Market regulator SEBI has revised its Listing Obligations and Disclosure Requirements (LODR) Regulations to introduce detailed norms governing the appointment, re-appointment, and removal of secretarial auditors in listed entities.
Only a peer reviewed company secretary or firm of Company Secretary (ies) in practice can undertake secretarial audit of a listed entity and its material unlisted subsidiaries incorporated in India, SEBI has now stipulated.
The latest changes and resultant structural clarity is expected to redefine the position of Secretarial Auditor in the corporate landscape, say corporate observers.
With this SEBI move, the entire process of obtaining shareholders’ nod for appointment as Secretarial Auditor at an annual general meeting will be on a par with statutory financial auditors, they noted.
The latest norms introduced by the market regulator flow from the recommendations of the SEBI appointed S K Mohanty-led committee for facilitating ease of doing business for listed and to be listed companies in India.
Currently, there are no provisions prescribed either in the LODR Regulations or in the Companies Act 2013 specifying criteria for appointment or reappointment or removal for secretarial auditors of a listed entity.
Cooling Off Period
SEBI has also now in its LODR regulations prescribed a cooling-off period for secretarial auditors of a listed entity. A cooling-off period of five years has been prescribed for re-appointment of an individual as a Secretarial auditor and for re-appointment of a secretarial audit firm after two consecutive terms.
Under the latest LODR amendments, SEBI has specified that an individual may be appointed for a term of five years and a firm may be appointed for a maximum of two terms of five years each subject to the approval of shareholders in a general meeting.
Role of Secretarial Auditors
Secretarial auditors play a pivotal role in strengthening corporate governance in India, ensuring that companies adhere to legal and regulatory frameworks.
Secretarial audit is now mandatory for every listed company; every public company with a paid-up share capital of at least ₹50 crore; every public company with a turnover of atleast ₹250 crore; every private limited company with paid-up capital of at least ₹50 crore or a turnover of at least ₹ 250 crore; every company with outstanding loans or borrowings of at least ₹100 crore from banks or public financial institutions.
Welcoming the latest SEBI LODR amendments, S.N. Ananthasubramanian, Past President of the Institute of Company Secretaries of India and a practising company secretary, emphasised the need for a revamp of the format of Secretarial Audit Report for listed companies.
He noted that the current format needs revision to reflect the expectations of stakeholders so as make it more relevant and contemporary.
