Which companies does the January 2020 secretarial-audit rule still cover?
The notification of 3 January 2020 still decides one class of secretarial audit. It added every company whose outstanding loans or borrowings from banks or public financial institutions are ₹100 crore or more. The two public-company tests that already existed were not removed.
What did 3 January 2020 add?
Before that date, Rule 9 covered every public company with paid-up share capital of ₹50 crore or more, and every public company with turnover of ₹250 crore or more. The notification added a third class: every company, public or private, with those outstanding borrowings of ₹100 crore or more. Listed companies were already inside section 204 itself.
Who is covered now?
Any one of these is enough. The figures are those on the last date of the latest audited financial statement.
| Class | Test |
|---|---|
| Listed company | Every listed company, under section 204. |
| Public company | Paid-up share capital of ₹50 crore or more, or turnover of ₹250 crore or more. |
| Any company | Outstanding loans or borrowings from banks or public financial institutions of ₹100 crore or more. |
Appointment of a whole-time company secretary is a different rule. The ₹10 crore capital test for that appointment is on the company-secretary page. Crossing that line does not by itself trigger secretarial audit, and the borrowing line can trigger secretarial audit in a company that has no whole-time company secretary under the other rule.
Where does the report go?
A company secretary in practice gives the report in Form MR-3. The company annexes it to the board’s report under section 134. The board explains, in that report, any qualification or observation. The company gives the practising company secretary the records the audit needs. The report is not Form AOC-4, and it is not the statutory auditor’s report.
What happened to the fine?
The January 2020 note recorded a fine of not less than ₹1 lakh and up to ₹5 lakh. A later amendment of section 204 replaced that fine with a penalty. The band in the note is not the penalty the subsection now imposes.
Frequently asked questions
Four questions cover the older tests, a private company, the date of the figures, and the old fine.
Did the notification replace the public-company tests?
No. A public company with paid-up share capital of ₹50 crore or more, or turnover of ₹250 crore or more, was already covered. The notification added the borrowing test.
Does the borrowing test cover a private company?
Yes. The class is every company, not only a public company, whose outstanding loans or borrowings from banks or public financial institutions are ₹100 crore or more.
Is the figure taken at any date in the year?
No. Paid-up share capital, turnover, and the outstanding borrowings are taken as they stand on the last date of the latest audited financial statement.
Is the fine still ₹1 lakh to ₹5 lakh?
No. The January 2020 note recorded that fine. A later amendment of section 204 replaced the fine with a penalty. The old band is not the current subsection.
Sources
Secretarial audit is section 204 of the Companies Act, 2013. The classes are Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended on 3 January 2020.