directors and key managerial
personnel; (l) appointment and remuneration of Auditors,
secretarial auditor (where applicable); and Cost Auditors (where
applicable); (m) transfers and transmissions of the Companys shares
and debentures, issue and dispatch of duplicate certificates and
requirements with regard to dematerialization and
re-materialization of securities; (n) redemption of preference
shares (where applicable);Contd.(o) payment of interest on
debentures and redemption of debentures; (where applicable)(p)
declaration and payment of dividends; (q) acceptance of deposits
from members or public, where applicable; (r) transfer of certain
amounts/securities as required under the Act to the Investor
Education and Protection Fund, uploading of details of unpaid and
unclaimed dividends on the relevant websites; (s) borrowings and
registration, modification and satisfaction of charges wherever
applicable;Contd.(t) investment of the Companys funds including
inter corporate loans and investments and loans to others (where
applicable); (u) giving guarantees in connection with loans taken
by subsidiaries and associate companies (where applicable); (v)
form of financial statement as prescribed under Schedule III of the
Act; (w) allotment of securities of the Company pursuant to
Employees Stock Option Scheme(where applicable); Contd.(x) buy-back
of equity shares of the Company (where applicable);(y) issue of
sweat equity shares, (where applicable); (z) Directors report; (za)
contracts, agreements, common seal, registered office and
publication of name of the Company; (zb) secretarial standards,
(zc) generally, all other applicable provisions of the Act and the
Rules made under the Act.Contd.3. I further report that: (a) the
Directors/Key managerial personnel have complied with the
requirements as to disclosure of interests and concerns in
contracts and arrangements, shareholdings / debenture holdings and
directorships in other companies and interests in other
entities;
(b) the Directors have complied with the disclosure requirements
in respect of their eligibility of appointment, their being
independent and compliance with the provisions of the Companies Act
and, where applicable, Listing Agreement;Contd.3. I further report
that: (c) the Company has obtained all necessary approvals under
the various provisions of the Act; and
(d) there was no prosecution initiated and no fines or penalties
were imposed during the year under review under the Act, SEBI Act,
RBI Act, SCRA, Depositories Act, Listing Agreement and Rules,
Regulations and Guidelines framed under these Acts against/ on the
Company, its Directors and Officers.Contd.4. I further report that
the Company has complied with the requirements under Acts, rules
and regulations mentioned in para 1 above.
5. I further report that based on the information received and
records maintained, there are adequate systems and processes in the
Company commensurate with the size and operations of the Company to
monitor and ensure compliance with applicable laws, rules,
regulations and guidelines.Contd.Place : Signature: Date : Name of
Company Secretary in practice / Firm: ACS/FCS No. C P No.:
Note: Para wise details of the Audit finding, if necessary, may
be placed as annexure to the reportICSI made representationsThe
Institute of Company Secretaries of India made representations to
the Ministry of Corporate Affairs expressing its concerns over some
of the provisions relating to Secretarial Audit
For quick reference, the representation is being produced
herewith, in the next few slidesICSI representation on Secretarial
AuditMCA: 2013 October 21, 2013 Shri Naved Masood, IAS Secretary to
Government of India Ministry of Corporate Affairs Shastri Bhawan
New Delhi
Dear Sir, Sub: Draft rules with respect to Secretarial Audit
under the Companies Act, 2013
ICSI repn. on Secretarial AuditContdSection 204(1) of the
Companies Act, 2013 provides that every listed company and a
company belonging to other class of companies as may be prescribed
shall annex with its Boards report made in terms of sub-section (3)
of section 134, a secretarial audit report, given by a company
secretary in practice, in such form as may be prescribed. The draft
Rule 13.7.(1), however provides that the other class of companies
shall be as under: (a) Every public company having a paid-up
sharecapital of one hundred crore rupees or more.
ICSI repn. on Secretarial AuditContd2. We submit the following
in this regard:a. Section 204 focuses on governance as also
compliance with applicable laws, as evident from draft format
issued along with draft rules. This cant be overlooked for
companies which have a paid up capital of less than Rs.100 crore.b.
The requirement proposed in draft rules would keep 99% of the
companies out of purview of section 204 of the Act.
ICSI repn. on Secretarial AuditContd2. We submit the following
in this regard:c. Generally, in large corporates the level of
governance is expected to be higher compared to smaller companies.
In this context, it is all the more necessary to ensure governance
in those companies where the public interest would be substantially
high. In this context, public interest would constitute:Amount of
paid-up capital;Total net-worth;Turnover;Borrowings including fixed
deposits;Number of stakeholders.
ICSI repn. on Secretarial AuditContd3. Secretarial Audit
comprises of verification of compliance of provisions of various
laws and rules/procedure, by an independent professional to ensure
that the company has complied with the legal and procedural
requirements and also followed due processes. This cant be
overlooked for a public company having a bank borrowing of Rs. 200
crore but with paid-up share capital of Rs. 10 crore only. Also
this cant be overlooked for a private company.
ICSI repn. on Secretarial AuditContd4. The Companies Act, 2013
for the first time defines the term fraud. Severe punishment for
fraud has been provided at several places throughout the entire
Act. Under the Act, the duty has been cast on practicing company
secretary who is conducting secretarial audit to report fraud to
the Central Government.
In the interest of governance, transparency and compliance, the
rules may provide that For the purposes of sub-section (1) of
section 204, the other class of companies may be as under:ICSI
repn. on Secretarial AuditContd(a) every company having a paid-up
share capital of Rs.10 crore or more or annual turnover of Rs. 25
crore or more as per its last audited financial statement; Or(b)
every company having outstanding loan or borrowing from Bank or
Financial Institution or accepted public deposits exceeding Rs. 25
crore or more at any point of time in last financial year. Thanking
you Yours faithfully (M S Sahoo), Secretary
For info - Secretarial AuditThe Ministry had in its Corporate
Governance Voluntary Guidelines, 2009 released during the India
Corporate Week (Dec 14-21, 2009) mentioned about Voluntary
Secretarial audit on page 20 of the said document in Para V.
For quick reference, the link enabling access to the said
document is provided hereunder:
www.mca.gov.in/Ministry/latestnews/CG_Voluntary
_Guidelines_2009_24dec2009.pdf
What was there in Voluntary GuidelinesV. SECRETARIAL AUDIT Since
the Board has the overarching responsibility of ensuring
transparent, ethical and responsible governance of the company, it
is important that the Board processes and compliance mechanisms of
the company are robust. To ensure this, the companies may get the
Secretarial Audit conducted by a competent professional. The Board
should give its comments on the Secretarial Audit in its report to
the shareholders.
For info - Secretarial Standards118(1): Every company shall
cause minutes of the proceedings of every meeting prepared and
signed in such manner as may be prescribed and kept within 30 days
of the conclusion of every such meeting concerned in books kept for
that purpose with their pages consecutively numbered.
118(10): Every company shall observe secretarial standards with
respect to general and Board meetings specified by the Institute of
Company Secretaries of India and approved as such by the Central
Government.For sake of clarity This PPT covers the actual
provisions envisaged in the new law. As, it is quite important to
first know the letter of law.