An overview: Secretarial Compliance Certificate and Secretarial Audit under Companies Act, 2013
Overview: Secretarial Compliance Certificate and Secretarial Audit under Companies Act, 2013
1. Secretarial Compliance Certificate
What is it?
A Secretarial Compliance Certificate is a certification provided by a Company Secretary (CS) that confirms the company’s compliance with all applicable laws and regulations during a particular period. It certifies that the company has adhered to statutory provisions, procedural requirements, and corporate governance norms.
Legal Provisions:
While the Companies Act, 2013 does not explicitly mandate a Secretarial Compliance Certificate for all companies, certain sectors, regulators, or stock exchanges require listed companies or regulated entities to obtain such certificates annually.
It is often required under SEBI regulations for listed companies.
The certificate provides assurance to stakeholders that the company is complying with relevant laws.
Contents of the Certificate:
Compliance with Companies Act provisions.
Compliance with SEBI regulations (for listed companies).
Compliance with applicable laws such as FEMA, Income Tax, Labour Laws, etc.
Maintenance of statutory registers and records.
Compliance with corporate governance norms.
Importance:
Enhances transparency and accountability.
Helps in identifying non-compliance issues proactively.
Builds stakeholder confidence.
Case Law Highlight:
Tata Consultancy Services Ltd. v. State of Andhra Pradesh, AIR 2005 SC 1032
The Supreme Court emphasized the importance of companies adhering to compliance norms and regulatory frameworks.
While not directly about Secretarial Compliance Certificates, it highlights the need for statutory compliance which these certificates aim to assure.
2. Secretarial Audit
What is it?
Secretarial Audit is an audit conducted by a practicing Company Secretary to verify that the company complies with various laws, rules, and regulations applicable to it, particularly the Companies Act, 2013, and allied laws.
Legal Provisions:
Section 204 of the Companies Act, 2013 mandates secretarial audit for certain classes of companies.
Applicability:
Every listed company.
Every public company having a paid-up share capital of ₹50 crores or more.
Every public company having a turnover of ₹250 crores or more.
The report of the secretarial audit is submitted to the Board and annexed to the Board’s report.
Objectives:
To ensure compliance with company law, SEBI regulations, labor laws, environmental laws, etc.
To identify and rectify non-compliance and procedural lapses.
To maintain good corporate governance practices.
Contents of Secretarial Audit Report:
Verification of compliance with Companies Act, 2013.
Compliance with other applicable laws.
Maintenance of registers and records.
Filing of returns with the Registrar of Companies (ROC).
Board processes and meeting compliances.
Importance:
Acts as a check on the internal control system.
Provides an independent and professional review.
Helps management and stakeholders in risk mitigation.
Case Law Highlights:
Kumari Madhuri Patil v. Union of India, (2007) 10 SCC 480
The Supreme Court highlighted the role of professionals (such as Company Secretaries) in ensuring compliance and upholding regulatory frameworks.
Underlines the importance of audit and certification in maintaining legal discipline.
Chandraprakash Dwarkadas v. Securities and Exchange Board of India, AIR 1996 SC 2370
Emphasizes strict compliance with statutory requirements in corporate governance.
Supports the need for periodic audits including secretarial audits.
Summary Table
| Aspect | Secretarial Compliance Certificate | Secretarial Audit |
|---|---|---|
| Definition | Certification of compliance by Company Secretary | Audit of company’s compliance by practicing CS |
| Legal Mandate | Sector/regulator specific (e.g., SEBI listed companies) | Section 204, Companies Act, 2013 |
| Applicability | Mostly listed companies or regulated sectors | Listed companies and certain large public companies |
| Objective | Certify compliance during a period | Verify overall compliance with laws and regulations |
| Report Submission | To management/regulators | To Board and annexed to Board report |
| Legal Importance | Provides assurance to stakeholders | Independent review & governance enhancement |
Conclusion
Secretarial Compliance Certificate acts as a formal attestation by a Company Secretary that a company has complied with relevant laws during a specific period.
Secretarial Audit is a comprehensive audit mandated under the Companies Act, 2013, for specified companies, focusing on continuous compliance monitoring.
Both mechanisms promote transparency, accountability, and good corporate governance.
Courts have consistently emphasized the importance of compliance and the role of professionals in ensuring adherence to statutory norms, which these processes support.
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