Section 204 of Companies Act, 2013 – Secretarial audit for bigger companies

  • Updated Till : February 26, 2021

Section 204. Secretarial Audit for Bigger Companies

[Effective from 1st April, 2014]

(1) Every listed company and a company belonging to other class of companies as may be prescribed shall annex with its Board’s report made in terms of subsection (3) of section 134, a secretarial audit report, given by a company secretary in practice, in such form as may be prescribed.

(2) It shall be the duty of the company to give all assistance and facilities to the company secretary in practice, for auditing the secretarial and related records of the company.

(3) The Board of Directors, in their report made in terms of sub-section (3) of section 134, shall explain in full any qualification or observation or other remarks made by the company secretary in practice in his report under sub-section (1).

(4) If a company or any officer of the company or the company secretary in practice, contravenes the provisions of this section, the company, every officer of the company or the company secretary in practice, who is in default, shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.

Applicable Rules

Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

[Effective from 1st April, 2014]

Rule 9. Secretarial Audit Report.—(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; [1] [or]

[2] [(c) every company having outstanding loans or borrowings from banks or public financial institutions of one hundred crore rupees or more

Explanation :- For the purposes of this sub-rule, it is hereby clarified that the paid up share capital, turnover, or outstanding loans or borrowings as the case may be, existing on the last date of latest audited financial statement shall be taken into account.]

(2) The format of the Secretarial Audit Report shall be in Form No. MR.3.

Guidance note issued by Insititue of Company Secretaries of India on Secretarial Audit

under Section 204 of the Companies Act 2013, dated 15th May, 2015

Dear Professional Colleagues

Sub: Secretarial Audit under Section 204 of the Companies Act, 2013

Secretarial Audit has become applicable to listed companies & all other specified companies, from the financial year 2014-2015.

Based on extensive consultations with the stakeholders, the then Council at its 226th meeting held on November 21, 2014 had laid the scope of Secretarial Audit.

In consonance with the scope in MR-3 it is being re-stated as under:

Examination &

Specific Reporting on

Compliance under:

Examination &

Specific reporting

on Compliance

of other laws as

may be applicable

specifically to the


Further Reporting Further reporting


i. Companies Act, 2013

and the Rules made


ii. Securities Contracts

(Regulation) Act, 1956

(‘SCRA’) and the rules

made thereunder

iii. Depositories

Act, 1996 and the

Regulations & Bye-laws

framed thereunder

iv. Foreign Exchange

Management Act,

1999 and the rules

made thereunder to the

extent of Foreign Direct

Investment, Overseas

Direct Investment and

External Commercial


v. Regulations and

Guidelines under the

Securities and Exchange

Board of India Act, 1992

as enlisted in MR-3

vi. Secretarial Standards

(not applicable to

Secretarial Audit Report

for Financial Year 2014-


vii. Listing Agreement

entered into by the

company with Stock

Exchange(s), if any

=> Eg. Banks- all laws

applicable to Banking


=> Companies in

petroleum sector- all

laws applicable to

petroleum industry;

Whether there are

adequate systems

and processes

in the company

commensurate with

its size & operation

to monitor and

ensure compliance

with applicable laws

including general

laws, labour laws,

competition law,

environmental laws.

a. Board of Directors


b. Notices, Agenda

and Minutes of

Board Meetings etc.

c. Board-processes


Reporting of Fraud

Secretarial Auditor to report fraud where during the course of his audit he has reason to believe that an offence involving fraud is being committed or has been committed against the Company by its officers/employees. [Pursuant to the provision of section 143 (12 & 14) read with section 447]

The Council of the Institute has issued guidelines specifying number of Companies to be audited by a company secretary in practice which will be effective for taking up secretarial audit assignments for the financial year 2015-2016 & onwards.

The Institute has received few suggestions on the number of companies to be audited and based on the suggestions & other inputs, the Council would deliberate in the forthcoming Meeting.


CS Atul Mehta


[1] Inserted by the Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2020 vide Notification No. F. No. 01/05/2013-CL-V-Pt-I  dated 3rd January, 2020.

[2] Inserted by the Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2020 vide Notification No. F. No. 01/05/2013-CL-V-Pt-I  dated 3rd January, 2020.

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