The Securities Exchange Board of India (SEBI) has issued circular no CIR/CFD/CMD1/27/2019 dated February 8, 2019 amending regulation 24A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. As per the circular:
- Applicability – Every listed entity and its material unlisted subsidiaries incorporated in India will be required to undertake secretarial audit and shall annex with its annual report, a secretarial audit report given by a company secretary in practice, in such form as may be prescribed, with effect from the year ended March 31, 2019.
- Annual Secretarial Audit Report Form – Listed entity and its unlisted material subsidiaries will continue to use Form No. MR-3 as required under Companies Act, 2013 and the rules made thereunder in order to avoid duplication.
- Annual Secretarial Compliance report – Listed entities will also be required to undertake a check by Practising Company Secretary (PCS) of compliance of applicable SEBI Regulations and circulars/guidelines issued thereunder, consequent to which, PCS shall submit a report to the listed entity in the manner specified in the circular. The report shall be submitted by listed entity to the stock exchanges within 60 days from the end of financial year.
- The circular shall come into force as under:
- With respect to the annual secretarial audit report, in the annual reports of the listed entities and the material unlisted subsidiaries from the financial year ended March 31, 2019 onwards;
- With respect to the annual secretarial compliance report, applicable to listed entities, with effect from the financial year ended March 31, 2019 onwards.
Generally, secretarial audit looks at compliance with respect to Companies Act, SEBI regulations, Foreign Exchange Management Act as well as system and process of compliance. As per the provisions of Companies Act 2013, companies were already adhering to secretarial audit requirement and the report that was required to be submitted to company’s management was not in an elaborate format. The new regulations and reporting mechanism thereunder will help in improving governance and transparency in a corporate structure.
Copy of the Circular is attached for reference.