Secretarial Audit Under Companies Act 2013 — The Complete Guide

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Companies Act 2013 · Section 204 · MR-3 · Compliance 2026

Secretarial Audit Under
Companies Act 2013
— The Complete Guide

A secretarial audit is no longer just a best practice — it is a statutory mandate for qualifying companies under Section 204 of the Companies Act, 2013. This comprehensive guide explains who needs it, what it covers, how it is conducted, and why partnering with Corpzo.com ensures your organisation stays ahead of every compliance deadline.

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Section 204 Mandatory
Form MR-3
Listed Companies
PCS Certification
Penalty Up to ₹5 Lakh
Sec 204Legal Provision
MR-3Audit Report Form
PCSPractising CS Only
₹5LMax Penalty
AnnualFiling Frequency
Introduction

What is Secretarial Audit and Why Does It Matter for Your Company?

Authored & Verified by Corpzo Compliance Advisory Team India’s trusted compliance solution advisor — helping companies navigate statutory requirements since inception.
✓ Expert-Reviewed Content

In the landscape of corporate governance in India, the secretarial audit stands out as one of the most significant compliance mechanisms introduced by the Companies Act, 2013. Governed by Section 204 of the Act, a secretarial audit is an independent, objective examination of a company's compliance with applicable laws, regulations, rules, and procedures — conducted by a Practising Company Secretary (PCS). Unlike a financial audit that scrutinises accounts and numbers, a secretarial audit examines whether a company has observed its legal obligations across a broad spectrum of corporate, securities, and labour laws.

Think of it as a health check for your company's governance framework. A secretarial audit gives the board of directors, shareholders, regulators, and stakeholders an independent assessment of how well the organisation is adhering to the complex web of statutory obligations it is subject to — and where the gaps, if any, lie. For companies that fall under its mandatory applicability, failing to conduct a secretarial audit — or conducting it inadequately — can attract significant penalties, regulatory scrutiny, and reputational damage.

📄 What This Article Covers
  1. Legal Framework — Section 204, Companies Act 2013
  2. Which Companies Must Conduct a Secretarial Audit?
  3. Scope of Secretarial Audit — Laws Examined
  4. How a Secretarial Audit is Conducted
  5. Understanding Form MR-3 — The Secretarial Audit Report
  6. Who Can Conduct a Secretarial Audit?
  7. Penalties for Non-Compliance
  8. Strategic Benefits Beyond Compliance
  9. How Corpzo Helps You Stay Audit-Ready
  10. Frequently Asked Questions
Section 02

Which Companies Must Conduct a Secretarial Audit?

One of the most common compliance questions Corpzo receives from business owners and CFOs is straightforward: does our company need a secretarial audit? The answer depends on the company's classification and financial thresholds. The following categories of companies are mandatorily required to obtain a secretarial audit report every year.

Company Category Threshold / Criterion Mandatory?
Listed Companies All companies listed on recognised stock exchanges in India Yes
Unlisted Public Companies Paid-up share capital of ₹50 crore or more Yes
Unlisted Public Companies Turnover of ₹250 crore or more Yes
Private Limited Companies Below prescribed thresholds Not Mandatory
Subsidiaries of Listed Companies Material subsidiaries as defined under SEBI LODR Yes (SEBI)
One Person Company (OPC) All OPCs regardless of size Not Mandatory
Advisory Note from Corpzo: Even if your company does not meet the mandatory threshold for a secretarial audit, voluntarily commissioning one is widely regarded as a hallmark of good corporate governance. Many private companies undertake voluntary secretarial audits before seeking external funding, applying for bank loans, or preparing for an IPO — as it provides investors and lenders with independent assurance on the company's legal health.
Section 03

Scope of Secretarial Audit — Laws and Regulations Examined

The scope of a secretarial audit is deliberately broad. A Practising Company Secretary conducting the audit is required to examine the company's compliance with all laws applicable to it — including, but not limited to, the statutes specifically mentioned in Form MR-3. This multi-law coverage is what makes the secretarial audit fundamentally different from any other type of statutory audit.

🏛️

Companies Act, 2013 & Rules

Board meetings, general meetings, resolutions, disclosures, director filings, charges, share capital, related party transactions, and MCA annual returns.

📈

SEBI Regulations (Listed Cos.)

LODR Regulations, Takeover Code, Insider Trading norms, ICDR Regulations, continuous disclosure obligations, and stock exchange compliance requirements.

🌐

FEMA & RBI Guidelines

Foreign exchange transactions, overseas investments, external commercial borrowings, inbound FDI compliance, and reporting obligations to the Reserve Bank of India.

📜

Depositories Act, 1996

Compliance with dematerialisation requirements, share transfer processes, demat account operations, and agreements with NSDL/CDSL.

👷

Labour & Employment Laws

Key applicable labour legislations including the Employees Provident Fund Act, ESIC, Payment of Wages Act, and other sector-specific employment regulations.

⚖️

Other Applicable Laws

Competition Act, Environment laws, sector-specific regulations (telecom, pharma, banking), and any other laws specifically applicable to the company's business.

The PCS also reviews the company's internal systems and processes — specifically whether adequate mechanisms exist for ensuring compliance with all applicable laws, and whether the governance structures (board composition, committees, code of conduct) are functioning as required under the law and listing agreements.

Section 04

How a Secretarial Audit is Conducted — Step by Step

A secretarial audit is a structured, evidence-based process that typically runs over several weeks. Unlike ad-hoc legal reviews, the audit follows a systematic methodology guided by the Institute of Company Secretaries of India (ICSI) guidance notes and the prescribed MR-3 format. Here is how the process typically unfolds when a company engages Corpzo for its secretarial audit.

  • 1
    Engagement & Scope Finalisation The company appoints a Practising Company Secretary (PCS) through a board resolution. The PCS and the company agree on the audit scope, access to records, and timelines for the financial year under review.
  • 2
    Document and Record Requisition The PCS requests all statutory registers, minute books, board resolutions, general meeting records, regulatory filings, contracts, SEBI disclosures, FEMA filings, and correspondence with regulatory authorities for the audit period.
  • 3
    Detailed Review & Verification The PCS conducts a thorough examination of documents against each applicable law and regulation. This includes verifying statutory timelines, checking filings on MCA21, BSE/NSE portals, and RBI FEMA reporting portals, and reviewing minute books for procedural compliance.
  • 4
    Management Discussions & Clarifications Where gaps, delays, or non-compliances are identified, the PCS discusses these with the company secretary, CFO, or management to understand the context, any compounding actions already taken, and reasons for deviations.
  • 5
    Draft Report & Management Comments A draft MR-3 report is prepared listing observations and qualifications. The management is given an opportunity to review and provide their comments or explanations on reported observations, which may be included in the final report.
  • 6
    Final MR-3 Report & Board Annexure The PCS issues the final signed secretarial audit report in Form MR-3. The company's board of directors reviews it and annexes it to the Board's Report, which is then placed before shareholders at the AGM and filed with the MCA.
Section 05

Understanding Form MR-3 — The Secretarial Audit Report

Form MR-3 is the prescribed format for the secretarial audit report under the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. It is a comprehensive document in which the Practising Company Secretary provides their findings, observations, qualifications, and certification regarding the company's compliance status across all applicable laws for the financial year.

What Form MR-3 Typically Contains

  • ①
    Introduction & Scope: Details of the company, audit period, and a statement of the PCS's responsibility and methodology followed.
  • ②
    Compliance Status Table: Law-wise compliance findings covering Companies Act, SEBI regulations, FEMA, Depositories Act, and other applicable statutes.
  • ③
    Observations & Qualifications: Specific instances of non-compliance, delays in filings, missed disclosures, or governance gaps identified during the audit.
  • ④
    Board Processes Confirmation: A statement on whether adequate board systems exist for compliance monitoring and whether board decisions were implemented properly.
  • ⑤
    Secretarial Standards Compliance: Confirmation of adherence to Secretarial Standards SS-1 (Board Meetings) and SS-2 (General Meetings) issued by ICSI.
  • ⑥
    PCS Certification: The report concludes with the PCS's signature, membership number, Certificate of Practice (CP) number, and date of report.

The MR-3 report is not merely a checklist — it is a professional opinion. A PCS issues the report based on their expert assessment and professional judgment. If a company has a clean compliance record, the report will be unqualified. Where there are identified lapses, the PCS will include specific observations or qualifications, which then become part of the public record through the Board's Report.

Section 06

Who Can Conduct a Secretarial Audit in India?

This is a point where the law is extremely clear and non-negotiable: only a Practising Company Secretary (PCS) — a member of the Institute of Company Secretaries of India (ICSI) who holds a valid Certificate of Practice — is legally authorised to conduct a secretarial audit and issue a report in Form MR-3. A Chartered Accountant, Cost Accountant, Advocate, or any other professional, however qualified, cannot issue a secretarial audit report.

Why Only a PCS? The discipline of company secretaryship specifically trains professionals in corporate law, governance, SEBI regulations, FEMA, and related statutes. The PCS is uniquely positioned to assess compliance across the multi-law framework that a secretarial audit covers. The ICSI has also issued detailed guidance notes and practice standards to govern how secretarial audits are to be conducted.

What Happens If the Wrong Professional is Appointed?

If a company obtains a compliance report from a non-PCS professional and presents it as a secretarial audit report, this would itself constitute a violation of Section 204 of the Companies Act, 2013 — as if no secretarial audit had been conducted at all. The company and its officers would be exposed to the full range of penalties prescribed under the Act. Corpzo's network of experienced PCS professionals ensures that every secretarial audit engagement is fully compliant with this fundamental legal requirement.

Section 07

Penalties for Non-Compliance with Secretarial Audit Requirements

The consequences of failing to conduct a secretarial audit — or of the company or its officers obstructing or providing false information during the audit process — are both financial and reputational. Section 204(4) of the Companies Act, 2013 prescribes the following penalties.

Minimum Penalty

₹1,00,000

Minimum fine imposed on the company and every officer in default for non-compliance with Section 204 provisions.

Maximum Penalty

₹5,00,000

Maximum fine that may be imposed on the company and each defaulting officer — which can include the MD, CS, and CFO.

False Information

Criminal Liability

Officers who knowingly furnish false or incorrect information to the PCS during the audit process may face criminal prosecution under the Act.

SEBI Additional Action

Regulatory Action

For listed companies, SEBI may independently levy penalties, initiate adjudication proceedings, or impose trading restrictions for non-compliance with secretarial audit mandates.

Important: Under the Companies (Amendment) Act, 2019 and subsequent amendments, several defaults under the Companies Act have been decriminalised and converted to civil penalties adjudicated by the Registrar of Companies. This means penalties can be levied swiftly through an administrative process without a prolonged court trial — making timely compliance even more critical.
Section 08

Strategic Benefits of Secretarial Audit Beyond Statutory Compliance

Forward-looking companies treat the secretarial audit not merely as a regulatory burden to be discharged, but as a strategic governance tool that delivers tangible business benefits. Here is why a well-conducted secretarial audit adds genuine value to an organisation, beyond the obvious benefit of avoiding penalties.

🔍

Early Risk Detection

Identifies compliance gaps, missed filings, and governance weaknesses before they escalate into regulatory investigations or shareholder disputes.

💼

Investor Readiness

A clean secretarial audit history significantly accelerates due diligence during fundraising, PE investments, or IPO preparation processes.

🏦

Better Credit Access

Banks and financial institutions increasingly review governance compliance records when evaluating large loan applications from companies.

🤝

Board Accountability

Creates a documented record of board decisions and legal compliance, protecting independent directors and non-executive directors from liability.

🌟

Reputation & Trust

Demonstrates to shareholders, business partners, and regulators that the company operates with transparency and is serious about governance.

📊

Merger & Acquisition Readiness

Legal due diligence in M&A transactions routinely examines secretarial audit reports — a clean history accelerates deal closure considerably.

Section 09

How Corpzo Helps Your Company Stay Secretarial Audit-Ready

At Corpzo.com, we understand that running a business is demanding enough without having to navigate the intricate, ever-evolving world of corporate compliance on your own. Our dedicated secretarial audit and compliance advisory team — comprising experienced Practising Company Secretaries, corporate lawyers, and regulatory specialists — works with companies across India to ensure that when audit season arrives, there are no surprises, no qualifications, and no penalties.

Our approach to secretarial audit is proactive rather than reactive. We don't just show up at the end of the financial year and start checking boxes. Instead, we work with your company throughout the year — monitoring MCA filing deadlines, tracking SEBI disclosure requirements, flagging upcoming compliance events, and maintaining your statutory registers in impeccable order — so that the annual secretarial audit becomes a smooth, confirmation exercise rather than a stressful excavation of missed filings.

Corpzo's Secretarial Audit & Compliance Services

  • ✓
    Full-scope Secretarial Audit and Form MR-3 preparation by PCS
  • ✓
    Year-round compliance calendar management and deadline tracking
  • ✓
    MCA21 annual return filing (MGT-7, AOC-4, DIR-3 KYC)
  • ✓
    Board meeting and AGM process management and minute-writing
  • ✓
    SEBI LODR compliance and stock exchange reporting for listed companies
  • ✓
    FEMA compliance review and RBI reporting assistance
  • ✓
    Statutory registers maintenance and updation
  • ✓
    Related party transaction documentation and board approval
  • ✓
    Pre-audit compliance gap assessment and remediation support
  • ✓
    Voluntary secretarial audit for private companies and startups

Ready to Secure Your Secretarial Audit?

Whether you are a listed company fulfilling a statutory mandate or a growth-stage company seeking governance excellence, Corpzo's expert team is ready to assist you. Reach out today for a free consultation on your secretarial audit requirements.

✉ reach@corpzo.com ☎ 9999 139 391 🌐 www.corpzo.com
✉ Email Us Now ☎ Call: 9999 139 391 🌐 Visit Corpzo.com
Section 10

Frequently Asked Questions — Secretarial Audit Under Companies Act 2013

No. A secretarial audit is mandatory only for specific categories of companies — all listed companies, unlisted public companies with a paid-up share capital of ₹50 crore or more, and unlisted public companies with a turnover of ₹250 crore or more. Private limited companies, LLPs, OPCs, and smaller companies are generally not required to conduct a statutory secretarial audit, though they may voluntarily choose to do so as a governance best practice.
A financial audit, conducted by a Chartered Accountant, examines the accuracy and fairness of a company's financial statements — its books of accounts, profit and loss, balance sheet, and cash flows. A secretarial audit, conducted by a Practising Company Secretary, examines the company's compliance with corporate, securities, labour, and regulatory laws — board processes, shareholder meetings, statutory filings, SEBI norms, and governance structures. The two audits are complementary and cover entirely different domains of corporate functioning.
No. An in-house Company Secretary — even one who holds a full membership of ICSI — cannot conduct the secretarial audit of their own employer company. The law requires that the secretarial audit be conducted by a Practising Company Secretary (PCS), meaning an independent professional in practice who holds a valid Certificate of Practice (CP) from ICSI. This ensures the independence and objectivity that a statutory audit demands. Appointing an in-house CS to conduct the audit would invalidate the process entirely.
The company must make available its statutory registers (including the register of members, directors, charges, and contracts), minute books for board and general meetings, all resolutions passed during the year, MCA filings and acknowledgements, SEBI disclosures and stock exchange submissions (for listed companies), FEMA filings with RBI, agreements with banks and financial institutions, and correspondence with regulatory authorities. The PCS may also request specific contracts, policies, and internal compliance records depending on the company's business nature and applicable laws.
The secretarial audit report in Form MR-3 must be ready before the company's Board's Report is finalised and approved by the board, as the MR-3 report is required to be annexed to the Board's Report. Typically, the Board's Report is approved at a board meeting held before the AGM. For companies following a financial year ending March 31, the secretarial audit process is ideally completed between April and August, with the board meeting to approve the annual report usually held by September 30 (the deadline for AGM for most companies).
If the PCS identifies non-compliances, delayed filings, or governance gaps during the audit, they will include these as observations or qualifications in the MR-3 report. The board of directors is then required to provide their explanation or comments on each such qualification in the Board's Report itself. Shareholders and regulators will have access to both the qualification and the board's response. Repeated qualifications in secretarial audit reports can attract regulatory attention. This is why proactive compliance management — which Corpzo specialises in — is far preferable to addressing issues after they have been flagged.
Under SEBI LODR Regulations, material subsidiaries of listed companies are required to conduct secretarial audits, and the secretarial audit report of material subsidiaries must be annexed to the listed holding company's Annual Report. The definition of a "material subsidiary" under SEBI LODR is specific — a subsidiary whose income or net worth exceeds 10% of the consolidated income or net worth of the listed company and all its subsidiaries in the immediately preceding accounting year. Companies should evaluate their subsidiary structures carefully to identify which entities trigger this obligation.
Absolutely, and Corpzo actively recommends it for private companies that are in growth mode, planning external fundraising, preparing for an IPO, or seeking large-scale bank financing. A voluntary secretarial audit signals governance maturity to investors and lenders, significantly shortens due diligence timelines during funding rounds, and identifies and remediates compliance gaps before they become deal-breakers. Many PE investors and strategic acquirers have begun routinely requesting secretarial audit reports as part of their pre-investment due diligence process, even for private companies.
The duration of a secretarial audit depends on the size and complexity of the company, the volume of transactions and regulatory filings during the year, and the readiness of the company's documentation. For a well-organised company with all records readily available, the audit process typically takes 3 to 6 weeks from commencement to issuance of the final MR-3 report. For companies with gaps in documentation or complex multi-jurisdictional operations, the process may extend to 8 to 10 weeks. Corpzo's pre-audit gap assessment service helps companies get their documentation in order before the formal audit begins, significantly reducing the overall timeline.
Corpzo offers end-to-end support across the secretarial audit lifecycle. We begin with a pre-audit compliance health check to identify and remediate any gaps before the formal audit commences. Our network of experienced PCS professionals then conducts the full-scope secretarial audit, prepares the MR-3 report, and manages all interactions with the board and management. Throughout the year, our compliance team helps maintain statutory registers, file MCA returns on time, manage board and general meeting processes, and track all regulatory deadlines — so that every annual secretarial audit reflects a company in complete compliance. To get started, contact us at reach@corpzo.com, call 9999 139 391, or visit www.corpzo.com.

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