Late CS Bipin S. Acharya used to say that Secretarial Audit will confer this professional its legitimate dues and legal recognition for secretarial audit his life mission. Recently, the Companies Act 2013 introduced secretarial audit first time in India under legal mandate. However, there is suspicious among company secretaries about its future as earlier compliance certificates became useless piece of paper. The Institute of Company Secretaries of India seems to share same apprehension and working to address all issues. However, Institute has own limitations. Presently, we have about 9500 companies covered under compulsory secretarial audit and there are about 6500 company secretaries in practice.
Institute recently came out with guideline notes on secretarial audit in hurry and immediately after release issuing these guideline notes, there is urgent need for revision even without change in law. There is a proposal for sector specific directory of laws specifically applicable to each sector. However many things are missing.
Section 204 of the Companies Act 2013 mandate secretarial audit for “bigger” companies as section heading itself indicates. Unlike other auditor mandated under the Act, there is no certain manner prescribed for appointment of secretarial auditor neither in Act nor in rules made there under. Same time, Section 143 of the Act cast same power and duties on keep secretarial auditor as on other auditors. In my views, there is scope of improvement for provisions relating to secretarial auditors in relation to appointment, reporting to registrar, disqualification, professional misconduct, limitation on number of secretarial audit per partner/proprietor. This all need willingness on part of secretarial regulator which is the Institute of Company Secretaries of India. Most of these may be achieved by appropriate action on part of council of the institute.
The council seems to be deliberately inactive on question of ceiling on number of secretarial audit as well as annual return certifications. This is being said by council members that there will be some limit from next fiscal year. I do not know, what kind of vested interest preventing the council to come to a conclusion. I strongly, there must be some limit in place by now. This issue need urgent attention from council.
I propose 5 secretarial audits and 25 annual return certifications per partner or proprietor.
There is a comprehension among members regarding disqualification of secretarial auditor. While, institute is maintaining that provisions of Section 141 of the Act are not applicable to secretarial, I am of the view that law is not everything in letters but in spirit. This would also be a good corporate governance practice on the part of the institute to recommend its members to comply provisions of Section 141. In case, secretarial regulator fails to act now, it may loss its ground very soon. I expect, otherwise, financial market regulator SEBI may encroach to ICSI domain and mandate professionally independent and eligible secretarial auditor as per Section 141(3) of the Act.
Appointment of secretarial auditor is also cause of concern. As secretarial audit report is going to be addressed to members of the company, this is quite logical that appointment should be by members only in general meeting and provision of Section 139 of the Act should apply. I advise secretarial standard on appointment of secretarial auditor to mandate appointment of secretarial auditor in general meeting and application of Section 139 of the Act. I understand, there may not be an immediate step regarding reporting to registrar about appointment and removal of secretarial auditor but institute may explore form MGT – 14 for this purpose.
I request all readers and stakeholders please express your views, concerns, apprehensions, suggestions to comment section of this blog post and actively discuss all these points.