A presentation by Group-4 (45TH MSOP ICSI WIRC)

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� The corporate sector is governed by a complexweb of laws, rules and regulations.

� However, enactment of laws is not enough and thedesired results cannot be achieved unless theirimplementation is geared up.

The Secretarial Audit is a mechanism that ensures

� timely and orderly compliance with the variouslegal and procedural requirements

� corrective measures when non-compliance isdiscovered

It is a legal compliance system that facilitates toensure compliance and avoid risk associated withnon-compliance.

� To Confirm Compliances

� To Point out non-compliances

� To make Recommendation for better Compliance

� To Enhance level of Transparency

� To Ensure timely Corrective Actions

� To protect interests of the various stakeholders

� To avoid any unwarranted Legal Actions

� To Improve Quality and Speed of Compliance

Promoters

Public at Large

Management

LendersGovernmentAuthorities/Regulators

Investors

Directors

Section 204 of the Companies Act, 2013 read withRule 9 of the Companies (Appointment andRemuneration to Managerial Personnel) Rules,2014 provides for the requirement of conductingSecretarial Audit for the following class of theCompanies:

�Every Listed Company [or]�Every Public Company havingpaid up share

capital of Rs. 50 crores or more [or]�Every Public Company having aturnover of

Rs. 250 crores or more

� The Secretarial Audit Report shall be annexed withthe Board Report.

� It shall be the duty of the Co. to give all assistanceand facilities to CSP for auditing secretarial &related records of the Co.

� Board in their Report to explain in full anyqualification or observation or other remarks madeby PCS in his report

� Format of Secretarial Audit Report shall be inForm No.MR-3

Only aCompany Secretary in whole time practiceshall be appointed as Secretarial Auditor of theCompany.

He/she shall give a declaration to the Company inthe prescribed form that he/she is aCOMPANYSECRETARY in practice as defined in Section 2(2)of the COMPANY SECRETARIES ACT, 1980,and that he/she does not suffer from anydisqualifications set out in the guidelines. Thereafter,Secretarial Auditor shall be appointed only by theauthority of the Board of Directors.

Qualification:

� Only a member of the institute holding a certificate of practice can be appointed as a secretarial auditor.

Disqualification:

� None of the following can be appointed as Secretarial Auditor:

� Body Corporate

� Officer or Employee of the Company

� A person who is indebted to the Company for an amount exceeding Rs. 2,000/- and given any guarantee and provided any security in respect of third person for an amount exceeding Rs. 10,000/-

� Ceased to be PCS before submitting his/her secretarial report.

� Any other disqualification as may be prescribed.

� Determine scope of Audit� Request for details of various corporate actions /

events subject to audit� Develop the audit framework� Ascertain applicable laws� Prepare check-lists and time schedule� Call for documents / information� Obtain Management Representation Letter� Discuss and seek clarification, if required� Discuss draft report with Management� Finalize and submit draft addressed to

shareholders

� Memorandum of Association & Articles of Association� Draft Financial Statements, Auditor’s Report, Director’s

Report

� All Statutory Registers� Filings with ROC / regulatory authorities / RBI� Filings / submissions to Stock Exchanges� Minutes Book of the Company� Loan agreement or sanction letter� Register of Contracts, Companies and Firms in which

Directors are interested� Copies of contracts made between the company and any

of the related parties.� Other Documents as shall be required.

The Secretarial auditor has to report on compliances ofi) The Companies Act, 2013 (the Act) and Rules made thereunder;ii)The Securities Contracts (Regulation) Act, 1956 andrules made thereunder;iii)Foreign Exchange Management Act, 1999 and the rulesto the extent Foreign Direct Investment, Overseas DirectInvestment and External Commercial borrowings;iv)The Depositories Act, 1996 and regulations and bye-lawsframed thereunder;v)Various regulations and guidelines under Securities andExchange Board of Indiavi)Other laws as may be applicable specifically to theCompany.Further, examination and compliances of SecretarialStandards issued by the Institute of Company Secretaries ofIndia and on provisions of Listing Agreement.

TaxationLaws

Labor Laws EnvironmentalLaws

Other Laws

Income Tax Act, 1961

The Factories Act, 1948

Air (Prevention and Control of Pollution) Act, 1981

FEMA, 1999

Wealth Tax ActIndustrial Dispute Act

Water (Prevention and Control of Pollution) Act, 1974

Foreign Trade (Development and Regulation Act, 1992

Central Excise Act

Payment of Wages Act

The Noise (Regulation and Control) Rules 2000

Indian Contract Act

Custom ActPayment of Bonus Act

The Environment (Protection) Act 1986

Sale of Goods Act

Service TaxWorkmen Compensation Act,

Transfer of Property Act

Sales Tax Act including Value Added Tax Act of 2003

Employees PF & Misc. Provisions Act, 1954

Micro, Small And Medium Enterprises Development Act, 2006 and many other Acts

� While the Companies Act, 2013 have opened up asignificant area of practice for CompanySecretaries, it equally casts immense responsibilityon them and poses a greater challenge wherebythey have to justify fully, the faith and confidencereposed by the industry as well as Regulators andmeasure up to their expectations. CompanySecretaries must take adequate care whileconducting Secretarial Audit.

� It becomes imperative for the PCS that he / sheexercises great care and caution while issuing theSecretarial Audit report and also adheres to thehighest standards of professional ethics andexcellence in providing his / her services.

� If Company Secretary in Practice, during conduct ofSecretarial Audit, has sufficient reason to believe that anoffence involving fraud is being committed or has beencommitted against the company by officers oremployees of the company, he shall report the same tothe Central Government immediately but not later than60 days of his knowledge with a copy to the Board /Audit Committee seeking their reply within 45 days

� Board / Audit Committee to reply in writing the stepstaken to address the fraud

� The Auditor to forward his report and reply of the Board/ Audit Committee with his Comments to the CentralGovernment within 15 days of reply by Board / AuditCommittee

� The Report shall be in Form ADT - 4

Form No. MR-3

SECRETARIAL AUDIT REPORT

FOR THE FINANCIAL YEAR ENDED … … …

[Pursuant to section 204(1) of the Companies Act, 2013 and rule No.9 of the Companies (Appointment

and Remuneration Personnel) Rules, 2014]

SECRETARIAL AUDIT REPORT

FOR THE FINANCIAL YEAR ENDED … … …

To,

The Members,

……….… Limited

I/We have conducted the secretarial audit of the complianceof applicable statutory provisions and the adherence to good corporate practices by…….(name of the company).(hereinafter called the company). Secretarial Audit was conducted in a manner that provided me/us a reasonable basisfor evaluating the corporate conducts/statutory compliances and expressing my opinion thereon.

Based on my/our verification of the .....………………………….. (name of the company’s) books, papers, minute books, forms and returns filed andother records maintained by the company and also the information provided by the Company, its officers, agents and authorized representativesduring the conduct of secretarial audit, I/We hereby reportthat in my/our opinion, the company has, during the audit period covering thefinancial year ended on _____, _____ complied with the statutory provisions listed hereunder and also that the Company has proper Board-processes and compliance mechanism in place to the extent, in the manner and subject to the reporting made hereinafter:

I/we have examined the books, papers, minute books, forms and returns filed and other records

maintained by ………….. (“the Company”) for the financial year ended on __, ______according to the provisions of:

(i) The Companies Act, 2013 (the Act) and the rules made thereunder;

(ii) The Securities Contracts (Regulation) Act, 1956 (‘SCRA’) and the rules made thereunder;

(iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed thereunder;

(iv) Foreign Exchange Management Act, 1999 and the rules andregulations made thereunder to the extent of Foreign DirectInvestment, OverseasDirect Investment and External Commercial

Borrowings;

(v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’):-

(a) The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;

(b) The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992;

(c) The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements)

Regulations, 2009;

(d) The Securities and Exchange Board of India (Employee Stock Option Scheme and Employee

Stock Purchase Scheme) Guidelines, 1999;

(e) The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008;

(f) The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client;

(g) The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; and

(h) The Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998;

(vi) .............................................................. (Mention the other laws as may be applicable specifically to the company)

I/we have also examined compliance with the applicable clauses of the following:

(i) Secretarial Standards issued by The Institute of Company Secretaries of India.

(ii) The Listing Agreements entered into by the Company with ….. Stock Exchange(s), if

applicable;

During the period under review the Company has complied with the provisions of the Act, Rules,

Regulations, Guidelines, Standards, etc. mentioned above subject to the following observations:

Note: Please report specific non compliances / observations / audit qualification, reservation or

adverse remarks in respect of the above para wise.

I/we further report that

The Board of Directors of the Company is duly constituted with proper balance of Executive Directors, Non-Executive Directors and Independent Directors. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Act.

Adequate notice is given to all directors to schedule the Board Meetings, agenda and detailed notes on agenda were sent at least seven days in advance, and a system exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting.

Majority decision is carried through while the dissenting members’ views are captured and recorded as part of the minutes.

I/we further report that there are adequate systems and processes in the company commensurate

with the size and operations of the company to monitor and ensure compliance with applicable laws, rules, regulations and guidelines.

Note: Please report specific observations / qualification, reservation or adverse remarks in respect of the Board Structures/system and processes relating to the Audit period.

I/we further report that during the audit period the company has ................................. (Give details of specific events / actions having a major bearing on the company’s affairs in pursuance of the above referred laws, rules, regulations, guidelines, standards, etc. referred to above).

For example:

(i) Public/Right/Preferential issue of shares / debentures/sweat equity, etc.

(ii) Redemption / buy-back of securities

(iii) Major decisions taken by the members in pursuance to section 180 of the Companies Act, 2013

(iv) Merger / amalgamation / reconstruction, etc.

(v) Foreign technical collaborations

Place: Signature:

Date: Name of Company Secretary in practice / Firm:

ACS/FCS No.

C P No.:

Note: Parawise details of the Audit finding, if necessary, may be placed as annexure to the report.

Penalty for Non-compliance (Section 204(4))If default if made in complying with the provisions of Secretarial Audit:-� Company, � Any Officer of the Company, or� Company Secretary in practiceWho is in default, shall be punishable with the fine which shall not be less than one lakh rupees but which may extend to five lakh rupees. It is for the first time direct penal provisions have been introduced for Practicing Company Secretary in case of any default is made in complying with the provisions of Section 204.

� Formed in 1987 in Hyderabad (India)

� Ramalinga Raju: Founder and Chairman

� Won the “Golden Peacock Award” for the

best governed Company in 2007 and in 2009

� Scope and framework of audit should be properly determined inadvance, in accordance with the size and business of theCompany.

� Ascertain all applicable laws whether commercial, industrial,labour, financial, land laws etc subject to the secretarialaudit. Aspoint (iv) of 3rd Para ofForm MR-3 specifically states“mentionthe other laws as may be applicable specifically to theCompany.”

� Prevention of non-compliance is better than compounding, payingpenalties or incurring civil or criminal liability.

� Proper disclosure of severe or deliberate non-compliance,fraud orscam. In Indian Law, hiding non-compliance is equal tocommitting the same.

� Keeping in a view the responsibilities imposed by the Law,Secretarial Auditor should perform his/her duties with fullknowledge of subject, high proficiency, due-diligence, andwithout any biasness or pressure.

In the perspective, introduction of Secretarial AuditReport by Company Secretary in practice is awelcome step. The secretarial audit will also boostthe corporate compliance level and step towardsgood corporate governance.

You can not escape your responsibilities by evadingit but only by complying with it.

Beware of False Knowledge

it is more dangerous than ignorance.

Members of Group 4:-• Vikas Mehta

• Amit Soni

• Amit Lodha

• Nisha Gawde

• Anshita Jhawar

• Anjana Jain