ANNUAL SECRETARIAL AUDIT AND ANNUAL SECRETARIAL COMPLIANCE REPORT FOR LISTED ENTITIES

[Mr. M. GOVINDARAJAN]

Committee Report

• The Committee on Corporate Governance, constituted under the Chairmanship of Shri Uday Kotak, in its report dated October 05, 2017, recommended the following in view of the criticality of secretarial functions to efficient board functioning:

• Secretarial audit to be made compulsory for all listed entities under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Regulations”) in line with the provisions of the Companies Act, 2013.
• Secretarial audit to be extended to all material unlisted Indian subsidiaries in line with the recommendations of the Committee on strengthening group oversight and improving compliance at a group level for listed entities.

Amendment to LODR

• SEBI accepted the above said recommendations of the Committee and amend SEBI LODR by inserting Regulation 24A;
• Regulation 24A provides that every listed entity and its material unlisted subsidiaries incorporated in India shall 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.

Circular

• In this regard SEBI issued a circular No. CIR/CFD/CMD 2/27/201, dated 08.02.2019.
• The said circular gives the format for annual secretarial audit report and annual secretarial compliance report for listed entities and their material subsidiaries.

Compliance by a listed company

A listed company shall comply with the following-

• Annual secretarial audit report- the listed entity and its unlisted material subsidiaries shall continue to use the same Form No. MR-3 as required under Companies Act, 2013 and the rules made there under for the purpose of compliance with Regulation 24A of SEBI (Listing Obligations and Disclosure Requirements) Regulations;
• Annual secretarial compliance report - While the annual secretarial audit shall cover a broad check on compliance with all laws applicable to the entity, listed entities shall additionally, on an annual basis, require a check by the PCS on compliance of all applicable SEBI Regulations and circulars/ guidelines issued there under, consequent to which, the PCS shall submit a report to the listed entity in the manner specified.

The annual secretarial compliance report in the aforesaid format shall be submitted by the listed entity to the stock exchanges within 60 days of the end of the financial year.

The listed entities and their material subsidiaries shall provide all such documents/information as may be sought by the PCS for the purpose of providing a certification under the Regulations and this circular

Guidance note

• SEBI advised the Institute of Company Secretaries of India to bring out a guidance note to practicing Company Secretaries so as to enable them to undertake certifications in accordance with the Regulations and this circular in letter and in spirit

Obligation of stock exchanges

• SEBI also advised the stock exchanges to bring the provisions of this circular to notice of the listed entities and also to disseminate on their websites.

Effect of circular

• This circular shall come into force-

• 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.

Secretarial compliance report

• The Secretarial Compliance report in respect of a list company shall be provided in the letter pad of the practicing Company secretary;
• The practicing Company Secretary shall examine for the review period-

• all the documents and records made available to us and explanation provided by the listed entity;
• the filings/ submissions made by the listed entity to the stock exchanges;
• website of the listed entity;
• any other document/ filing, as may be relevant, which has been relied upon to make this certification

in respect of compliance with the provisions of-

• the Securities and Exchange Board of India Act, 1992 and the Regulations, circulars, guidelines issued there under; and
• the Securities Contracts (Regulation) Act, 1956 (“SCRA”), rules made there under and the Regulations, circulars, guidelines issued there under by the Securities and Exchange Board of India.

• The practicing Company Secretary shall examine the following specific regulations-

• Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015;
• Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018;
• Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;
• Securities and Exchange Board of India (Buy-back of Securities) Regulations, 2018;
• Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014;
• Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008;
• Securities and Exchange Board of India(Issue and Listing of Non-Convertible and Redeemable Preference Shares) Regulations, 2013;
• Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015;
• Other regulations as applicable and circulars/ guidelines issued there under.

• Based on the above examination, the practicing Secretary shall report for the review period as detailed below-

• The listed entity has complied with the provisions of the above Regulations and circulars/ guidelines issued there under, except in respect of matters specified-

• Compliance Requirement (Regulations/ circulars / guidelines including specific clause)
• Deviations
• Observations/ Remarks of the Practicing Company Secretary

• The listed entity has maintained proper records under the provisions of the above Regulations and circulars/ guidelines issued there under insofar as it appears from my/our examination of those records.
• The following are the details of actions taken against the listed entity/ its promoters/ directors/ material subsidiaries either by SEBI or by Stock Exchanges (including under the Standard Operating Procedures issued by SEBI through various circulars) under the aforesaid Acts/ Regulations and circulars/ guidelines issued there under:

• Action taken by
• Details of violation
• Details of action taken E.g. fines, warning letter, debarment, etc.
• Observations/ remarks of the Practicing Company Secretary, if any.

• The listed entity has taken the following actions to comply with the observations made in previous reports:

• Observations of the Practicing Company Secretary in the previous reports
• Observations made in the secretarial compliance report for the year ended. (The years are to be mentioned)
• Actions taken by the listed entity, if any
• Comments of the Practicing Company Secretary on the actions taken by the listed entity