Section 204 of the Companies Act, 2013
Section 204 of the Companies Act, 2013 deals with the requirement for Secretarial Audit for certain classes of companies.
๐ Section 204 โ Secretarial Audit for Bigger Companies
This section mandates that specified classes of companies must obtain a report from a Company Secretary in Practice (PCS) on compliance with various laws and regulations.
โ Key Provisions:
๐น 1. Applicability [Sub-section (1)]
The following companies are required to obtain a Secretarial Audit Report from a Practicing Company Secretary (PCS):
As per Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014:
Every listed company;
Every public company having:
Paid-up share capital โฅ โน50 crore, or
Turnover โฅ โน250 crore.
๐น 2. Secretarial Audit Report
The PCS shall submit a Secretarial Audit Report in Form MR-3.
The report must be annexed to the Boardโs Report as part of the Annual Report.
๐น 3. Scope of Audit
The PCS will verify compliance with:
The Companies Act, 2013,
SEBI regulations,
Listing regulations (if applicable),
Other applicable corporate laws,
Secretarial Standards (SS-1 and SS-2).
๐น 4. Responsibility
The Board of Directors is responsible to ensure compliance and cooperate with the secretarial auditor.
If the company or any officer contravenes this section, they may face penalties under Section 448 (false statement) or Section 447 (fraud) if misstatements are found.
๐ Example:
If ABC Ltd. is a public unlisted company with paid-up capital of โน60 crore, it must obtain a Secretarial Audit Report from a practicing Company Secretary and include it in its Board Report.
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