A company is generally referred to as a group of people who contribute money or money’s worth to a common pool of resources and work towards a common objective. The company registered under the Companies Act 2013 acquires the status of an artificial judicial person with a separate legal identity. To identify instances of non-compliance and take corrective measures to safeguard the interest of various stakeholders, Secretarial Compliance & Secretarial Audits have been mandated for a certain class of companies. The main features, among other things, of a company, registered or incorporated under the Companies Act, 2013 comprise the following:
- On registration under the Companies Act, 2013, a company acquires the status of the artificial judicial person identity which is separate from its members and directors. Due to this feature, a member or shareholder can enter into a contract with the company and can also sue the company and be sued by the company. Also, a company can purchase and own property, and bank accounts, enter into contracts, raise loans or incur liabilities.
- Since the company exists and operates as a separate entity, members of the company are not liable for the debts of the company. Their liability is limited to the extent of the shares that are held by them or by the extent of the guarantee amount.
- The company is an artificial person established by law perpetuates to exist regardless of the differences in its membership or directors.
- The company is an artificial entity or a person cannot sign its name by itself. Thus, it creates the necessity of a common seal that can be used for representing the decisions made on behalf of the company.
As per Regulation 24A of the SEBI Regulations (LODR), all listed companies and their asset unlisted subsidiaries are needed to submit a Secretarial Compliance Report to the stock exchanges where the securities of the companies are listed within 60 days after the end of the Financial Year. The secretarial compliance report is limited to the SEBI Act, its regulations, circulars, orders, and guidelines which are a comprehensive set of laws having broad coverage over the capital market.
The Companies Act prescribes certain compliances which every company incorporated under the Act is required to make. A few of the compliances are:
- Assignation, stipulation, remuneration, and retirement of directors of the company;
- Appointment of the statutory auditors of the company;
- Convening and conducting a meeting of the Board of Directors;
- Convening and conducting an annual general meeting of the members/shareholders of
- Preparation and presentation of annual accounts of the company and the regular maintenance of books of accounts;
- Furnishing annual financial statements with the Registrar of Companies;
- Maintenance of the books of accounts as per the accrual system of accounting;
- Intimation to Registrar of Companies on receipt of deposits, loans, etc.
The consequences of non-compliance are both far-reaching and far-sighted.
How ASC Helps in Secretarial Audit
We, at ASC, have Company Secretaries and other professionals who understand the law related to companies in India, assist in Secretarial Compliance and Secretarial Audit matters, and stay constantly abreast with the regulatory environment in India, and assist our clients in making companies under the Companies Act promptly. Our key services offerings include the following:
- Assistance with the incorporation of the company in India viz preparation of application form, memorandum, and articles of association and filing of the same with the Registrar of Companies;
- Assistance concerning the filing of an application and obtaining the certificate of commencement of business from the Registrar of Companies
- Preparation of minutes of the meeting of the Board of Directors and members;
- Assistance about how the meetings under the Companies Act are convened and operated and also voting in the same;
- Assistance with the filing of annual returns and other forms as prescribed.
Frequently Asked Questions
What is the applicability of secretarial audit?
The secretarial audit requirement has been mentioned under section 204. The secretarial audit is mandatory for the following classes of companies:
- Every listed company
- Every public company with
- Paid-up share capital of Rs. 50 crores or more
- Turnover of Rs. 250 crores or more
- Outstanding loans or borrowings from banks or public financial institutions of Rs. 100 crores or more
What is the scope of secretarial audits?
Secretarial audits involve ensuring compliance with various laws and regulations applicable to the companies. It includes but is not limited to checking compliances with companies act, SEBI laws and regulations, FEMA provisions, depositories act and other regulatory laws specific to the industry in which the company operates.
What are other secretarial compliances that a company shall adhere to?
The extent of secretarial compliances applicable to the companies depends upon the operations and laws applicable to the companies. This can include:
- Maintenance of statutory registers
- Annual filings
- Change in statutory auditors
- Admission or retirement of directors
- Filings with sectoral regulators etc.
- Submission of various reports and returns
What can be the consequences of non-compliance with the legal requirements?
Non-compliance can attract mild to severe penalties depending upon the nature of non-compliance. In certain serious non-compliances, the name of the company can be struck off from the register of the companies.