Background:
The Committee on Corporate Governance, under the Chairmanship of Shri. Uday Kotak (Committee) dated 5th October, 2017 has laid emphasis on the following:
- To make secretarial audit compulsory for all listed entities under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 in line with the provisions of the Companies Act, 2013.
- Extend secretarial audit to all material unlisted Indian subsidiaries to improve compliance at a group level for listed entities.
With a view to implement the recommendations of the Committee, the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 has been amended to include the following Regulation:
“24A: Secretarial Audit
Every listed entity and its material unlisted subsidiaries incorporated in India shall undertake secretarial audit and shall annex with its annual report, a secretarial audit report, given by a company secretary in practice, in such form as may be prescribed with effect from the year ended March 31, 2019.”
Currently, Section 204 of the Companies Act, 2013 read with rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 requires Secretarial Audit by Practicing Company Secretaries (PCS) for listed companies and certain unlisted companies above a certain threshold in From No. MR-3.
This circular clarifies that in order to avoid duplication in filing, listed entities and its unlisted material subsidiaries can continue to use the same Form No. MR-3 for the purpose of compliance with Regulation 24A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 as well.
The annual secretarial audit covers a broad check on compliance with all laws applicable to the entity.
Annual secretarial compliance report:
Listed entities will additionally, on an annual basis, require a check by the PCS on compliance of all applicable SEBI Regulations and circulars/ guidelines issued thereunder, consequent to which, the PCS must submit a report to the listed entity in the manner specified in this circular.
The format for the annual secretarial compliance report will be as per Annex-A (Attached for reference). This report must be submitted by the listed entity to the stock exchanges within 60 days of the end of the financial year.
Effective Date
This circular shall come into force as under:
- Annual Secretarial Audit Report- From the financial year ended March 31, 2019 onwards
- Annual Secretarial Compliance Report- From the financial year ended March 31, 2019 onwards.
Source: Securities Exchange Board of India
