Secretarial Audit plays a significant role in ensuring that a listed company complies with applicable corporate laws, securities laws, regulations, guidelines and governance requirements. In case of a BSE listed company, the appointment of Secretarial Auditor should be made in accordance with the provisions of Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 , and Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 .
A listed company should not treat the appointment of Secretarial Auditor as a mere annual compliance formality. The process requires proper evaluation of applicability, eligibility of the auditor, Board approval, stock exchange disclosure, shareholders' approval wherever applicable, and issuance of a formal appointment letter.
Applicability of Secretarial Audit
As per Section 204 of the Companies Act, 2013, Secretarial Audit is applicable to every listed company. Accordingly, such company is required to obtain a Secretarial Audit Report from a Company Secretary in Practice and annex the same with the Board's Report.
Further, Regulation 24A of SEBI LODR requires every listed entity and its material unlisted Indian subsidiaries to undertake Secretarial Audit by a Peer Reviewed Company Secretary and to annex the Secretarial Audit Report with the annual report.
However, before proceeding with the appointment, the company should also examine whether any exemption is available under Regulation 15(2)(a) of SEBI LODR. As per the said regulation, certain corporate governance provisions are not applicable to a listed entity having paid-up equity share capital not exceeding ₹10 crore and net worth not exceeding ₹25 crore, as on the last day of the previous financial year.
Therefore, where such exemption is available, Regulation 24A may not apply. However, the applicability of Section 204 of the Companies Act, 2013 should still be checked separately, as exemption under SEBI LODR does not automatically exempt the company from the requirements of the Companies Act.
Eligibility of Secretarial Auditor
The Secretarial Auditor proposed to be appointed by a listed company should be a Company Secretary in Practice, either as an individual or as a firm. The auditor should also hold a valid Peer Review Certificate issued by the Institute of Company Secretaries of India.
The proposed Secretarial Auditor should be independent from the listed entity and should not be disqualified under the provisions of SEBI LODR, ICSI guidelines or any other applicable law. The auditor should also be competent to issue the Secretarial Audit Report under the Companies Act and the Annual Secretarial Compliance Report under SEBI LODR, wherever applicable.
Regulation 24A specifically recognizes a Secretarial Auditor as a Company Secretary in Practice or a firm of Company Secretaries in Practice appointed to conduct Secretarial Audit. It also requires such auditor to be peer reviewed.
Documents to be Obtained from Proposed Secretarial Auditor
Before placing the proposal before the Board of Directors, the company should obtain necessary documents and confirmations from the proposed Secretarial Auditor. These documents generally include the consent letter for appointment, copy of Peer Review Certificate, ICSI membership details, Certificate of Practice details, eligibility and non-disqualification certificate, independence confirmation, proposed fee quote and brief profile of the auditor.
The brief profile is particularly important for the purpose of stock exchange disclosure and inclusion in the AGM notice, wherever shareholders' approval is required. The company may also obtain confirmation regarding tenure, existing assignments, past association and other professional services, if any.
Board Meeting and Approval Process
The company should convene a duly constituted Board Meeting for considering the appointment or recommendation of the Secretarial Auditor. The Board may pass a resolution approving or recommending the appointment, approving the tenure, fixing or recommending remuneration and authorising the Company Secretary or any Director to issue the appointment letter and make necessary filings and disclosures.
After the amendment in Regulation 24A of SEBI LODR, the appointment, re-appointment or continuation of Secretarial Auditor in a listed entity should be aligned with the requirement of Board recommendation and shareholders' approval. Therefore, in case of a BSE listed company, the safer and more appropriate process is to first place the matter before the Board and thereafter include the proposal in the notice of the general meeting for approval of shareholders.
Shareholders' Approval
With effect from 1 April 2025, Regulation 24A has introduced a more structured framework for appointment of Secretarial Auditor of listed entities. Accordingly, the appointment or re-appointment of Secretarial Auditor should be made on the basis of recommendation of the Board of Directors and approval of shareholders in the Annual General Meeting.
The usual process may be summarized as:
Board recommendation → AGM notice item → Shareholders' approval → Final appointment / continuation
The resolution for appointment of Secretarial Auditor may generally be passed as an Ordinary Resolution, unless the Articles of Association, internal policy or any specific legal requirement provides otherwise.
Tenure of Secretarial Auditor
The tenure of Secretarial Auditor should be fixed in accordance with Regulation 24A. An individual Company Secretary in Practice may be appointed for not more than one term of five consecutive years. A firm of Company Secretaries in Practice or LLP may be appointed for not more than two terms of five consecutive years each.
After completion of the permitted tenure, a cooling-off period of five years is applicable. Further, where a firm has completed its term, another firm having a common partner with the outgoing firm should not be appointed during the cooling-off period.
Accordingly, at the time of appointment, the company should carefully verify the past association of the proposed Secretarial Auditor and ensure that the appointment is within the permitted tenure limits.
Disclosure to BSE under Regulation 30
After approval by the Board of Directors, the company should submit the outcome of the Board Meeting to BSE under Regulation 30 of SEBI LODR. The disclosure should generally include the name of the Secretarial Auditor, reason for appointment or re-appointment, date of appointment, term of appointment, brief profile and disclosure of relationship with directors, if any.
Where the appointment is subject to approval of shareholders, the same should be clearly mentioned in the disclosure. After shareholders' approval, the company should also file the outcome of the general meeting and voting results with BSE within the prescribed timeline.
ROC Filing Requirement
There is no requirement to file Form ADT-1 for appointment of Secretarial Auditor, as ADT-1 applies to statutory auditor appointed under Section 139 of the Companies Act, 2013.
However, in case of a public company or listed company, filing of Form MGT-14 for the Board resolution may be considered as a conservative compliance practice, wherever applicable, within 30 days from the date of passing of the resolution.
Issuance of Appointment Letter
After approval by the Board and, wherever applicable, approval by shareholders, the company should issue a formal appointment letter to the Secretarial Auditor. The appointment letter should clearly mention the financial year or tenure of appointment, scope of work, reports to be issued, audit fee, timelines and responsibilities of the management.
The scope should include issuance of Secretarial Audit Report in Form MR-3 under the Companies Act, 2013 and issuance of Secretarial Audit Report / Annual Secretarial Compliance Report under SEBI LODR, wherever applicable.
The appointment letter should also provide that the company shall provide necessary documents, records, registers, minutes, filings, explanations and other assistance required by the Secretarial Auditor for carrying out the audit. Section 204 specifically casts responsibility on the company to provide all assistance and facilities to the Company Secretary in Practice for auditing secretarial and related records.
Practical Process Flow
The practical process for appointment of Secretarial Auditor in a BSE listed company may be followed as under:
First, the company should check the applicability of Secretarial Audit under the Companies Act, 2013 and SEBI LODR. Thereafter, the company should examine whether exemption under Regulation 15(2) of SEBI LODR is available. Once applicability is confirmed, a Peer Reviewed Company Secretary in Practice or firm should be identified.
The company should obtain consent, eligibility certificate, independence confirmation and peer review certificate from the proposed auditor. The proposal should then be placed before the Board of Directors for approval or recommendation. After the Board Meeting, disclosure should be filed with BSE under Regulation 30.
The matter should then be placed before the shareholders in the Annual General Meeting, wherever applicable, for their approval. After shareholders' approval, the company should file necessary outcome and voting results with BSE. The appointment letter should then be issued to the Secretarial Auditor.
Thereafter, the Secretarial Auditor shall conduct the audit and issue the Secretarial Audit Report. The report should be annexed with the Board's Report and Annual Report. The Annual Secretarial Compliance Report should also be filed with BSE within the prescribed timeline, wherever applicable.
Conclusion
For a BSE listed company, appointment of Secretarial Auditor requires proper compliance with both the Companies Act, 2013 and SEBI LODR Regulations. For FY 2025–26 onwards, the appointment should not be treated as a simple annual Board approval matter. Due to the amended framework under Regulation 24A, the appointment or continuation of Secretarial Auditor should be aligned with Board recommendation, shareholders' approval, tenure restrictions, peer review requirement and stock exchange disclosure obligations.
A listed company should therefore follow a structured and well-documented process so that the Secretarial Audit Report and other compliance reports are issued on the basis of a valid and properly approved appointment.
CAclubindia
