A secretarial audit is a compliance verification mechanism under the Companies Act, 2013 that ensures companies follow all applicable laws, rules, and regulations. For certain companies, it is mandatory — and non-compliance attracts significant penalties. This guide explains everything you need to know about secretarial audits in India in 2026, including who needs one, the process, and the consequences of skipping it.
What Is a Secretarial Audit?
A secretarial audit is an independent examination of a company’s compliance with the Companies Act, 2013, SEBI regulations, FEMA provisions, and other applicable laws. It is conducted by a Practicing Company Secretary (PCS) who issues a Secretarial Audit Report in Form MR-3. This report is annexed to the Board’s Report filed with the ROC in the Annual Return.
Think of it as the compliance equivalent of a financial audit — while the statutory auditor checks your financial statements, the secretarial auditor checks whether your company has followed all corporate laws and governance requirements.
Who Needs a Secretarial Audit? (Applicability)
Under Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, secretarial audit is mandatory for:
1. Listed Companies
Every company whose shares are listed on a recognized stock exchange must undergo a secretarial audit every financial year. This is non-negotiable — there are no thresholds or exemptions for listed companies.
2. Public Companies Meeting Threshold
Every public company with a paid-up share capital of ₹50 crore or more, OR a turnover of ₹250 crore or more in the preceding financial year must get a secretarial audit done.
3. Private Companies Meeting Threshold
Every private company with a paid-up share capital of ₹50 crore or more, OR a turnover of ₹250 crore or more must also undergo secretarial audit. This was added by the Companies (Amendment) Act to bring large private companies under the compliance umbrella.
4. Material Subsidiaries of Listed Companies
Under SEBI (LODR) Regulations, 2015, every material subsidiary of a listed company (whether Indian or foreign) must also get a secretarial audit. A material subsidiary is one whose income or net worth exceeds 10% of the consolidated income or net worth of the listed parent.
The Secretarial Audit Process: Step by Step
Step 1: Appointment of PCS
The Board of Directors appoints a Practicing Company Secretary (PCS) to conduct the secretarial audit. The PCS must hold a Certificate of Practice issued by ICSI and should be independent of the company. The appointment is typically done through a Board Resolution at the beginning of the financial year.
Step 2: Engagement Letter & Planning
The PCS issues an engagement letter outlining the scope, timeline, responsibilities, and fee. The audit plan identifies key compliance areas based on the company’s nature, industry, and regulatory requirements.
Step 3: Document Collection & Verification
The PCS collects and examines key documents including: Memorandum and Articles of Association, Board and committee meeting minutes, shareholder meeting minutes, statutory registers, ROC filings and forms, SEBI filings (for listed companies), RBI/FEMA filings, contracts and agreements, and compliance certificates from management.
Step 4: Compliance Testing
The PCS verifies compliance with:
- Companies Act, 2013: Board composition, meetings, disclosures, filings, related party transactions
- SEBI Regulations: LODR, insider trading, takeover code, SAST (for listed companies)
- FEMA: FDI compliance, ODI, ECB filings, FC-GPR/FC-TRS
- Other Applicable Laws: Industry-specific regulations, labour laws, environmental laws, tax laws
- Secretarial Standards: SS-1 (Board Meetings) and SS-2 (General Meetings) issued by ICSI
Step 5: Issue Secretarial Audit Report (Form MR-3)
The PCS issues the Secretarial Audit Report in Form MR-3, which includes: a statement of compliance (or non-compliance) with applicable laws, qualifications/observations/remarks on material non-compliances, and recommendations for corrective action. This report is annexed to the Board’s Report and filed with the ROC as part of the Annual Return (MGT-7).
Secretarial Audit Checklist
Here is a comprehensive checklist that a PCS typically covers during a secretarial audit:
Board & Governance
- Board composition (independent directors, woman director where applicable)
- Minimum 4 Board meetings per year with gap not exceeding 120 days
- Quorum requirements met for all meetings
- Proper notice (7 days) for Board meetings
- Minutes prepared within 30 days, signed at next meeting
- Committees formed as required (Audit, NRC, CSR, Stakeholders)
- Director disclosures received (MBP-1, DIR-8)
Shareholder Meetings
- AGM held within 6 months of year-end (September 30 deadline)
- 21 clear days notice for general meetings
- Special resolutions passed where required
- E-voting facility provided (if applicable)
- Minutes recorded and signed within 30 days
ROC Filings
- AOC-4 (financial statements) filed within 30 days of AGM
- MGT-7/MGT-7A (Annual Return) filed within 60 days of AGM
- ADT-1 (Auditor appointment) filed within 15 days
- DIR-12 (Director changes) filed within 30 days
- All event-based forms filed within prescribed timelines
Share Capital & Transfers
- Register of Members maintained and updated
- Share transfers processed within timelines
- Share certificates issued within 2 months of allotment
- PAS-3 (Return of Allotment) filed within 30 days
- Related party transaction approvals obtained
Penalties for Non-Compliance
Companies that are required to undergo a secretarial audit but fail to do so face serious consequences:
- Company penalty: Fine of ₹1 lakh to ₹5 lakh under Section 204(4)
- Officer in default: Fine of ₹1 lakh to ₹5 lakh, and in case of continuing default, ₹2,000 per day
- Qualified MR-3 report: While not a penalty per se, a qualified secretarial audit report is flagged by SEBI and stock exchanges, and can trigger regulatory scrutiny, investigations, and reputational damage
- SEBI action (listed companies): Non-compliance with LODR requirements related to secretarial audit can result in SEBI enforcement action including fines and trading restrictions
- Director liability: Directors can face personal liability and disqualification for persistent non-compliance identified in the secretarial audit
Secretarial Audit vs. Secretarial Compliance Report
These are two different compliance requirements — do not confuse them:
Secretarial Audit (Form MR-3) — Conducted under Section 204 for companies meeting the thresholds above. It is a comprehensive audit covering all applicable laws and is annexed to the Board’s Report.
Annual Secretarial Compliance Report — Required under SEBI LODR Regulation 24A for listed companies. This is an additional compliance report filed with stock exchanges, separate from the MR-3 report. It certifies compliance specifically with SEBI regulations.
Listed companies need BOTH — the MR-3 secretarial audit AND the annual secretarial compliance report.
How a Company Secretary Helps with Secretarial Audit
A Company Secretary plays a dual role in the secretarial audit process — both as the in-house compliance officer who prepares the company for audit, and potentially as the external PCS auditor who conducts it:
- Pre-audit preparation: Reviews all compliances, identifies gaps, and ensures corrective action before the PCS auditor arrives
- Document organization: Compiles board minutes, shareholder resolutions, statutory registers, and filing receipts
- Gap analysis: Conducts an internal compliance gap analysis to minimize qualifications in the MR-3 report
- Liaison with PCS auditor: Coordinates document requests, clarifications, and management representations
- Post-audit compliance: Implements recommendations from the secretarial audit report to address identified non-compliances
- Ongoing monitoring: Sets up compliance calendars and tracking systems to prevent future non-compliances
Frequently Asked Questions
Is secretarial audit mandatory for private companies in India?
Yes, secretarial audit is mandatory for private companies with paid-up share capital of ₹50 crore or more OR turnover of ₹250 crore or more. Smaller private companies are exempt unless they are material subsidiaries of listed companies.
Who can conduct a secretarial audit in India?
Only a Practicing Company Secretary (PCS) holding a Certificate of Practice issued by the Institute of Company Secretaries of India (ICSI) can conduct a secretarial audit under Section 204. Chartered Accountants and Cost Accountants cannot conduct secretarial audits.
What is the penalty for not getting a secretarial audit done?
Companies that fail to get a mandatory secretarial audit face a fine of ₹1 lakh to ₹5 lakh. Officers in default face the same fine plus ₹2,000 per day for continuing default. For listed companies, SEBI can impose additional penalties.
What is the difference between Form MR-3 and Annual Secretarial Compliance Report?
Form MR-3 is the secretarial audit report under Section 204 covering all applicable laws, annexed to the Board’s Report. The Annual Secretarial Compliance Report is required under SEBI LODR Regulation 24A for listed companies, filed separately with stock exchanges, covering SEBI-specific compliance. Listed companies need both.
When should a company appoint a secretarial auditor?
The Board of Directors should appoint the PCS as secretarial auditor at the beginning of the financial year, ideally at the first Board meeting. This allows the PCS to conduct concurrent compliance reviews throughout the year rather than only at year-end.