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Published on 10 April 2025

Comprehensive Guide to Secretarial Audits in India: Regulations and Best Practices for 2025

Introduction

Secretarial audits are of prime importance in validating corporate conformity to the Companies Act, SEBI regulations, and other relevant laws. This guide offers an overview of the new processes, procedures, and regulatory updates for secretarial audits in India, namely the new SEBI and ICSI requirements that will become operational in 2025.

What is a Secretarial Audit?

A secretarial audit is an independent examination of compliance of a company with the statutory and regulatory requirements by a capable Practicing Company Secretary (PCS). The review of compliance is extended to compliance under a range of laws—that is, corporate, securities, labor, environment, and tax laws—to enhance corporate governance and transparency.

Applicability of Secretarial Audit (2025)

Secretarial audit is mandatory for the following:

  • All listed companies.
  • All public companies meeting the following criteria:
  • Paid-up share capital of ₹50 crore or more, or
    • Turnover of ₹250 crore or more.
  • Any private or otherwise company with borrowing or bank loans from public sector financial institutions or otherwise over ₹100 crore.
  • All major unlisted subsidiaries of a listed entity in India, as defined in SEBI LODR Regulation 24A (2024).

Key Regulatory Changes (2024–2025)

  • Peer Review Requirement: On December 31, 2024, secretarial auditors for listed companies as well as material unlisted subsidiaries may be either only Peer Reviewed Company Secretaries or firms in whose name there exists a valid peer review certificate under the roof of ICSI.

  • Tenure and Cooling-Off Rules: Starting from April 1, 2025:

    • Individual PCS: Shall be permitted up to a maximum of one tenure of 5 years after observance of 5 years of cooling off while reapplying.

  • PCS Firms: 2 terms of 5 years each, with a 5-year cooling-off period prior to reappointment.

  • Signing of Reports: Secretarial Compliance Reports must be signed by the auditor or a qualified Peer Reviewed Company Secretary.

  • Revised Secretarial Standards: Changes to SS-1 & SS-2 (2024) include new requirements and exemptions for board and general meetings, particularly for startups and private companies.

  • ICSI Auditing Standards: Compulsory use of CSAS 1-4, and auditor quality review and peer review standards.

Step-by-Step Secretarial Audit Process

1. Appointment and Communication

  • The Board appoints a PCS (where required, peer-reviewed).
  • The former auditor and new auditor must establish correspondence in writing with each other.

2. Acceptance and Planning

  • An appointment letter is prepared and received.
  • Preliminary research is undertaken, and meetings are conducted with the management and an audit plan is drawn.

3. Fieldwork and Data Collection

  • Close observation of books, registers, filings, and compliance procedures is conducted.
  • Sampling, test checking, and interviews are tools that are used to verify information.

4. Documentation

  • Prepare detailed working papers according to ICSI guidelines.
  • Procure a signed letter of representation of management.

5. Drafting and Discussion

  • Summarize findings, present them to the management, and resolve important points as necessary.

6. Reporting

  • Prepare Secretarial Audit Report in Form MR-3, reporting any reservation or adverse remarks.
  • Place the report before the Board and annex it to the Board's Report.

7. Follow-Up

  • The Board should review and publicly report the results of the audit.

Compliance Tips and Best Practices

  • Carry Out Adequate Due Diligence: Perform complete due diligence before finalization of the audit report.
  • Apply Checklists: Employ updated ICSI checklists of all relevant legislations.
  • Keep Yourself Current: Remain updated about the modifications in Secretarial Standards as well as SEBI guidelines.
  • Documentation Should be Compelling: Practice quality in audit reporting to allow appropriate peer review.
  • Adhere to Professional Conduct: Avoid conflicts of interest and abide by the ICSI code of conduct.

FAQs: Secretarial Audit in India (2025)

Q: Who can be hired as a secretarial auditor of a listed company? A: Only Peer Reviewed Company Secretary or firm having a valid peer review certificate granted by ICSI is eligible post December 31, 2024.

Q: What are the cooling-off and tenure requirements for secretarial auditors? A: An individual can hold office for a maximum period of 5 years (1 term), whereas companies can hold office for a maximum period of 10 years (2 terms), subject to mandatory cooling-off of 5 years before reappointment from April 1, 2025.

**Q: Is a secretarial audit required for private companies? A: Yes, if they have listed securities or are eligible for loans or borrowings.

Q: What are the recent changes to Secretarial Standards? A: The 2024 amendments have simplified exemptions, quorum, and documentation requirements, easing some requirements for startups while enforcing stricter record-keeping norms.

Conclusion

Secretarial audits are being increasingly regulated with more standardization. The new SEBI and ICSI directives mandate that companies ensure their secretarial auditors are peer-reviewed and adhere to current standards. By following best practices and staying current, both companies and PCS can perform effective audits, steer clear of legal pitfalls, and promote better corporate governance.

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