INTRODUCTION
A secretarial auditor is an independent Practising Company Secretary or a firm which examines company’s compliance to corporate rules, laws, regulations and procedural requirement. The concept of Secretarial Audit of a company is ruled under Section 204 of the Companies Act, 2013. To ensure the effective functioning of a company’s secretarial audit mechanism, it is essential that the Secretarial Auditor maintains independence, transparency, and impartiality.
With the aim of strengthening auditor independence and corporate governance, SEBI introduced amendments to Regulation 24A of the SEBI (LODR) Regulations relating to the appointment and cooling-off framework for Secretarial Auditors.
UNDERSTANDING SECTION 204 OF COMPANIES ACT,2013
Section 204: Secretarial audit for bigger companies.
- Every listed company and a company belonging to other class of companies as may be prescribed shall annex with its Board’s report made in terms of sub-section (3) of section 134, a secretarial audit report, given by a company secretary in practice, in such form as may be prescribed.
- It shall be the duty of the company to give all assistance and facilities to the company secretary in practice, for auditing the secretarial and related records of the company.
- The Board of Directors, in their report made in terms of sub-section (3) of section 134, shall explain in full any qualification or observation or other remarks made by the company secretary in practice in his report under sub-section (1).
- If a company or any officer of the company or the company secretary in practice, contravenes the provisions of this section, the company, every officer of the company or the company secretary in practice, who is in default, shall be [liable to a penalty of two lakh rupees].
SCENARIO BEFORE 2024 AMENDMENT
Before 2024 amendment the process was more simple as compared to today’s strict
provisions. The rules followed before the 2024 amendment were:
- No specified term: Prior to the 2024 amendment there was no specified term or tenure fixed for secretarial auditor. Consequently, a secretarial auditor could continue to hold the office for indefinite period subject to the discretion of the company and willingness of the Secretarial Auditor.
- Flexibility of reappointment: The same independent secretarial auditor or firm could be re-appointed multiple times consecutively without serving any cooling-off period.
- Permission to appoint annually: Earlier, since no fixed term was prescribed many companies appointed the secretarial auditor on annual basis.
- Casual Vacancies: Before the 2024 amendment, whenever any casual arose it was filed by the usual procedure mentioned under the Companies Act,2013 but the prescribed time period within which such vacancy should be filled was not mentioned.
- Certificate of Practice: Previously, the Secretarial Auditor was only required to hold Certificate of Practice (COP) apart from this they were not required to hold any other certificate.
SCENARIO AFTER 2024 AMENDMENT
SEBI made certain necessary amendments under Regulation 24A of the SEBI (LODR) Regulations concerning with the appointment and cooling-off rules for Secretarial Auditors. The main purpose of introducing this change is to ensure that there is proper transparency and accountability in the process of secretarial audit.
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- Fixed tenure: After the amendment came into picture, no independent secretarial auditor or firm could hold the position as secretarial auditor for more
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- than 5 consecutive years (in case of independent secretarial auditor) and 10 consecutive years (in case of firm).
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- Cooling-off period: Following the expiration of their term, every secretarial auditor must serve the cooling period for 5 years, which means that they cannot be re-appointed for the next 5 consecutive years.
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- Peer Review Requirement: SEBI made it compulsory for every secretarial auditor that they must hold a Peer Review certificate to be appointed as a secretarial auditor in a listed company.
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- Vacancies: The company is required to fill the casual vacancy within three months and the appointed person can hold the office until next Annual General Meeting.
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- Common Partners: A company cannot re-appoint a secretarial auditor if the firm shared a common partner with the previous firm whose term has been expired.
SERVICES RENDERED BY SECRETARIAL AUDITOR AFTER THE AMENDMENT
1. Representation Before Quasi-Judicial Authorities
A Secretarial Auditor may appear and represent companies before various quasi- judicial and regulatory authorities in matters relating to corporate and securities laws.
2. Certification of Annual Return
The Secretarial Auditor is authorised to certify the Annual Return of eligible companies in Form MGT-8 under the Companies Act, 2013.
3. Pre-Certification of E-Forms
A Practising Company Secretary may undertake pre-certification and verification of various e-forms filed with the Registrar of Companies (ROC) under the Companies Act, 2013.
4. Issuance of Secretarial Audit Report
The Secretarial Auditor is empowered to issue Secretarial Audit Reports for listed companies and their material subsidiaries, holding companies, or associate entities, wherever applicable.
5. Annual Secretarial Compliance Reporting
A Secretarial Auditor may issue the Annual Secretarial Compliance Report as mandated under the SEBI (LODR) Regulations for listed entities.
6. Valuation-Related Services
Where registered as a Valuer under the Companies Act, 2013, a Secretarial Auditor may also provide valuation and related advisory services.
7. Certification in Foreign Investment Transactions
The Secretarial Auditor may issue certificates and compliance confirmations in relation to foreign investment transactions and receipt of investments from foreign investors.
8. Certification Under SEBI SBEB Regulations
A Practising Company Secretary may certify matters relating to shares held by inactive shareholders under the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.
9. Certification of Alteration of Constitutional Documents
The Secretarial Auditor may certify alterations made in the Memorandum of Association (MOA) and Articles of Association (AOA) of a company.
10. Digital Signature Facilitation Services
A Secretarial Auditor may assist companies and stakeholders in matters relating to procurement, facilitation, and compliance involving Digital Signature Certificates (DSCs).
SERVICES THAT CANNOT BE RENDERED BY SECRETARIAL AUDITOR AFTER THE AMENDMENT
1. Advisory Services on Legal and Procedural Matters
A Secretarial Auditor may advise companies on legal, regulatory, and procedural matters relating to corporate governance and compliance requirements.
2. Advisory in Securities Issuance
A Practising Company Secretary may act as an advisor in matters relating to the issuance of securities, including compliance with applicable SEBI and Companies Act provisions.
3. Drafting and Vetting of Annual Reports
The Secretarial Auditor may assist in the drafting, review, and vetting of the company’s
Annual Report to ensure regulatory compliance and proper disclosures.
4. Insolvency and Resolution Professional Services
Where duly qualified and registered under the Insolvency and Bankruptcy Code, 2016, a Secretarial Auditor may act as an Insolvency Professional or Resolution Professional.
5. Maintenance of Statutory Records and Bookkeeping Assistance
A Secretarial Auditor may assist companies in maintaining statutory registers, records, and other corporate compliance documentation, including bookkeeping-related support services where permissible.
6. Vetting of Alterations in Constitutional Documents
A Practising Company Secretary may examine and vet proposed alterations in the Memorandum of Association (MOA) and Articles of Association (AOA) of a company.
7. Assistance in Obtaining Import Export Code (IEC)
The Secretarial Auditor may facilitate and file applications for obtaining Import Export Code (IEC) registration and related regulatory approvals.
CRITICAL ANALYSIS
Secretarial Rotation proved to be beneficial in many aspects for the growth and betterment of the company. The basic benefit of this change is that it enhanced Independence and Governance as long-term relationship between secretarial auditors and company can result into interference and biased decision.
It also inculcates the company with the sense of responsibility to align with the rules and regulations. But there are some areas in which it lacks. It can increase the cost for listed companies as appointing a new audit firm involves high financial costs. Apart from this, secretarial audit requires in-depth understanding of a company’s historical compliance, compulsory rotation can lead to auditors facing a steep learning curve every few years.
CONCUSION
The 2024 Amendment made it compulsory for every company to appoint a secretarial auditor after every 5 years and after the completion of that period such auditor need to serve a cooling-off period for 5 consecutive years. This amendment brought major change in the traditional practice regarding secretarial auditor. Earlier, the same independent auditor or auditor firm was re-appointed for many years which also lead to interference of secretarial auditor in areas outside their scope.
Q1: What is the 5-year cooling-off requirement in secretarial audit rotation in India?
Answer: The 5-year cooling-off requirement restricts a secretarial auditor from immediate reappointment after completing the permitted audit term. Companies in Delhi NCR, Mumbai, Bengaluru, and across India follow this governance practice to improve auditor independence and corporate transparency.
- Promotes unbiased compliance reporting
- Strengthens board-level governance
- Reduces long-term conflict of interest
Q2: Which companies need to follow secretarial audit rotation rules in India?
Direct answer (1–2 sentences): Listed companies and certain large public companies governed under the Companies Act, 2013 commonly implement secretarial audit rotation practices. Businesses in Noida, Hyderabad, Chennai, and Pune often review compliance structures to align with evolving governance standards.
- Listed entities
- Companies crossing prescribed thresholds
- Businesses under enhanced compliance review
Q3: Why is secretarial audit rotation important for corporate governance?
Answer: Secretarial audit rotation improves transparency by introducing an independent compliance review after a fixed period. Startups, SMEs, and growing companies across India use rotation practices to improve investor trust and board accountability.
- Better compliance monitoring
- Stronger investor confidence
- Independent legal review process
Q4: Can a secretarial auditor get reappointed after the cooling-off period ends?
Answer: Yes, a practicing company secretary or audit firm may become eligible again after completing the required cooling-off period. Many businesses in Gurgaon, Ahmedabad, and Kolkata review auditor eligibility before fresh appointments.
- Reappointment depends on internal policies
- Compliance review remains necessary
- Board approval may apply
Q5: How does the cooling-off requirement affect startups and private companies?
Answer: Startups and private companies planning expansion or funding rounds often adopt structured governance practices early, including audit rotation policies. Investors in Bengaluru, Mumbai, and Delhi NCR increasingly prefer businesses with transparent compliance systems.
- Supports due diligence readiness
- Improves governance credibility
- Helps during fundraising discussions
Q6: What documents are reviewed during a secretarial audit in India?
Answer: Secretarial auditors review statutory registers, board resolutions, ROC filings, and compliance records under MCA regulations. Companies in Jaipur, Chennai, and Noida maintain proper documentation to avoid compliance gaps during audits.
- Board meeting records
- Annual filings with MCA
- Statutory registers and disclosures
Q7: What are the common mistakes companies make during secretarial audits?
Answer: Delayed ROC filings, incomplete registers, and weak compliance tracking are common audit issues faced by Indian companies. Businesses across PAN India often face penalties due to poor documentation management.
- Missed annual filing deadlines
- Incorrect board resolutions
- Incomplete compliance records
Q8: How can companies prepare for secretarial audit rotation smoothly?
Answer: Companies should maintain updated compliance records and plan auditor transitions before the rotation period ends. Businesses in Hyderabad, Pune, and Delhi NCR often conduct internal reviews to reduce audit delays.
- Update statutory records regularly
- Track audit tenure timelines
- Conduct periodic compliance checks
Q9: Who appoints the secretarial auditor in an Indian company?
Answer: The Board of Directors generally appoints the secretarial auditor based on compliance requirements under the Companies Act. Companies in Mumbai, Noida, and Ahmedabad usually finalize appointments during board meetings.
- Board approval process
- Professional eligibility verification
- Compliance-based appointment review
Q10: Where can businesses get expert support for secretarial audit compliance and rotation in India?
Answer: Corpzo provides professional support for secretarial audit compliance, auditor rotation planning, ROC filings, and corporate governance advisory across PAN India. Our experts assist startups, listed companies, and established businesses with structured compliance management.
- Secretarial audit assistance
- Corporate governance advisory
- ROC and annual compliance support