SECRETARIAL AUDIT - COMPANIES ACT, 2013

Transcription

1 1. SECRETARIAL AUDIT - COMPANIES ACT, 2013 CS P. S. DUA 5-GF,Sant Ishar Singh Nagar, Pakhowal Road, Ludhiana. Friday March 13, 2015

2 2 MORAL DUTY OF SECRETARIAL AUDITOR

3 3 1. OBJECT OF SECRETARIAL AUDIT 1. Firstly, to protect the interest of the customers, employees, revenue, environment and the directors and officers of the company. 2. Secondly, to avoid any unwarranted legal actions by the law-enforcing agencies and other persons as well.

4 4 2. TO WHOM IT IS ADDRESSED SHAREHOLDERS : To provide comfort to investors that the company has been conducting its affairs in accordance with laws and, therefore, their investment is safe and being taken due care of SECRETARIAL AUDIT will help unearth and check these practices and also enable law-enforcing agencies take timely corrective action by bring to book the guilty. In the era of corporate governance, SECRETARIAL AUDIT will provide comfort to shareholders about the compliance as also to feel secure about their investments.

5 5 3. LAWS Today, in India, the corporate sector is governed by a complex web of laws, rules and regulations, viz., 1. Company law, 2. Competition law, 3. Economic laws, 4. Securities and capital market laws, 5. Consumer protection laws, 6. Industrial and labour laws, 7. Pollution control laws, 8. Foreign exchange legislations, etc.

6 6 4. AUDIT IS NOT JUST A CERTIFICATION ON CERTIFICATE In Controller of Insurance v. H.C. Das, the Calcutta High Court held as follows: If an auditor were to rely upon statement of the management even in respect of matters which were capable of direct verification, his appointment by the shareholders to examine the accounts of the company would be perfectly useless and would serve no purpose at all. An auditor is not only not a blood-hound, but he is not also an insurer. He does not certify the absolute accuracy of the accounts which he audits and approves of, but only says that he has taken all possible care and exercised reasonable skill and, having done so, has arrived at the conclusions which are

7 7 CONTINUE recorded in his certificate. But if an auditor does nothing at all in the way of scrutinizing the books of the company, but only relies upon statement statements made to him by the Management as his own case is...no enquiries of any kind appear to have been made and no audit enquiries or any replies made to them were produced. Indeed, his own case is that certain lists or statements were submitted to him by the management and he accepted them without further enquiry.

8 8 5. PRINCIPLES AND PRACTICE OF AUDITING BY J.R. BATLIBOY, 9 TH EDN.-- The auditor s duty in verifying the assets is two-fold. He must satisfy himself that they really existed at the date of the balance sheet and were free from any charge, and that they have been properly valued.

9 9 6. SPICER AND PEGLER S PRACTICAL AUDITING The verification of loans on security involves not only an examination of the loan account in the ledger, but also of the security lodged, in order that the auditor can satisfy himself that the loan is properly secured, and that there is a reasonable margin between the amount of the loan and the value of the security.

10 7. BENEFITS AND BENEFICIARIES OF SECRETARIAL AUDIT To Shareholders 2. To Management 3. To Legal Compliance Officers 4. To Independent Directors 5. To Government Authorities 6. To Investors 7. To Prospective Acquirer

11 8. A BRIEF PROCESS FOR SECRETARIAL AUDIT APPOINTMENT OF SECRETARIAL AUDITOR ACCEPTANCE OF APPOINTMENT PRELIMINARY DISCUSSIONS AND MEETINGS WORKING PAPERS TESTING INTERVIEWS AND ANALYSIS FINALISATION OF AUDIT PLAN AND BREIFING THE STAFF AUDIT SUMMARY FOR DISCUSSION SUBMISSION OF SECRETARIAL AUDIT REPORT

12 Form No. MR-3 SECRETARIAL AUDIT REPORT FOR THE FINANCIAL YEAR ENDED 31 st March, 2015 [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 31 st March, To, The Members,. Limited I/We have conducted the secretarial audit of the compliance of 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 basis for evaluating the corporate conducts/statutory compliances and expressing my opinion thereon.

13 Based on my/our verification of the..... (name of the company s) books, papers, minute books, forms and returns filed and other records maintained by the company and also the information provided by the Company, its officers, agents and authorized representatives during the conduct of secretarial audit, I/We hereby report that in my/our opinion, the company has, during the audit period covering the financial year ended on 31 St March, 2015 complied with the statutory provisions listed hereunder and also that the Company has proper Board-processes and compliancemechanism 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 31 st March, 2015 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 thereunder; made (iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed thereunder; (iv) Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to the extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings;

14 (v) The following Regulations and Guidelines prescribed under the Securities Exchange Board of India Act, 1992 ( SEBI Act ):- (a) (b) (c) (d) (e) The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011; The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992; The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009; The Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999; 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 Regulations, 2009; and and Equity Shares) (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)

15 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.

16 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: Company has signed the technical collaboration agreement with. Limited but the precise impact of such collaboration can not be reasonably estimated for the time being.

17 Company has received show cause notice from the collector for non-payment of stamp duty in respect of transfer of immoveable property. Company has filed its reply however there is a contingency that company may have to pay sum of Rs. Lac by way of penalty. Place Signature. Date Name of Company Secretary in practice/firm ACS/FCS No. C P No.:

18 Following Letter is general guidance. Representation made by management may very from one entity to another. M/s ABC & CO, Company Secretaries,.. Address, Date:-. (i) Dear Sir, This representation letter is provided in connection with your audit of the Secretarial records maintained under the Companies Act, 2013 and the rules made thereunder; (ii) The Securities Contracts (Regulation) Act, 1956 and rules made thereunder; (iii) (iv) The Depositories Act, 1996 and Regulation and Bye-laws framed thereunder Foreign exchange Management Act and the rules and regulations made thereunder to the extent of Foreign Direct investment, Overseas Direct

19 Investment and External Commercial Borrowings; (iii) (iv) The Regulations and Guidelines prescribed under the SEBI Act, 1992 and Other applicable laws including Labor Laws like factories Act, Payment of Gratuity Act etc for the Year ended on 31 st March, 2015 for the purpose required in it. We the undersigned acknowledge our responsibility for maintaining the Secretarial records referred above and confirm, to the best of our knowledge and belief, the following representations; Company Law 1. The Company has maintained books of accountants as required under Sec The Company has complied with all the provisions of Companies Act, 2013 relating to Statutory Audit/Cost Audit/Internal Audit. 3. No request for transfer or transmission of shares have been received by the company during the year other than as recorded. 4. Statutory registers were kept open for public inspection during working hours on all working days. 5. Notice of Board meetings were duly sent to all the directors.

20 6. No resolution were passed by way of circulation during the review. 7. Company has not obtained any secured loan from any financial institution/banks other than those mentioned in the register of charges. 8. Notice of annual general meeting has been duly sent to all the members. 9. No show cause notice has been received by the company under the acts referred above or any other laws applicable to the company. 10. Minutes of the Board and general meetings were entered in the minutes books within 30 days from the date of meeting. 11. The share certificate were properly stamped. 12. The entries in the statutory registers were made within the prescribed time. 13. The company has not done any alternation to the Article of Association or Memorandum of Association other than those which the necessary compliance as to alteration is carried out and the proofs of the filling with ROC are available in the records. 14. We have to provided you all relevant information and have given access to all data and records. 15. There is no pending litigation and claims other than reported in the balance sheet by way of contingent liability.

21 16. No event other than reported to you specifically occurred during the year which has a major bearings on the company affairs in pursuance of the laws, rules, regulations, guidelines, standards etc. referred above. 17. The views of all the dissenting Directors (if any) on important matters have been captured and recorded in the minute. 18. The venue and time of Board meeting was finalized with the consultation of all board members Securities Laws 1. All Price Sensitive Information which was informed to the stock exchanges from time to time. 2. All investors complains directly received by the company are recorded on the stamp date of receipt

22 22 Labour Laws 1. All the premises and establishments have been registered with the appropriate authorities. 2. The company has not employed any child labour/bonded labour in any of its establishments. 3. The company is ensuing the compliance of PF/ESI and other social security measure to the contracts employees. One of the responsible officers of the company carry out the survey regarding the compliance of this Environmental Laws 1. The company is not discharging the contaminated water at the public drains/rivers. The company has significant water treatment plants at its factory premises (if applicable). 2. The company has been disposing the hazardous waste as per applicable rules

23 23 We are attaching herewith the list of various applicable laws other than the laws listed above. (List of Applicable laws) For XYZ Limited Date.. Director Director Place.

24 24 GENERAL DUTY OF SECRETARIAL AUDITOR

25 25 1. APPLICABILITY OF SECRETARIAL AUDIT (SECTION 204) (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; or (ii) Every public company having a turnover of two hundred fifty crore rupees or more.

26 26 2. DUTY OF COMPANY Duty of Company Give assistance and facility to the company secretary in practice For auditing the secretarial and related records of the company

27 27 3. FORMAT OF SECRETARIAL AUDIT REPORT Format of Secretarial Audit Report shall be in Form MR-3 Secretarial Audit Report shall be annexed to Board s Report. Board in their Report to explain in full any qualification or observation or other remarks made by PCS in his report.

28 28 4. APPOINTMENT OF SECRETARIAL AUDITOR Board to appoint at its meeting the Secretarial Auditor (on yearly basis) and fix his remuneration [Section 179(3)] Company to file the resolution with RoC [Section 117] Period of Office: The Act is silent suggested to be similar to statutory Auditor appointed under Section 139 (10 years whether Secretarial Auditor is a Proprietor or a firm) Obtain consent of the Secretarial Auditor

29 29 5. BENEFICIARIES OF SECRETARIAL AUDIT Assurance of Compliances to: Companies Directors Management Shareholders Creditors / Trustees Credit Rating Agencies Regulatory Authorities Other Stakeholders

30 30 6. NOTIFICATION BY ICSI PDII:CA-2013 DECEMBER 22, 2014 Dear Professional Colleagues, Sub: Scope of Secretarial Audit under section 204 of the Companies Act, 2013 Section 204 requires every listed company and a company belonging to other class of companies as may be prescribed to annex with its Board s report made in terms of sub-section (3) of section 134, a secretarial audit report, given by a company secretary in practice, in such form as may be prescribed.

31 31 CONTINUE The format of the Secretarial Audit report has been prescribed as Form no. MR. 3. In terms of Form No. MR. 3, the Secretarial auditor needs to examine and report the compliance of: - Five specific laws: 1. Companies Act, 2013, 2. Securities Contracts (Regulation) Act, 1956 ( SCRA ), 3. Depositories Act, 1996, 4. Foreign Exchange Management Act, 5. Securities and Exchange Board of India Act, 1992;

32 32 CONTINUE Point (vi)...(other laws as may be applicable specifically to the company); - secretarial standards and listing agreement To finalize the scope of Acts to be examined by Secretarial Auditor while conducting secretarial audit, ICSI held consultation meets at various regional chapters in four regions of the Institute to get the views of company secretaries (in employment as well as in practice). After deliberating on the views emerged from consultation meets and taking into consideration the views of members of Corporate Laws and Governance Committee, the Council at its 226th meeting held on November 21, 2014 decided as under:

33 33 CONTINUE Scope of Secretarial Audit would include: Reporting on compliance of Five laws as mentioned in form MR-3 1. Companies Act, 2013, 2. Securities Contracts (Regulation) Act, 1956 ( SCRA ), 3. Depositories Act, 1996, 4. Foreign Exchange Management Act, 5. Securities and Exchange Board of India Act, 1992;

34 34 CONTINUE 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 Banksall laws applicable to Banking Industry; for insurance companyall 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. Examining and reporting whether the adequate systems and processes are in place to monitor and ensure compliance with general laws like labour laws, competition law, environmental laws. In case of financial laws like tax laws and Customs Act etc., Secretarial Auditor may rely on the Reports given by statutory auditors or other designated professionals.

35 35 CONTINUE You are all aware, that this recognition of secretarial audit has been received after long undying efforts of the Institute. Regulators have reposed faith in us, the CS professionals and hence let us all display professionalism and meet the challenges of the new law. Let us submit quality secretarial audit reports and keep the dignity of the profession high. Thanking you, Yours faithfully, R Sridharan President

36 36 7. NOTIFICATION BY ICSI Dear Members, March 11, 2015 The Practising Company Secretaries Committee of the Council of the Institute in its 68th meeting held on March 10, 2015 at New Delhi decided to seek views and suggestions on the draft Guidelines for Issuing Secretarial Audit Report, Signing and Certification of Annual Return, from the stakeholders. Accordingly, a copy of the draft Guidelines for Issuing Secretarial Audit Report, Signing and Certification of Annual Return is placed below. We request you to send your views/suggestions on the draft guidelines, to Mr. Mahesh Airan, Assistant Education Officer, at mahesh.airan@icsi.edu, latest by March 16, 2015.

37 37 Regards, Dr. S.K. Dixit Joint Secretary CONTINUE DRAFT GUIDELINES FOR ISSUING SECRETARIAL AUDIT REPORT, SIGNING AND CERTIFICATION OF ANNUAL RETURN1 In exercise of the powers conferred by Clause (1) of Part II of the Second Schedule to the Company Secretaries Act, 1980 (56 of 1980), as amended by the Company

38 38 CONTINUE Secretaries (Amendment) Act, 2006, the Council of the Institute of Company Secretaries of India hereby issues the following guidelines in supersession of the Guidelines for Issuing Compliance Certificate and Signing of Annual Return issued by the Council on 27th November, 2007:- 1. A member of the Institute in practice who is entitled (i) to issue Secretarial Audit Report pursuant to Section 204 of the Companies Act, 2013 (Act No. 18 of 2013); and/or (ii) to sign / certify an Annual Return pursuant to Section 92 of thecompanies Act, 2013 (Act No. 18 of 2013),

39 39 CONTINUE shall be deemed to be guilty of professional misconduct if he/she: issues Secretarial Audit Report for more than five companies in a financial year ; and/or signs /certifies Annual Return for more than eighty companies in aggregate, in a financial year. Provided, however, that in the case of a firm of Company Secretaries, the ceiling of five companies in case of issuance of Secretarial Audit report and eighty companies in case of signing/certification of Annual Return would apply to each partner therein who is entitled to:

40 40 CONTINUE (i) to issue Secretarial Audit Report pursuant to Section 204 of the Companies Act, 2013 (Act No. 18 of 2013); and/or (ii) to sign/certify an Annual Return pursuant to Section 92 of the Companies Act, 2013 (Act No. 18 of 2013). 2. These Guidelines shall come into effect from 1st April, 2015.

41 41 CONTINUE 1 THE INSTITUTE OF COMPANY SECRETARIES OF INDIA, (Constituted under the Company Secretaries Act, 1980) ICSI Guideline No.1 of 2015 [Pursuant to Clause (1) of Part II of the Second Schedule to the Company Secretaries Act, 1980 as amended] New Delhi, the 19th March, 2015.

42 42 8. APLLICABLE LAWS Applicable Laws/Rules/Regulations 1. Companies Act, Securities Contracts (Regulation) Act, 1956 ( SCRA ), 3. Depositories Act, 1996, 4. Foreign Exchange Management Act, 5. Securities and Exchange Board of India Act, 1992; a) SEBI (SAST) Regulations, b) SEBI (Prohibition of insider Trading) Regulations, c) SEBI (ICDR) Regulations, d) SEBI (ESOS & ESPS) Guidelines, e) SEBI (Issue and Listing of Debt Securities) Regulations, g) SEBI (Registrar to an Issue and Share Transfer Agents) Regulations, 1993.

43 43 h)sebi (Delisting of Equity Shares) Regulations, i) SEBI (Buy-Back of Securities) Regulations, j) Listing Agreement. k) SEBI (ESOS & ESPS) Guidelines, l) SEBI (Issue and Listing of Debt Securities) Regulations, m) SEBI (Registrar to an Issue and Share Transfer Agents) Regulations, n) SEBI (Delisting of Equity Shares) Regulations, o) SEBI (Buy-Back of Securities) Regulations, Listing Agreement. 7. Industry Specific; (As per given below)

44 44 7. FOR THE BENEFIT OF MEMBERS, ICSI IS DEVELOPING A LIST OF VARIOUS LAWS SPECIFICALLY APPLICABLE TO COMPANIES IN DIFFERENT SECTORS. SOME OF THE SECTORS IS PLACED BELOW FOR REFERENCE. 1. PHARMACEUTICAL INDUSTRY Pharmacy Act, 1948 Drugs and Cosmetics Act, 1940 Homoeopathy Central Council Act, 1973 Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954 Narcotic Drugs and Psychotropic Substances Act, 1985 Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 The Medicinal & Toilet Preparations ( Excise Duties) Act, 1955 Petroleum Act 1934 Poisons Act 1919 Food Safety And Standards Act, 2006

45 45 2. OIL & PETROLEUM SECTOR The Petroleum Act, 1934 Petroleum and Minerals Pipelines (Acquisition of Right of User Inland) Act, 1962 Explosives Act, 1884 The Oilfield ( Regulation & Development) Act, 1948 Petroleum and Natural Gas Regulatory Board Act, 2006 The Oil Industry( Development) Act 1974 The Mines Act, 1952 Mines and Minerals (Regulations and Development) Act, 1957 The Territorial Waters, Continental Shelf, Exclusive Economic Zone And Other Maritime Zones Act, 1976 Offshore Areas Minerals (Development and Regulation) Act, 2002

46 46 3. COMPUTER PROGRAMMING, CONSULTANCY AND RELATED SERVICES The Information Technology Act, 2000 The Information Technology Act, 2000 The Special Economic Zone Act, 2005 Policy relating to Software Technology Parks of India and its regulations The Indian Copyright Act, 1957 The Patents Act, 1970 The Trade Marks Act, GAS INDUSTRY The Petroleum Act, 1934 Petroleum and Minerals Pipelines (Acquisition of Right of User Inland) Act, 1962 Explosives Act, 1884 The Oilfield ( Regulation & Development) Act, 1948 Petroleum and Natural Gas Regulatory Board Act, 2006 The Oil Industry( Development) Act 1974 The Mines Act, 1952

47 47 5. Power 6. SUGAR INDUSTRY The Electricity Act, 2003 National Tariff Policy Essential Commodities Act, 1955 Explosives Act, 1884 Mines Act, 1952 (wherever applicable) Mines and Mineral (Regulation and Development) Act, 1957 (wherever applicable) Sugar Cess Act, 1982 Levy Sugar Price Equalization Fund Act, 1976 Food Safety And Standards Act, 2006 Essential Commodities Act,1955 Sugar Development Fund Act, 1982 Export (Quality Control and Inspection) Act, 1963 Agricultural and Processed Food Products Export Act, 1986

48 48 7. TOBACCO INDUSTRY Tobacco Board Act, 1975 Tobacco Cess Act, 1975 Beedi and Cigar Workers (Conditions of Employment) Act, 1966 as amended in 1993 Beedi Workers Welfare Cess Act, 1976 Beedi Workers Welfare Fund Act, 1976 Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, INSURANCE Insurance Act, 1938 Insurance Regulatory and Development Authority Act, 1999 General Insurance Business (Nationalization) Act, 1972 Industrial Disputes (Banking and Insurance Companies) Act, 1949 Marine Insurance Act, 1963

49 49 9. COMMERCIAL BANKS (OTHER THAN NATIONALISED BANKS AND STATE BANK OF INDIA) Reserve Bank of India Act, 1934 Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 The Bankers' Books Evidence Act, 1891 Recovery of Debts due to Banks & Financial Institution Act, 1993 Credit Information Companies (Regulation) Act, 2005 Prevention of Money Laundering Act, 2002 The Deposit Insurance and Credit Guarantee Corporation Act, 1961 Industrial Disputes (Banking and Insurance Companies) Act, 1949 Information Technology Act, 2000

50 BEVERAGES (NON- ALCOHOLIC) 11. REAL ESTATE SECTOR Food Safety and Standards Act, 2006 The Insecticide Act, 1968 Export (Quality Control and Inspection) Act, 1963 Inflammable Substances Act,1952 Agricultural and Processed Food Products Export Cess Act, 1986 Agricultural Produce ( Grading and Marking ) Act, 1937 Housing Board Act, 1965 Transfer of Property Act, 1882 Building and Other Construction Workers (Regulation of Employment and Conditions of Services) Act, 1996

51 AUTOMOBILE 13.AVIATION SECTOR Motor Vehicles Act, 1988 The Motor Transport Workers Act, 1961 The Explosive Act, 1884 The Petroleum Act, 1934 The Environment Act, 1986 (Protection) The Water( Prevention and Control of Pollution) Act, 1974 The Air( Prevention and Control of Pollution) Act, 1981 Aircraft Act, 1934 Airports Authority of India Act, 1994 Carriage by Air Act, 1972 Tokyo Convention Act, 1975 Anti-Hijacking Act, 1982 Suppression of Unlawful Acts against Safety of Civil Aviation Act, 1982 Airports Economic Regulatory Authority of India Act, 2008

52 52 14.HUMAN HEALTH SECTOR Clinical Establishment (Registration and Regulation) Act, 2010 Indian Medical Council Act 1956 Indian Medical Degrees Act, 1916 Indian Nursing Council Act 1947 The Dentists Act 1948 Rehabilitation Council of India Act, 1992 Drugs and Cosmetic Act 1940 The Drugs Control Act, 1950 Pharmacy Act, 1948 Narcotics and Psychotropic Substances Act 1985 Homoeopathy Central Council Act, 1973 Insecticide Act 1968 Transplantation of Human Organs Act 1994 Drugs and Magic Remedies (Objectionable) Advertisements Act 1954 Birth and Death and Marriage Registration Act 1886 Mental Health Act, 1987 Ear Drums and Ear Bones (Authority for Use For Therapeutic Purposes) Act, 1982 Eyes (Authority for Use For Therapeutic Purposes) Act, 1982 The Epidemic Disease Act 1897

53 53 9. DOCUMENTS REQUIRED FOR AUDIT 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 Compliance certificates of functional heads for compliance of applicable laws Any other document.

54 54 10.APPROACH TO THE DEPARTMENT HEADS FOR SEEKING INFORMATION REGARDING COMPLIANCE OF VARIOUS INDUSTRIAL LAWS. Finance & Taxation Department Sales Department Production Department Marketing Department Human Resource Department

55 WAYS TO ENSURE COMPLIANCE Secretarial Standards Indian Accounting Standards Auditing Notification Formal Training Sessions Carrying out Internal Audit Time to time meeting with Department Heads List of Compliances with various Laws, along with the occurrence of event i.e. Date of event; etc.

56 AUDIT METHODOLOGY Obtain Management Representation Letter 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 Discuss and seek clarification, if required Discuss draft report with Management Finalize and submit draft addressed to shareholders

57 As per Section 143 (12) of Companies Act, 2013 and Companies (Audit and Auditors) Rules, In case the auditor has sufficient reason to believe that an offence involving fraud, is being has been committed against the company by officer or employees of the company, he shall report the matter to Central Government immediately but not later that 60 days of his knowledge in Form ADT-4. 57

58 58 SEC. 143 (14) The provisions of this section shall mutatis mutandis apply to (a) the cost accountant in practice conducting cost audit under section 148; or (b) the company secretary in practice conducting secretarial audit under section 204. SEC. 143 (15) If any auditor, cost accountant or company secretary in practice do not comply with the provisions of sub-section (12), he shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees.

59 PENAL PROVISION Section 204 For contravention of this section company, every officer who is in default and PCS punishable with fine Rs 1 lakh to Rs 5 lakh Fine (Individually) Minimum Fine - 1 Lac Maximum Fine - 5 Lac

60 60 CONTINUE Any Person who is found to be guilty of Fraud, shall be punishable with imprisonment for which shall not be less than 6 months but which may extend to 10 years and shall also be liable to fine which shall not less than amount involved in the fraud but which may extend to 3 times the amount involved in the fraud. In case fraud involves Public Interest the term of imprisonment shall not be less than 3 years.

61 61 CONTINUE (a) (b) Section 448 Companies Act, 2013 deals with penalty for False Statements. If in any Return, Report, Certificate, Financial Statement, Prospectus, Statement or other document required by, or for the purpose of any of the provisions of this Act or the Rules made there under, any person makes a statement ;- Which is false in any material particulars, knowing it to be false; or Which omits any material fact, knowing it to be material, he shall be liable under section 447.

62 62 CONCLUSION Secretarial Audit is always in the better interest of every corporate management as, an independent professional will certify that the company has carried out the compliances under the Act. This will also serve the larger interest of the shareholders, creditors and employees. Secretarial audit also help the sectoral regulators, MCA and other law enforcement agencies as all the companies covered by the Companies Act will ensure proper Compliance. This, in turn, will foster compliance culture.

63 63 CONCLUSION It would act as a check on frauds. It would definitely reduce the number of prosecutions by Govt. & consequent litigation on account of noncompliance with the provisions of corporate and securities laws, thereby reducing burden on Courts as well as national exchequer. It act as a pre-emptive check to ensure that the Board processes and compliance mechanisms of the Co. are robust thereby generating confidence amongst the shareholders, the creditors and other stakeholders in the Co., besides instilling self regulation and professional discipline in companies.

64 64 QUOTE OF THE DAY Everyone experiences tough times, it is a measure of your determination and dedication how you deal with them and how you can come through them. - Lakshmi Niwas Mittal

65 65 Queries & Questions are Welcome

66 THANK YOU 66