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SECRETARIAL COMPLIANCE REPORT
REGULATION 24A OF LODR & SEBI
CIRCULAR DATED 8TH
FEBRUARY 2019
AN ANALYSIS…….
PRESENTATION BY CS B NARASIMHAN
CENTRAL COUNCIL MEMBER ICSI
•1
SECRETARIAL AUDIT FOR COMPANIES (SEC 204)
Companies covered:
(a) Every Listed Company (includes Companies whose
debentures, warrants are listed)
(b)Other class of companies:
(i) Every Public Company having a paid up share
capital of fifty crore rupees or more
(ii) Every public company having a turnover of two
hundred fifty crore rupees or more
IS SECRETARIAL AUDIT A PANACEA FOR ALL ILLS ????
•2
SECRETARIAL AUDIT FOR COMPANIES
(SEC 204)
ENTITIES NOT COVERED
MATERIAL SUBSIDIARIES OF LISTED ENTITIES
PUBLIC SECTOR BANKS EVENTHOUGH
LISTED……
PSB DO NOT HAVE EVOTING ALSO ???
INSURANCE COMPANIES EVENTHOUGH LISTED
LARGE PRIVATE LIMITED COMPANIES
COMPANIES WITH LESSER PAID UP CAPITAL…
BUT WITH LARGE PUBLIC INTEREST… SAY
HUGE BORROWINGS
•3
MAJOR ITEMS TO BE CHECKED
• Notice, Agenda, Notes on Agenda minutes of meetings,
attendance registers
Draft Financial Statements, Auditor’s Report, Director’s Report
Statements for borrowings and investments
All Statutory Registers
disclosures / consents / declarations
Filings with RoC / regulatory authorities / RBI
Filings / submissions to Stock Exchanges
Relevant approvals / correspondence/disclosures by directors.
Compliance certificates of functional heads for compliance ofapplicable laws
AUDIT PROCEDURE
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
WHY SECRETARIAL
COMPLIANCE REPORT
Kotak committee recommendations
NSE examination of SARs
NSE REPORT - Data verified for 1000
companies for the F.Y. 2016-17 and 595
companies for the F.Y. 2015-16; identified
based on the type of non- compliances, market
capitalization and fines levied by the
Exchange
Suspended companies are not considered.
NSE OBSERVATIONS
The format of secretarial audit is not very
transparent.... It does not tell anything about what
was examined, what is the extent of
compliance/non-compliance under different
regulations applicable to the company.
Most of secretarial auditors seem to prefer to
adhere to the format suggested and are ...not
willing to add any additional statements or
annexure to state their points in clear terms.
NSE OBSERVATIONS
The following are the deficiencies generally
noticed in the secretarial audit process:
1. Remark on composition of the Board would say it
is compliant; no specific mention is made about
whether woman director was appointed.
Therefore, one is not sure if woman director is
appointed when a positive certification of
composition of the board is given.
2.Not sure if non-compliances with MCA requirements were verified.
NSE OBSERVATIONS
3.Not sure what are all the corporate actions done or not done. If done, whether the company was in compliance with it or not.
4.Not sure if the affirmations suggested in the corporate governance report are in fact checked or not.
5.Not sure is non-compliances with Listing Regulations were verified.
6.Not sure if non-compliance with other applicable laws is verified.
NSE FINDINGS – 15-16 AND 16-17
Sr. No. Particulars (Reporting of Non-
Compliances)
Companies with
non-compliance
Reported Not Reported
1 Corporate Governance Non-Compliances
2 i. Composition of Board of Directors 126 74 52
3 ii. Composition of Audit Committee 63 21 42
4 iii. Appointment of Women Director 16 16 0
5 100 % Promoter Shareholding not in Demat
Form
98 1 97
6 Limited Review Report non-submission 99 0 99
7 SAST & PIT Non-Compliance 57 0 57
8 Modified/Unmodified Opinion not submitted
along with the Financial results
84 1 83
9 No disclosure for BRR Policy in Annual Report 12 0 12
10 No Disclosure for Dividend Policy in Annual
report
51 51
SECRETARIAL AUDIT & COMPLIANCE REPORT..
GENESIS & THE NEED
CONSTITUTION OF A COMMITTEE UNDER
CHAIRMANSHIP OF SHRI UDAY KOTAK ON 3RD
JUNE 2017
HELD 12 SITTINGS TO GIVE THEIR VIEWS
WITHIN FOUR MONTHS I.E. OCTOBER 2017
SUBMITTED THEIR RECOMMENDATIONS
MOST RECOMMENDATIONS ACCEPTED
AMMENDMENTS MADE IN LODR IN PHASED
MANNER
SEBI ON FEBRUARY 8 2019, CAME OUT WITH
ANNUAL SAR AND SCR
•11
SECRETARIAL AUDIT & COMPLIANCE REPORT
RECOMMENDATIONS OF THE COMMITTEE
OBSERVATIONS…..CURRENTLY the Companies
Act requires a secretarial audit for listed companies
and unlisted companies above certain threshold.
However, there is no specific provision for
Secretarial audit under SEBI LODR Regulations…..
Secretarial functions are critical to efficient board
functioning. Therefore it is recommended that
“ SA be made compulsory for all listed entities under
SEBI LODR Regulations in line with the provisions of
the Companies Act… SA may also be extended to all
material unlisted subsidiaries (MUS)”…….NEW
REGULATION INTRODUCED
•12
SECRETARIAL COMPLIANCE REPORT- SEBI LODR
NEW REGULATION 24A INTRODUCED
24A Secretarial Audit.
Every listed entity and its materialsubsidiaries incorporated in India shallundertake secretarial audit and shallannex with its annual report, asecretarial audit report, given by acompany secretary in practice, in suchform as may be prescribed with effectfrom the year ended March 31, 2019
•13
SECRETARIAL COMPLIANCE REPORT. SEBI LODR
Applicable for all Listed Entity (LE) and its Material
Unlisted Subsidiaries (MUS)
All LE & MUS shall continue with the same form
MR-3 for the purposes of compliance with
Regulation 24A of LODR.
In addition thereto all LE shall in addition to MR-3
require to check and provide by PCS an Annual
Secretarial Compliance Report (SCR) As per format
specified in SEBI circular dated 8th Feb 2019
•14
SECRETARIAL COMPLIANCE REPORT. SEBI LODR
Applicable for companies falling under Chapter IV
of LODR – “Specified Securities”
Regulation 15(a) and 15(b) however provides
specific exemption for Companies with < 10 crore
capital or net worth <25 crore as also companies
listed in SME segment from Regulation 17 to 27 of
LODR (FOR THESE COMPANIES EXEMPTED)
SAR & SCR WILL COVER ALL LISTED ENTITIES WHICH ARE
NOT INCORPORATED UNDER COMPANIES ACT BUT UNDER
OTHER REGULATIONS LIKE PUBLIC SECTOR BANKS,
INSURANCE COMPANIES ETC
COMPANIES ACT 2013 SHALL CONTINUE TO APPLY
WHEREVER APPLICABLE
•15
SECRETARIAL COMPLIANCE REPORT. SEBI LODR
• REGULATION 16(1) (c) “material subsidiary” shall mean
a subsidiary, whose income or net worth exceeds
[ten % #] (# earlier 20%) of the consolidated
income or net worth respectively, of the listed
entity and its subsidiaries in the immediately
preceding accounting year. WEF 1st April 2019
• MUS to use same form MR-3 as prescribed
under Companies Act 2013. SCR not required
for them if not listed….. (WHERE & WHOM TO
SEND?... TO PARENT LISTED ENTITY)
•16
SECRETARIAL COMPLIANCE REPORT. SEBI LODR
• The emphasis on SCR for a LE is for
compliance with all applicable SEBI
Regulations, including all Circulars and
Guidelines, SOP etc issued from time to time
and PCS shall issue a Report in a specific
format
• TIME FRAME 60 DAYS.....
• FOR LISTED ENTITIES SCR WITHIN 60DAYS TO SE..
• MR-3 MAY BE LATER ALONG WITH ANNUAL REPORT
TO SE
•17
SECRETARIAL COMPLIANCE REPORT. SEBI LODR
FORMAT OF SCRPARA 1…EXAMINATION OF ALL DOCUMENTS &
RECORDS MADE AVAILABLE, EXPLANATION
PROVIDED, FILINGS AND SUBMISSIONS MADE BY LE,
ANY OTHER DOCUMENT, WEBSITE OF THE LE
WITH RESPECT TO COMPLIANCE WITH
PROVIDSIONS OF SEBI ACT AND SCRATHIS WOULD ENCOMPASS ALL RULES, CIRCULARS
GUIDELINES ETC
SPECIFIC REGULATIONS WHICH ARE COVERED AS PER
ILLUSTRATIVE LIST PROVIDED IN THE CIRCULAR
INCLUDES AS UNDER……..
•18
ANALYSIS OF SECRETARIAL AUDIT UNDER
COMPANIES ACT 2013 & SEBI LISTING
REGULATIONS 2015
•19
Secretarial Audit
SEBI MCA
SEBI Listing Regulations,
Circulars
Companies Act, 2013 and
Rules made there under
Regulatio
n 24A
Section
204
Analysis
SECRETARIAL COMPLIANCE REPORT. SEBI LODR
LODR
ICDR
SAST
BUY-BACK
ESOP
ISSUE AND LISTING OF
DEBT SECURITIES
ISSUE AND LISTING OF NON-CON REDEEMABLE PREF SHARES
PIT
CIRCULARS &
GUIDELINES
•20
•21
Rule 9- Companies (Appointment and
Remuneration of Managerial Personnel)
Rules, 2014
(1) For the purposes of sub-section (1)
of section 204, the other class of
companies shall be as under-
(a) Every public company having a paid-
up share capital of fifty crore rupees
or more; or
(b)Every public company having a
turnover of two hundred fifty crore
rupees or more.
(2) The format of the Secretarial Audit
Report shall be in form MR_3.
SEBI Circular No.
CIR/CFD/CMD1/27/2019 vide dated
February 08, 2019- Format for annual
secretarial audit report and annual
secretarial compliance report for
listed entities and their material
subsidiaries
Secretarial audit to be extended to all
material unlisted Indian subsidiaries
in line with the recommendations of
the Committee on strengthening
group oversight and improving
compliance at a group level for listed
entities.
4.
Observations
1. The SEBI Listing Regulations 2015, specify that every listed entity and its
material unlisted subsidiaries to conduct secretarial audit i.e. if an unlisted
material subsidiary is a private company, the private company is required
to carry out secretarial audit.
2. Further, even if the unlisted material subsidiary is a public company, SEBI
has not categorised the public company as per the Companies Act, 2013. It
is implied that, every unlisted material subsidiary which is a public
company or private company, it has to fall under the category of material
subsidiary which is defined under SEBI Listing Regulations to which the
secretarial Audit is applicable.
That is why SEBI has written specifically in its circular dated February 08,
2019 that improving compliance at a group level for listed entities by
widening the scope of secretarial audit beyond the Companies Act, 2013.
•23
4.
Observations
4. Filing of Secretarial Audit Report
i. For every listed entity: Within 30 days of AGM with ROC and
before AGM with the Stock Exchanges (the date of dispatch of
annual report to Shareholders).
ii. For MUS: Submit to parent Company Board which is a LE, which
will submit along with its AR.
It may be noted that MR 3 is to be annexed with the financial
statements in the annual report in case of filing with ROC and in
case of filing with Stock Exchanges, MR 3 is to be annexed with the
annual report.
SECRETARIAL COMPLIANCE REPORT. SEBI LODR
FORMAT OF SCR3(a)…EXCEPTION REPORT: The LE has complied with the
provisions of the above Regulations and circulars /guidelines
except in respect of matters specified below:-
•24
SR NO Compliance requirement
Regulations/circulars/
guidelines including
specific clause
Deviations Observations/
Remarks of
the Practicing
Company
secretary
1
2
SECRETARIAL COMPLIANCE REPORT. SEBI LODR
FORMAT OF SCR3(b)…..MAINTENENACE OF RECORDS: The LE has
maintained proper records under the provisions of the above
Regulations and circulars/guidelines issued there under
insofar as it appears from my/our examination of those
records…….
•25
Provide details of records nor maintained giving reference to the Regulations, circular/guidelines
SECRETARIAL COMPLIANCE REPORT. SEBI LODR
FORMAT OF SCR3 (c)….ACTION TAKEN REPORT AGAINST LE: FOLLOWING
ARE THE DETAILS OF ACTION TAKEN AGAINST THE LE/ ITS
PROMOTER/DIRECTORS/MATERIAL SUBSIDIARIES BY SEBI OR BY
SE’S (INCLUDING UNDER SOP ISSUED BY SEBI THROUGH
VARIOUS CIRCULARS) UNDER THE AFORESAID Acts/Regulations
and circulars and guidelines
•26
SR
NO
Action
taken by
Details
of
violatio
ns
Details of action
taken e.g. Fines
warning letter
debarment, etc
Observations/re
marks of the
PCS, if any.
1
2
SECRETARIAL COMPLIANCE REPORT. SEBI LODR
FORMAT OF SCR3(d)…ACTION TAKEN BY LE: The LE has taken the following
actions to comply with the observations made in previous reports :
•27
SR
NO
Observatio
ns of the
PCS in
previous
Reports
Observati
ons made
in the
SCR for
the year
ended.....
Actions
taken by
the LE
Comments of the
PCS on the
actions taken by
the LE
1
SECRETARIAL COMPLIANCE REPORT. SEBI LODR
SCR….. NOTES
1. Provide the list of observations in the
report for the previous year along with
the action taken by the LE on those
observations
2. Add the list of observations in the
reports pertaining to the periods prior
to the previous year in case the LE has
not taken sufficient steps to address
the concerns raised/ observations
•28
SECRETARIAL COMPLIANCE REPORT. SEBI LODR
SCR….. NOTES
E.g. In the report for the year ended 31st
March, 2021, the PCS shall provide a list
of :All the observations in the report for the year
ended 31st March, 2020 along with the actions
taken by the LE on those observations
The observations in the reports pertaining to the
year ended 31st march, 2020 and earlier, in case
the entity has not taken sufficient steps to
address the concerns raised/ observation in
those reports.
In the year 2019, what to give??
•29
SECRETARIAL COMPLIANCE REPORT. SEBI LODR
SPECIFIC DIRECTIONS GIVEN BY SEBI
REQUESTING ICSI TO PREPARE GUIDANCE
NOTES (Sr. no (4) of circular… When expected????
SOME UNANSWERED QUESTIONS:
1. Whether existing PCS can do the SCR as well?..YES WHY
NOT
2. PCS to sensitize their client on the new requirement.
IMMEDIATELY
3. If so does it require Board approval? YES OR GET IT
RATIFIED
4. Whether new appointment letter required? YES
PREFERRABLE
•30
SECRETARIAL COMPLIANCE REPORT. SEBI LODR
SOME UNANSWERED QUESTIONS:
5. Does the existing limit prescribed by ICSI
apply for SCR as well? NO. (Proposed 5+5)
6. Time limit for SA is before the AGM
whereas for SCR it is 60 days from closure
of FY… Does it create complications for LE
and PCS? IT SHOULD NOT
7. YES CHARGEABLE… HOW MUCH????
•31
PIT REGULATIONS
Sr. No Requirement Regulation Compliance Point / Source
1 Board’s Policy for determination of “legitimate
purposes” as a part of “ Code “ formulated under
regulation 8.
3 [2(A)] Disclosure of price
sensitive information to
be checked
2 Execution of agreements by the concerned parties in
relation to their obligations as per the Confidentiality /
Non-Disclosure requirements.
3 ( 4 ) Check the clauses of
agreement executed
with parties.
3 Maintenance of a structured digital database
containing the names of such persons or entities
with whom information is shared under this
regulation along with PAN or any other identification
authorized by law, in the absence of PAN
3 (5) Details of database to
be checked.
4 Formulation of a trading plan by the insider , it’s
presentation to the compliance officer for approval
and public disclosure pursuant to which trades may
be carried on, as per the plan
5 (1) Check Insider Trading
Plan of insider to the
Company.
5 Receipt of Continual Disclosures from insiders. 7 (2) Check disclosures
made by promoters /
designated persons/
directors and if related
disclosures are made
to stock exchange.
PIT REGULATIONS
Sr. No Requirement Regulation Compliance Point / Source
6 Contents of disclosures made by any person to
include those relating to trading by his immediate
relatives and / or any other person for whom such
person takes trading decisions.
6 (2) Check all disclosures
received by the
company
7 Receipt of Initial Disclosures received from insiders. 7 (1) Check disclosures made
by insiders
8 Formulation of a code of practices and procedures for
fair disclosure of unpublished price sensitive
information as per Schedule A to these regulations by
the BOD .
8 (1) Check the Code duly
approved by BOD and
disclosed on website of
the company.
9 Display of the Code on the company’s website and
forwarding a copy of the Code to the Stock
Exchange/s
8 (2) Verify if the Code is
available on the website
and communication to
SEs.
10 Formulation of Code of conduct by the company to
regulate, monitor and report trading by insiders as per
Schedule B of these regulations.
9 (1) Check the code of
conduct approved by
BOD and disclosure on
website.
11 Identification and designation of a compliance officer
to administer the code of conduct and other
requirements under these regulations?
9 (3) Check Board resolution
PIT REGULATIONS
Sr. No Requirement Regulation Compliance Point / Source
12 Specification of designated persons to be covered
by the code of conduct, by the BOD in consultation
with compliance officer.
9 (4) Check Board resolution
and the list for
changes, if any.
13 Existence of adequate and effective system of
internal controls as per requirements given in these
regulations.
9A. (1) Check the internal
control procedure laid
down by the Board of
the Company.
14 Review of compliance with the provisions of these
regulations at least once in a financial year and also
that internal control are adequate and are operating
effectively, by the Audit Committee .
9A. (4) Verify from the minutes
of Audit Committee.
15 Existence of a Whistle Blower Policy to enable
employees to report instances of leak of
unpublished price sensitive information?
9A. (6) Check the Whistle
Blower Policy
formulated by the
company
16 Any enquiry has been initiated by a listed company
in case of leak of unpublished price sensitive
information?
9A. (7) Check the details of
enquiry proceedings by
the company.
REMOVAL & RESIGNATION OF SECRETARIAL
AUDITOR – UNANSWERED QUESTIONS
Removal of Secretarial Auditor – no provisions in the
Act
Resignation of Secretarial Auditor – Board to note and
file form with ROC (not specified)
Secretarial Auditor also to file form with ROC (not
specified)
Appointment of Secretarial Auditor on casual
vacancy??...How and when to do????
Would it be desirable to have rotation of SA?
•60
OTHER LAWS AS MAY BE SPECIFICALLY
APPLICABLE TO THE COMPANY
Reporting on compliance of ‘Other laws as
may be applicable specifically to the
company’ which shall include all the laws
which are applicable to specific industry for
example for Banks- all laws applicable to
Banking Industry; for insurance company-all
laws applicable to insurance industry;
likewise for a company in petroleum sector-
all laws applicable to petroleum industry;
similarly for companies in pharmaceutical
sector, cement industry etc.
LIST OF LAWS
Primarily Other Laws Compliance System
1.Companies Act 2013
2. Securities Contract
(Regulation Act 1956
3. Depositories Act 1996
4. FEMA (FDI / ODI /
ECB)
5. SEBI Regulations wrt –
Takeover Regulations,
Insider Trading, ICDR
ESOP, Issue and Listing
of Debt , RTA Compliance
Delisting, Buy Back
Listing Agreement
Secretarial Standards
Other Laws
as may be
‘specifically
applicable’
to the
Company
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
MR 3 – STATEMENT ABOUT SPECIFIC
LAWS APPLICABLE TO THE COMPANY
• I have examined books, papers, minutes books, forms and
records according to provisions of –
1. 5 laws mentioned earlier
2. …. (Mention the other laws as may be specifically applicable
to the Company)
During the period under review the Company has complied with
the provisions of the Act, Rules, Regulations, Guidelines,
Standards etc. mentioned above subject to following ….
MR 3 – STATEMENT ABOUT
‘SYSTEM’
“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”
WHAT IS THE DIFFERENCE IN 2
STATEMENTS?
Laws Specifically
applicable to the
Company
Laws [generally]
applicable to the
Company
Secretarial Auditor
confirms compliance with
provisions of these laws,
rules, regulations,
guidelines, standards
Secretarial Auditor
confirms existence of
adequate system and
processes
commensurate with the
size and operations of
the Company to monitor
and ensure compliance
WHAT KIND OF TRANSFORMATION
ACHIEVED BY THE CORPORATE WORLD
• SINGLE MOST DIFFICULT QUESTION TO BE ANSWERED
• HAS THEIR BEEN ANY PERCIPTIBLE CHANGE?
• HOW HAVE THE COMPANIES RESPONDED DURING THE
LAST FIVE YEARS?
• IS THE REGULATOR RESONABLY SATISFIED….SEBI, MCA
AND STOCK EXCHANGES?
• DOES THE BOARD DERIVE CONFIDENCE FROM THE
REPORT
• HOW HAVE THE STAKEHOLDERS TAKEN IT?
• STUDY CARRIED OUT BY A GROUP OF PROFESSIONAL
REVEALS SOME ANSWERS TO THESE QUESTIONS……
71
TOP CS FIRMS SECRETARIAL AUDITORS BASED ON THE NUMBER
OF AUDITS UNDERTAKEN OF NIFTY COMPANIES 2016 - 2017
2017 2018
Rank Firm Name # of
Companies
Ran
k
Firm Name # of
Companies
1 BNP Associates, Mumbai 6↔ 1 BNP Associates, Mumbai 7↑
2 Chandrashekaran & Associates,
New Delhi
4↑ 2 Chandrashekaran & Associates,
New Delhi
4↔
3 Dr.KR Chandratre, Pune 4↓ 2 Dr.KR Chandratre, Pune 4↔
4 Parikh & Associates, Mumbai 5↔ 2 Parikh & Associates, Mumbai 4↓
5 Vinod Kothari & Co Kolkatta 3 ↑ 2 Vinod Kothari & Co Kolkatta 4 ↑
72
• 153 unique Acts, Rules, Regulations,
Guidelines, Agreements and Standards were
referred to in the Secretarial Audit Reports of
48 companies in 2016.
• This represents a decrease in the number of
mandates reported by 4 from 157 reported in
2015.
Ten companies had qualified Secretarial
Audit Reports of which seven were public
sector companies. in 2016
OBSERVATIONS ON AUDITS UNDERTAKEN OF NIFTY COMPANIES 2016
73
• There is a reduction by three companies with
qualified Secretarial Audit Reports in 2016, as 13
companies had qualified reports in 2015
• In public sector companies, qualified Secretarial
Audit Reports remained unchanged at seven in 2016,
the same as in 2015.
• Overall, the standards of compliance have
improved with lesser number of companies
having qualified Secretarial Audit Reports.
However, the improvement is only in private
sector companies, as compliance levels in
public sector companies remained
unchanged.
OBSERVATIONS ON AUDITS UNDERTAKEN OF NIFTY COMPANIES 2016
74
• Secretarial Audit Firms
• The Companies Act, 2013 for the first time mandated
Secretarial Audits for bigger public companies.
• 2017-18 is the fourth year where companies have included
Secretarial Audit Reports in the Annual
• Reports. Of the Nifty 50 Companies, only 49 companies
underwent Secretarial Audit.
• The top CS firm conducted SEVEN secretarial audits in 2017-
18. The top 5 Firms conducted Secretarial audit for 23 Nifty
companies (48%) in 2017-18, as compared to 25 companies
(52%) in 2016-17.
• SBI has not undergone Secretarial Audit.
OBSERVATION ON AUDITS UNDERTAKEN OF NIFTY COMPANIES 2016
KEY FINDINGS
Company Secretary still remains the most popular
designation, despite a reduction of 4% in the last one year
from 59% to 55%.
The title of Chief Compliance Officer has been added to
Company Secretaries in 1% of companies.
The combination of CFO with role of CS declined by 1%.
Further, the designation of CS amplified by a
prefix reflecting their standing in the corporate
hierarchy as illustrated by: President & Company
Secretary, Head Secretarial & Company
Secretary, Senior V. P. & Company Secretary,
General Manager & Company Secretary, Manager
& Company Secretary increased by 4%.
COMPENSATION FOR CS
Average annual compensation for Company
Secretaries of the Nifty 50 Companies in
2018 is ₹116 lakhs, in the range of ₹26 lakhs
(Adani Ports) to ₹601 lakhs (Hindustan
Unilever).
In 2018, eight out of the 50 Company
Secretaries of Nifty 50 Companies are
WOMEN. Women account for only 16% of
the Company Secretaries in the Nifty 50
Companies.
• FRAUDS AND ITS
IMPLICATIONS ON
AUDIT UNDER THE
COMPANIES ACT 2013
DUTIES OF SECRETARIAL AUDITOR – FRAUD
REPORTING [SEC 143(12)(14)]
Reference to Fraud appears in 45 sections of the New Act(Section
7,8,34,35,36,38,46,56,66,73,74,75,130,134,140,143,144,149,177,
195,199,206,210,211,212,213,216,218,219,221,223,224,225,226,
229,245,251,266,271,336,339,430,442,447 & 448)
If Company Secretary in Practice, during conduct of
Secretarial Audit, has sufficient reason to believe that an
offence involving fraud is being committed or has been
committed against the company by officers or employees
of the company, he shall report the same to the Central
Government immediately but not later than 60 days of his
knowledge with a copy to the Board / Audit Committee
seeking their reply within 45 days
•78
•4/22/2019
•79
FRAUD
Criminal liability for fraud for mis- statement in prospectus-
Liability of every person who authorizes issue of
misleading prospectus.
Promoter, director, expert or any other person who has either
assented to be director of the company or who has authorized
The issuance of prospectus, to be held liable for fraud.
Definition “Officer in Default” includes Key Managerial Personnel
In case of frauds, all the professionals and experts rendering
independent services to the Company are to be held liable.
•4/22/2019
•80
DEFINITION OF FRAUD[Section 447]
“Fraud” includes
•Any act,
•Omission,
•Concealment of any fact; or
•Abuse of position committed
by any person or any other person with the connivance
in any manner, with intent to deceive, to gain undue
advantage from, or to injure the interests of, the
company or its shareholders or its creditors or any other
person, whether or not there is any wrongful gain or
wrongful loss.
•4/22/2019
•81
PENALTY FOR FRAUD
Any person guilty of fraud –
Imprisonment: 6 months to 10 years; and
Fine: Atleast amount involved in fraud, but may
extend to 3 times the amount
involved in fraud.
Where the fraud involves public interest,
imprisonment shall not be less than 3
years.
•4/22/2019
•82
REPORTING OF FRAUD TO CENTRALGOVERNMENT
[Section143 (12)]
If an auditor of a company,
in the course of the performance of his duties as
auditor,
has reason to believe that an offence involving fraud
is being or has been committed against the company
by officers or employees of the company, he shall
report the matter to the
Central Government
Immediately or within prescribed time & manner.
•4/22/2019
•83
APPLICABLE TO COST & SECRETARIAL AUDITORS[Section 143(14]
Section 143(14) extends obligation cast by section 143 mutatis
mutandis to:
Cost Auditors appointed u/s148 &
Secretarial Auditors appointed u/s204.
NO DUTY OF CONFIDENTIALITYUNDER THE CA ACT. [Section 143(13)]
No duty to which an auditor of a company may be subject to (e.g.
duty of confidentiality under the CA Act, 1949) shall be regarded as
having been contravened by reason of his reporting the matter as above
if it is done in good faith
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Security Market frauds since 1990
Scams above Rs 5000 Crores
Year Name of the Scam
Amount in
Crores
1992 Harshad Mehta 5400
1993 Vanishing Companies 25000
1995
Plantation companies
Scam 50000
1995-
98 Mutual Funds Scam 15000
2008 FX derivative scam 32000
2009 Satyam scam 12000
2012-
13 Sahara ?????? 25000
2013 Saradha scam 20000
TOTAL 184400
WHAT IS BHAKTI FOR A
PROFESSIONAL IN HIS WORK?
CAN WE CALL IT PASSION..
CAN WE CALL IT INVOLVEMENT..
CAN WE CALL IT KNOWLEDGE…
CAN WE CALL IT EYE FOR DETAILS….
CAN WE CALL IT HARDWORK….
OR IS IT ALL COMBINED……
IN ORDER TO SUCCEED YOUR DESIRE FOR
SUCCESS SHOULD BE FAR GREATER THAN YOUR
FEAR OF FAILURE………..ALBERT EINSTEIN
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THANK YOU
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