A secretarial audit is an independent check of whether a company has complied with the corporate laws that apply to it. Section 204 of the Companies Act, 2013, read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, sets out which companies must have one — and provides that it is carried out by a Company Secretary in practice.
Which companies are covered
A company falls within Section 204 if it is:
- every listed company;
- every public company with paid-up share capital of ₹50 crore or more, or with turnover of ₹250 crore or more;
- every company with outstanding loans or borrowings from banks or public financial institutions of ₹100 crore or more.
Meeting any one of these tests brings the company within the requirement. The borrowing test is worth noting: because it is framed by reference to borrowings rather than to the kind of company, it can pull in a private company that has taken large bank or institutional debt, even though the paid-up and turnover tests are limited to public companies.
The report — Form MR-3
The secretarial auditor records the audit in Form MR-3, which is annexed to the board's report for the year. The report sets out the laws and records examined and states any observations, qualifications or adverse remarks. It is a statement of compliance for the year, not a one-off certificate.
Listed entities: an additional report
A listed entity has a further obligation under SEBI's Listing Regulations that is separate from MR-3. Under Regulation 24A of SEBI (LODR), it files an Annual Secretarial Compliance Report — distinct from the MR-3 secretarial audit — within 60 days of the end of the financial year. So a listed company has two outputs: the MR-3 under the Companies Act, and the annual compliance report under the LODR.
In short
Secretarial audit is mandatory for every listed company, for larger public companies by paid-up capital or turnover, and for any company carrying ₹100 crore or more of bank or institutional borrowings. The audit is reported in Form MR-3, and listed entities additionally file the LODR Regulation 24A compliance report within 60 days of the year-end.
This note is general information about when a secretarial audit applies, not advice on any particular company. The thresholds are tested against a company's own figures and may change, so applicability should be checked for each company and year. More notes are on the Insights page, and the office's details are on the contact page.