\n| Company with specified borrowings<\/td>\n | Outstanding loans or borrowings from banks or public financial institutions of \u20b9100 crore or more<\/td>\n | The borrowing test can apply to a private company and should be checked for the financial year.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/span>Is Secretarial Audit Mandatory for Private Companies<\/b><\/strong><\/span><\/h2>\nA private company does not ordinarily require Secretarial Audit merely because of its paid-up capital or turnover. However, it may become liable where its outstanding loans or borrowings from banks or public financial institutions reach the prescribed threshold.<\/p>\n A private company may also obtain a voluntary Secretarial Audit as part of investor due diligence, a merger or acquisition, fundraising, corporate restructuring, an internal governance review, preparation for listing or a compliance risk assessment.<\/p>\n <\/span>Who Can Conduct a Secretarial Audit<\/b><\/strong><\/span><\/h2>\nA Secretarial Audit can be conducted only by a Company Secretary in Practice (PCS). The company should formally appoint the Secretarial Auditor through a Board resolution. The appointment, scope, reporting period, remuneration and authority to inspect records should be properly documented. The auditor should remain independent and avoid circumstances that may create a conflict of interest.<\/p>\n <\/span>What Is Form MR 3<\/b><\/strong><\/span><\/h2>\nForm MR-3 is the prescribed format of the Secretarial Audit Report. It records the auditor\u2019s observations regarding compliance with applicable laws, maintenance of statutory records, statutory filings, Board and shareholder meetings, Board composition, decision-making processes, regulatory approvals, adequacy of compliance systems and material legal or corporate events during the year.<\/p>\n The report may be unmodified or may contain qualifications, observations and adverse remarks.<\/p>\n <\/span>Secretarial Audit Process<\/b><\/strong><\/span><\/h3>\n\n- Determine Applicability: <\/strong>Evaluate listing status, paid-up capital, turnover and outstanding bank or public financial institution borrowings. Document the assessment even where the conclusion is that Secretarial Audit is not applicable.<\/li>\n
- Appoint the Secretarial Auditor: <\/strong>The Board should approve a Company Secretary in Practice. The engagement letter should specify the financial year, audit scope, reporting responsibilities, information required, management responsibilities, professional fees and timelines.<\/li>\n
- Prepare a Compliance Checklist: <\/strong>Prepare a law-wise and event-wise checklist showing the provision, due date, responsible department, supporting evidence and current status.<\/li>\n
- Provide Records to the Auditor: <\/strong>Provide complete and accurate statutory registers, meeting documents, ROC filings, agreements and regulatory correspondence.<\/li>\n
- Verification and Testing: <\/strong>The auditor examines documents and may test selected transactions, resolutions, approvals and filings. Explanations may be sought from directors and the legal, secretarial and finance teams.<\/li>\n
- Discuss Audit Observations: <\/strong>Potential non-compliances are discussed with management. Corrective action may be taken, but later correction does not necessarily remove the need to report the original delay or default.<\/li>\n
- Issue Form MR 3: <\/strong>After completing the examination, the Secretarial Auditor issues Form MR-3. It is annexed to the Board\u2019s Report and forms part of the annual reporting documentation.<\/li>\n<\/ol>\n
<\/span>Documents Required for Secretarial Audit<\/b><\/strong><\/span><\/h3>\n\n- Certificate of incorporation, Memorandum and Articles of Association;<\/li>\n
- Registered office, corporate structure and group-company details;<\/li>\n
- Registers of members, directors, key managerial personnel and charges;<\/li>\n
- Registers of loans, guarantees, securities, investments and contracts in which directors are interested;<\/li>\n
- Board, committee and general meeting notices, agendas, attendance records and minutes;<\/li>\n
- Directors\u2019 disclosures, including MBP-1 and DIR-8;<\/li>\n
- Share transfer, transmission, allotment and share certificate records;<\/li>\n
- Annual returns, financial statement filings, ROC challans and acknowledgements;<\/li>\n
- Loan agreements and related-party transaction documents;<\/li>\n
- Records for statutory, cost and internal auditor appointments;<\/li>\n
- CSR documents, foreign investment and FEMA filings;<\/li>\n
- SEBI and stock-exchange filings, where applicable;<\/li>\n
- Legal notices, regulatory orders and details of material events during the year.<\/li>\n<\/ul>\n
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