This webinar discusses the corporate governance requirements for subsidiary companies of listed entities, focusing on secretarial audit reports and secretarial compliance reports, and the practical challenges faced by company secretaries and auditors.
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okay good morning
morning and uh welcome to to the fourth
webinar in the master class series on C listing
listing
regulations and today we are going to
discuss one of the very important topics
on relating to corporate governance
requirements of sub
companies secretarial audit and
secretarial compliance
report so today we have one eminent
panelist Miss maner Roy with us who will
be giving the her expert views during
the progress of the
presentation and one of our partners
Miss Aditi patnik is going to make the
presentation Aditi is our secretary
audit in charge and she takes care of
about 60 to 70 secretarial audits as
well as secretarial compliance reports
and she is having an expert knowledge as
far as the secretarial Audits and
compliance reports are
concerned and she is going to discuss
not only the legal Provisions as far as
the listing regulations are concerned
but at the same point of time she's also
going to discuss certain practical
issues what she was facing or she is
facing apart from other practicing
company secretaries during the course of the
the
audits at the same point of time on the
other side of the table Miss maner Roy
is going to also discuss about certain
issues preping to secet Audits and secet compliance
compliance
reports to briefly introduce today's panelist
panelist
Miss Roy is the company secretary and
Global head legal and compliance of TGA Industries
Industries
limited for the benefit of the
participants TGA Industries is a listed
company and is a global leader in
designing and manufacturing of critical
to operate consumables for
the mining mineral processing and
material handling
Industries so she holds a bachelor
degree in Commerce from usmania
University and is a member of The
Institute of company secures of India
she was previously associated with lafar
holim Bangladesh and lafar omim Mining
private limited for over two
decades and as the same point of time uh
I was privileged to to meet mjeri a few
months before at the Goa Convention of
the corporate Secret's
conference and in fact my luck would
have it I attended that conference
otherwise I would have missed the
opportunity to meet such a professional
you know which I'm privileged to thanks
very much M for oiling us to join
today's uh
webinar thank you sir it's my pleasure
and myself as well as B thank you very
much M myself and Bala are going to be
the pelist from I mean the in-house
panelists and uh Bala you know that very
well Professor balakrishnan is a company
secretary having almost four Decades of
experience in secretarial complains and
he has worked with FCO India limited and
is's a regular speaker at icsc
ccgt and he regularly contributes in
various magazines including chartered
Secretary of
icsi and selflessly he is disseminating
his knowledge across the fraternity as
well as the other professionals also and
by uploading his articles on the
whatsapps and several me the
professionals are getting benefited
especially the buding company
secretaries as far as my I'm concerned I
don't need any introduction as such
because most of you might be knowing me
from time to time so we thank uh all our
panelists today and webinar and joining
us in our knowled sharing Journey on
behalf of the entire team of MAA and MAA
as we all know that National Convention
is in progress and
both b as well as dpti are attending
that apart from our some of our partners
also and I'm sure that uh several of our
participants too might be what's called
as no participating in today's uh
National Convention that's why
attendance I was expecting initially
maybe a bit thin but already I could see
about almost 78 participants are there
which is quite
encouraging now I request miss m to give
her introductory remarks on today's
topic thereafter I will add and before
inviting Aditi I will also request
therea Professor Bak to give his
comments M your please thank you Zak it
is in indeed a pleasure and honor to be
among you all today this uh I as I met
you a few months back and I mentioned
that it is the series which meta and MAA
is doing and what you are doing is a
very encouraging uh for all the company
secretaries Whatever Whenever we have
any doubts whenever we have any any
guidance is required we feel that with
these series you are guiding us
personally so with this I would say that
it's really an honor and privilege to be
here today and being associated with
this seminar on the topic I would say um
when you we discussed this topic uh of
governance requirements related to
subsidaries of listed companies
uh normally when we are working the our
attention is mainly to the listed
companies but as lodr is becoming uh so
I would say it is becoming one of the
most critical things of a company
secretary subsidary companies also need
equal attention so with this topic today
we will come to know and when we are
preparing our for the seminar also we
came to know so many new things which we
thought we knew but when we have to
revisit them we have learned a lot so I
think this will be a very interesting
and a very educative uh seminar for all of
us thank
you and friends as far as my views are
concerned in today's topic as we all
know that when a listed entity is having
subsidaries the financials of the
subsidiary companies are to be
Consolidated with the listed entity in
view of that say we felt that uh it is
the responsibility of the listed entity
to also ensure the corporate governance
Norms whatever it is comping with to get
the same percolated down to its subsidaries
subsidaries
also it is
the one of the reason that why under
regulation 24 the listed entity is
obligated to ensure certain corporate
governance Norms whatever
prescribed in respect to its subsidary
companies apart from the compan es the
secretarial audit report and secretarial
compliance reports are also made
mandatory in fact uh as we all know that
secretary audit reports are applicable
to all the listed entities under 204 but
it may not be applicable to all the
subsidiaries of
the listed entity so V committee
observed that secretarial functions are
very critical to efficient board
functioning and has recommended that
secr auditor may also be extended to the
at least material unlisted subsidiaries
of the listed entity that means all the
subsidiaries secretary audit may not be
mandatory under the listing regulations
as far as the material unlisted
subsidiaries of the listed entity is
concerned though the secret auditor
audit is not mandatory under 204 of the
companies act but still to get secret
audit conducted and submit its report to
the listed entity which has to attach
the same together with its report in the annual
annual
reports now as far as the secretarial
complaint report is
conern several of us have the view that
when the secretarial audit is there why
again another report that is secretarial compliance
compliance
report in fact you know if you go to to
I mean I'm sure that everyone of you
know the r rational for this but just to
give a recap and only for the benefit of
the participants were not aware of this
what is the rational for introducing
this secal compliance
report NSC has verified the data of 595
companies for the financial year 2015
and 2016 and this uh what's called as
you know you can say a survey was
conducted at that point of time or a
study was conducted in the year 2017
second half of 2017 and it has picked up
certain companies listed entities
primarily based on the market cap as
well as the type of non-compliances what
they're observed by the both the stock
exchanges so it has picked up about 595
companies in
20156 financial year and approximately
another thousand companies in the year
201617 and it has observed that the
secret is not very transparent it
doesn't tell anything about what was
examined and what is the extent of
compliance and non-compliance under
different regulations ible to the
company as we all know that as
secretarial Auditors we have to give the
report in the MR3 and in the MR3 in the
same format we have to give the report
and very few Auditors have taken the
liberty of reporting more than what MR3
is asking you to do that but several
Auditors were confined that themselves
and because the audities companies were
also asking that why you have to go
beyond3 so it was felt
that by NS it was conducting the study
that MR3 as such is not revealing
anything so they face that secretary
audit is not focusing on the very
critical requirements of the listing
regulations and most of the secretary
Auditors as I was mentioning that they
prefer to adhere to the format suggested
by the companies Act only because even
in the listing regulations also as far
as the secretary audit is
concerned they said that let let there
be not too forms let it be the only
maybe I mean used for this purpose in
fact the then chairman Mr aagi in one of
the our own conferences PCS conference I
think golden
jubly conference if I am not wrong where
he has attended that he mentioned that
based on this analysis conducted by the
NSE in the year and submitted its report
in February
2018 it was found rather disappointed to
see that many secretary AUD s didn't
report the non-compliances penalties or
compliance of action taken events as
pointed out by the stock exchanges
because as again the same thing you know
in the MR3 there is no requirement to
mention all these things so many
secretary Auditors have confined
that their report only to
MR3 so S Felt and they said that
effective May 2021 they have introduced
the secret compliance report this report
need not be published in
the reports but it is to be submitted to
the stock exchanges within 60 days from
the end of each Financial year this
report talks more about the companes as
far as the listing regulations are
concerned so the orientation of this
report is different to that of the SEC
audit report so hence we don't need to
complaint that when there is a secret
audit why again there is a secret
compliance report because the
orientation of these two are entirely
different so as we know that uh in case
of secal compliance report you have to
also give that what are the non-c
compliances and in the next year's
report these non-compliances how they
have been addressed to that they have
been complied with subsequently or not
that is to be also reported to in
addition to that if SE has taken any
action against the listed entity or its
promoters or directors or the KMS that
is also to be reported in the
secretarial compliance report recently
uh this report was again further amended
and it has also now asking about the
complaints of sec
standards in fact right from 2016 when I
became a member of this SSB that point
of time onwards I used to say that SEC
standards are going to get its
prominence over a period of time I think
now apart from The Regulators we to have
realized the benefits of the uh the
secretary standards are concerned now
still there are some people that they
feel that secal standards are a kind of
a second class uh
I mean preference is given to
that I mean the first preference is to listing
listing
reg second preference is to company act
provisions and third is to secret
standards now the secretarial the PCS
has to give comment about the compliance
of Secretarial standards in the
secretarial compliance report so this
particular report may be taken as a
feeder for the secretary
audit and at the same point of time this
is applicable only to
the uh listed entities and it is not
required to be given as far as the
material subsidaries as concerned
material subsidaries only secet audits
are required they don't need to give the
secetary compliance report I think I
have given enough uh what's called
introductory remarks why I have given
almost I have taken about five to seven
minutes is this particular controversy
that why to reports are required is
there for since the time I think if I'm
not wrong SC was introduced in the year
2019 am I correct ad 2019 or 2020 this
was introduced right from the time for
the last four five years this
controversy is going that and at the
same point of time that the amount of
seriousness what is to be given to
secretary compliance report is not still
being given and the secr and the PCS are
facing some kind of a difficulty so
today both additi as well as are going
to discuss about this from the two sides
of the table and myself and Bala will in
where required to now I request
Professor balakrishna also to give his
introductory remarks and there after
will take over thank
to good morning to all of
you I as usual have a great pleasure in
welcoming you all on my own behalf and
also on behalf of Ma
and sudakar started with it the score
has now gone up to 125 people I can see
that definitely shows the importance of
this particular
topic and as sudhakar said clearly and
and this is and this is despite the and
this is despite the National Convention
going on yeah and several participants
might be attending that also that is
right and today we actually have really
a very eminent Center who who virtually
holding a practical experience of
conducting the secretarial audit for
many companies listed unlisted companies
material subsidy companies very vast
experience and we also have the other
side representing the company that we
have auditor and auditing generally it
is said two professional never agree on
anything except one thing they agree for the
the
disagreement so there are lot of issues
between the two people watch secal
audior is looking forward what the
company secretary would like to state in
the report or not otherwise to report
what he want to share what he doesn't
want to share all these issues are there
because the problem with the secret
auditor is how do I certify without
verifying the facts there are many
examples which can be actually given one
of the claric
example was actually regarding to the
meeting held by the independent
directors I think if you all recall many
of you would have been present in the
last two three seminars and this was one
of the matter which was very elaborately
discussed I think our sudagar is
actually taken clear very clearly has
given the company secretaries are not
party to the independent directors
meeting he is not acting as a company
secretary he is not pred to have the
minutes of the meeting very clearly so
minutes of the meeting of the
independent directors not going to be
available it cannot be demanded that is
one thing second thing is that how do
the PCS certify he very clearly said if
the atance register is signed by the
director who present in the meeting that
is the conclusive evidence of meeting
has been conducted in addition to agenda
item has been issued and minutes uh
sorry and the notice has been circulated
Etc other thing and all based on that
they allow to certify that he very
clearly is one of the thing even today
many people keep demanding no no no we
want to see the minut we want to see the
things and all the things which is
actually unwanted similarly the making
the entries in the register ETA and all
the things within the time and ETA
within 7 Days within 10 days ET on the
reement how do I check it see the thing
is mostly we are all being a
professional we to believe each other
trust and believe once the document is
presented to you if it is updated you
there is no doubt there is something
would have gone wrong back or something
to to go by that to the larger extent
and another thing is that as you said
very clearly the
secretarial audit and secretarial
complaints report report what regulator
now looking they are looking little more
beyond the secretarial audit report in
terms of the Assurance from the company
in the secretarial
complaint because what they are looking
forward in the secretarial compliance
report is what is the action arising out
of the non- compliances which has
happened in the past what is the action
taken by the company on this issue what
is the complaint status today and again
what is happening is on that what is the
management view or what is the
observation view remarked by the people
these are all the things which you are
looking for so Frankly Speaking the
secretarial audit report pertain only
for the proceeding year what is issued
by the PCS but where the secretarial
complaints report goes much beyond the
proceeding years the past non
compliances which is specifically
required to be addressed that is one
thing which is there between the report
so in which case it cannot be a
duplicated there is a separate exercise
has to be undertaken for certifying the
second complaints certificate and
another thing is there if you actually
seen the format which is issued by the
sebi very clearly the first point itself
is complaints relating to secretarial
standard one and two which is actually
mandatory so they have to actually State
what is the secret standard compliances
they to stay any non- compliances they
to say first thing they to say compl
they comp or non- compl if there are any
contention any non- compliances Etc then
again that has to be actually stated and
arising out of that if there are any
violation which has taken place any fine
penalties are L that is to be indicated
so all these details which are actually
going through any action is pending what
is the action is taken what is the
action initiated by the company what is
the complaint stated all those things
which are Reed to be given and not only
that it has to you to address everything
that means you start with the secret
standard complaints you talk about it
you you talk about the various policies
circular guidelines issued by the CB
other thing and all then again you talk
about website the maintenance of the
website whatever the various disclosure
the updation because website normally
there are many policies which are
actually issued but the thing is which
are required to be updated from time to
time the regular maintenance regular
review which are actually required they
are also specifically you to address in
this particular report and again it also
talks about the disqualification of the
directors specifically you have to
comment on the disqualification of
director again going to related parties
and again it is talking about the
preservation of the documents so many
other things which are actually looking
into in the secr complain report it is
not the duplication of the secret report
SEC complaints report that is one thing
very clear but many time what happen
when I talk to the many practicing
professional also they also face the
same problem when they go to the
organization for the certificate the
employee secretary or the the management
they say what is there you already
issued the secret certificate secret
audit report So based on that you can
issue this report that is the standard
thing which they people seem to be
talking in many organization which is
one of the concern about the Practical
aspects and I think Aditi will address
definitely this how she is facing what
is that how she's actually informing the
importance what is re ex other thing and
all one thing on the other side we have
the MRI who also speak on that that is
one thing and second thing is now today
the way Regulators are looking forward
is more of the transparent and
disclosure there nothing which you can
actually disclose half or you can hide
or something that that is not the case
everything is reord to be disclosed that
is one thing and more or less very
recently in one of the seminar also we
did discuss that c has actually come out
in the similar line with the company s
for imposing the penalty for the
non-compliances more or less on the
continuing offense which is leved by the
company site that they also come
out there are lot of things which should
be looking after the non-compliances
very seriously and they have been taking
action and the company secretes are need
to be very very careful in fact company
secr both I say that for the employees
company security as well as the
practicing company security both they to
be very very careful that is number one
number two as on today if you look at it
as sudagar puts it audit report form the
same under the C regulation of the
company site because the C regulations
are actually adopted and accepted what
is prescribed on the company side there
is no change so naturally it goes under
the section 204 of the company side the
second audit
report but there have been lot of
uh non-compliances
either from the company side or from the
practicing company secretary side also
on these issues so the MCA Regulators
though they are not having a
jurisdiction or the sa regulation but
they are definitely having the
jurisdiction over the company law and
they have taken lot of issues and if you
look at the recent orders which are
actually coming out from the regulator
they are not only referring the
secretarial standards they are also
refer in the guidance issued by the
second standard one of the order which I
have seen very recently they
have actually referred the revised
guidance latest revised guidance note
issued by the company secretary that
they have category held the responsible
the secal auditor in one of the related
party transaction for the non-disclosure
he has been taken for the task he has
been actually penalized So to that
extent Regulators are very much
concerned about it we cannot take it
likely that saying you know as put it
SEC standard is the substandard
regulation and there is nothing like
that it is not like that because SEC
standard is a very very important thing
which actually talks about it so much
efforts have been put in by the SEC
standard board on that and they have
been reviewing it they have been
bringing the Rev guidance notes Etc
which is very helpful for our profession
we to Bound by that there is no doubt
about it I have the great great heads up
to the SEC standard board for their
doing the extraordinary job on this so
this is going to be very interesting
session for all of us and there are lot
things to learn lot things to know the
Practical aspects we will be having an
opportunity to hear both the sides from
the audity and auditor so I also eagerly
looking forward like all of you so let
us start with the presentation let us
move on and as usual you can put up your
doubts and queries Etc on the chat box
we will take it then and there if there
are anybody wants to talk they can raise
their hand we can actually talk also sud
adti very good morning to all the
participants uh thank you sudakar sir
thank you Bala sir for giving us a very
good introduction to the topic and uh I
on behalf of mean mea also thank mujuri
to be a part of this session so I
welcome all of you once again to the
master class on sebi lodr part four so
today's topic of uh deliberation is
Corporate governance requirements of
subsidiary companies secretarial audit
report so uh regulation 24 of the sebi
lodr subregulation one reads as follows
at least uh one independent director on
the board of director dors of the listed
company shall be a director on the board
of directors of an unlisted material
subsidiary whether Incorporated in India
or not so uh for uh for the purpose of
this regulation there are two things
that needs to be considered first is uh
as the word uh the term subsidiary has
been defined under the company's act so
whenever a company is holding more than
51% of the total voting rights or has
control over the composition of the
board it qualifies to be a subsidiary
and further to understand the term
material subsidary so sebbi uh
guidelines sebbi regulations have
actually uh used the term material under
two regulations so one is under 161c and
one is under regulation 24 so the
regulation 24 is very specific when it
comes to the definition of material
subsidiary so uh it is is like a
material subsidiary for the purpose of
this provision is when a subsidiary
whose net worth or the income exceeds
20% of the Consolidated income or net
worth respectively of the listed entity
and its subsidaries in the immediately
preceding accounting here so for the
purpose of this regulation it is
pertinent uh to understand that the uh
uh the trigger point here is crossing a
percentage of more than 20% of the
Consolidated income or net worth so if a
subsidiary is contributing to more than
20% of the income or net worth of the uh
listed company along with all its
subsidiaries then it qualifies to become
a material subsidiary and for the
purpose of this uh uh calculation we
will have to consider the financials or
the figures as on the immediately
preceding accounting
year so uh let us take a few examples
just to understand how does a entity
qualify to be a material uh subsidiary
supposedly XY Z is a subsidiary of ABC
limited and in the financial year 2022
23 the net worth of XYZ limited happens
to be 190 CR and the Consolidated net
worth of ABC limited is 18 uh 800 CR so
when we calculate the consolid ated in
net worth of ABC limited it is the net
worth of the subsidiary is contributing
to more than 20% of the Consolidated
netw worth therefore XYZ shall be
considered as a material subsidary of ABC
limited uh now moving on to a next
example where we have a negative network
uh we take the same example of the
figures supposedly XY Z is having a
negative net worth of 190 CR and ABC is
also having a negative net worth of 800
CR so uh what we need to understand here
in this regulation is irrespective of a
positive or A negative net worth if a
subsidiary is contributing to more than
20% of that Consolidated figure so it
happens to be or qualifies to be a
material uh unlisted subsidiary so
irrespective of the negative net worth
XYZ continues to be considered as a
material subsidiary of the listed
entity now further going to uh another
example where there is a positive as
well as a negative uh net worth so uh
here the net worth of XYZ limited is 120
CR and the Consolidated net worth of ABC
limited is uh running into negative
figures but it is negative 800 cross so
will the uh subsidiary be still
considered as has a material subsidiary
of ABC limited so even though it is a
positive contribution that it is making
so what what what we have to understand
here is uh even though the Consolidated
figure is running into a negative figure
but and the subsidary compan is making a
positive contribution but if it is not
Crossing that limit of 20% it will not
be considered as a material subsidiary
so even though the final figures are
negative and there is a positive contri
bution from the subsidiaries financials
still it is less than 20% and therefore
it shall not be considered as a material
limited now moving forward uh we go to
regulation 24 subregulation uh 2 uh
which is stating that the audit
Committee of the listed entity shall
also review the financials
and in in particular the Investments
which is being made by the unlisted
subsidiary so here the term material is
not used so it is only an unlisted
subsidiary so uh when uh the sub like
when a listed company's investing in a
subsidiary it becomes equally important
for the board of directors of the listed
company to have a overall idea about how
the operations of the listed uh of the
subsidary company is taking place
therefore audit committee the stress on
audit committee has been made because uh
in the last lodia classes also we have
kind of stressed upon the functions that
a audit committee uh performs therefore
audit committee constitutes of people
who have Financial background therefore
when they review the financial
statements it is like when they are
reviewing the financial statements uh it
is the audit committee is able to get a
entire background entire background of
of the uh operations of the subsidiary
company of the revenue generation of
maybe the investment policies or the
profitabilities uh profitability made by
the subsidiary the borrowings that has
been done so ultimately uh because
ultimately any changes which takes place
in the financials of the subsidiary is
going to have an direct impact on the
financials of the parent company which
is the listed entity because there is a consolidation
consolidation
therefore it becomes very important for
the audit committee to go through the
financials of the uh uh listed of the
unlisted subsidiary as
well uh now uh the next uh subregulation
that is subregulation three of
Regulation 24 it talks about uh the
minutes of the meeting of the board of
directors of unlisted subsidiary shall
be placed at the meeting of the board of
directors of the listed entity so uh
this is again a very important point
because as we all know minutes are kind
of the official recordings or the
proceedings that takes place uh uh that
takes place in a meeting so uh it is
like we in uh the board of directors of
the listed entity in order to understand
the board processes the decision making
uh flow in the unlisted subsidiary it
becomes very important for them to even
understand the kind of procedures which
is being followed in the unlisted
subsidiary so noting of the minutes can
be in a way uh it can be one of the ways
through which the board of the listed
company can have an idea of how the
unlisted subsidiary is
functioning so ADI if I may I would like
to add out here that it is not always
import uh the signed minutes which have
to be placed if before because what
happens normally if it's unlisted subsid
their meetings have to be held before
the listed companies meetings are held
so we there will be a time lack before
which the minutes can be finalized and
placed so we need to have a very firm
calendar when the unlisted subsidaries
are having their minutes by which days
in how many days we need to close those
minutes so that a right picture can be
placed for the listed company it is and
since the regulation is very open it has
not given a time limit which uh Which
comp uh which which periods minutes have
to be whether it's the last quarters or
the halfly results so there is no there
is no Clarity so we have to have a very
good schedule to ensure that when the
meeting is happening the latest minutes
are there with them the latest
information is placed before the board
so this is very important for governance
point of view and disclosures to the
directors that they have complete
information on what is happening in the
unlisted subsidaries and here I would
say whether it is material subsidary or
a non-material subsidary that is not
there is no differentiation so if you
have got 20 subsidaries you have to
ensure that all those subsidiaries and
even if they are step down subsidaries
you have to ensure that all those
minutes are always
available with us so that they can be
placed on a practical aspect I know it
becomes very challenging but if your
minutes are not signed off and
especially if you have board members who
are there who are not your main board
members then you can have the draft
minutes at least place so that if any
director wants to review and has any
queries we can uh we can do so this for
me this is one of the most critical
aspects which has to be looked at under this
this
regulation so
add I would like to ask one thing yeah
what you rightly said it is okay that
you can have a meticulous planning you
can have the board meeting of the suby
plan Etc all the thing can be done so
long as we are actually the subsidies
are situated in India but this also
covers the subsid which is situated outside
outside
India so that is not within your scope
actually sir
uh when the subsidaries which are not
situated in India their accounts are
also getting reviewed by us so those
accounts also have to be signed off to
be placed with the main company's board
so it's not that we lost your
voice am I AUD we yeah yeah you're
audible you're very clear so the thing
is if a subsidary is is from outside
India so when we are consolidating the
Indian listed companies accounts these
subsidaries also have to even if it's
the quarterly accounts they need to
present their we need to take up their
figures so if you're taking up any from
them you have to have it approved by
their board and then brought to the main
board so at any point of time any
figures which are going to come from the
subsidary have to be signed off by its
Bo and then we then only the audit
committee will take them assigned accounts
accounts
so even if there is no requirement in
their companies act which we Face also
in on very practical situations it might
not be the that country's regulation
which might require but since we require
it in India we will have to ask and this
is a situation which we have seen even
for when you when I when we are in the
Indian company which is a subsidary of a
foreign uh holding company if you are in
any other geography their accounts will
only get uh closed if we from the in
India are able to give them our audited
accounts or unaudited accounts so our
board has to review it and then give it
so the cycle is a continuous cycle
whether when we are a listed company in
India or we are a part of a company
which is listed outside India
also so on very practical aspects
minutes of the subsidary companies have
actually become even if we in India take
three to four days to finalize minutes
there sometimes it has to be taken that
their minutes have to be closed within
24 hours so that they can be reviewed
and then placed uh to the listed companies
board I think sudagar wants to add
something yeah I fully agree with what M
says that in fact though there is no
timelines prescribed to place which
period minutes are to be placed before
the listed entity but I I can always say
that as per the company's act within 30
days the minutes are to be finalized so
where though they are not signed as she
rightly has mentioned it the moment the
30 days period is over you are supposed
to finalize the minutes only thing is at
the next board meeting you may get it
signed so all those minutes are to be
placed before the listed entity as in
when the board meeting of the listed
entity is taking place because one of
the uh what's called as know the
responsibilities of the board of
director is to ensure that the subsidary
companies are complying with the
corporate governance Norms apart from
the performance of the subsidiaries are
concerned so while you are placing it
before the board normal practice every
one of us is following is that to attach
the the what's called a subsidary
minutes together with the agenda and one
of the normal agenda items is to review
the minutes of the subsidary companies
if you are not able to attach to the
agenda maybe we will circulate it
separately as a binder or whatever you
may concerned always it is a good
practice to summarize the minutes and to
bring the significant items in the
particular minutes of the meetings
because by merely dumping everything on
the board of directors is not a a good
company secretary's job you it is always
advisable to summarize the significant
decisions company wise apart from that
full minutes are also to be placed
before the
board yeah only problem as I said also
it will only you know
creates a problem with the sub situated
in the overse because many time what
happens is as she rightly says their law
does not govern that our law governs
there is a some difficulty which is
being experien which I also P sometime
so that anyway we have to actually
educate them what is the law requirement
what is the thing and all we have to do
that is the thing yeah so sometimes even
the subsidary minutes are in their local
language so the the profession profal
who is out there has to be has now got a
custom that when it is being made in the
local language at the site the English
is also done so that when we are placing
it we are actually placing both the
languages which are signed off and uh
and have to be there so there are
companies where we need to ensure that
even though local language is there it
is converted and sent to us so that is
one and uh if I may add to this uh there
are in certain uh countries the the
requirement is that even a presentation
has to be made on whatever are uh
whatever are the Affairs of the
subsidary companies so the certain
countries which are also following the
listing regulations like us we have had
a situation where we have had to ensure
that all the list uh subsidaries have
made presentations even though if it's
even if it might be a two-pager they
have made the presentations and
circulated it along with the minutes so
that the in the the listed company has
happening there is
one chat has
come uh it is actually addressed to
you the threshold of the material
subsidy is 10% contribution the
Consolidated income to network since the
last four years instead of the 20% as
the as explained in the example in your presentation
P so which one sir here they are saying
the threshold of the material subsid 10%
contribution to the Consolidated income
stock Networth the last four years
instead of
20% uh no sir So 20% is only for the
purpose of subregulation one that is 24
regulation 24 subregulation one that is
uh if I may go back to the yeah please
please go back sir just a minute sir
it uh so this one if we go through this
regulation once again it is regulation
24 subregulation 1 it is only for the
purpose of having the independent
director of the listed entity on the
board of the unlisted materal IAL
subsidiary for as as I previously also
told when we look at the sebi
regulations there are two regulations
which is defining the materiality
criteria one is 16 uh 161c which is
obviously saying the 10% the other one
is the material subsidiary only for the
purpose of having the independent
directors on the board of the understood
subsidary so that for that purpose
itself it is 20% only for rest of the uh
rest rest of the criteria remains a 10%
only okay probably I think yeah yeah
that is the correct view also yeah
so yeah I question on this which is
always this thing that this 20% once you
have appointed an independent director
and in the next uh Financial year it is
not having this 20% it goes down what do you
you
do you once you have appointed I think
you will have to continue with that
independent director on that board you
cannot say just because the 20% netw
worth has is not there in this year
because this is a group level which you
are looking at from the listed company
so if in the next are some subsidary has
not done well or somebody else has done
it and because of which your figures
have inflated or have gone up so what do
you do do you you you can't remove the
independent director so once you have
appointed somebody that person will
continue to be on that vot whether 20%
is met or
not so I would quote it in this way that
it is obviously a good corporate
governance because uh usually uh how it
happens is once this uh uh transa I mean
once this provision is getting triggered
then you continue to fall under that
only so like you said like appointing
someone on the board and asking them I
mean removing them just because we are
not reaching out to that criteria
doesn't obviously it is not solving the
purpose so it is kind of once we reach
that criteria it is obviously a good
corporate governance practice to
board and if that independent director
retires or so the new one who comes will
have to be there so these are very
practical things which we have to uh
start thinking about because once we
have those in our thought proc processes
then suppose it is not a person who gets
import it is that subsidiary will always
need to have an independent director
there so where if this Mr X goes out
when Mr Y is coming in as another one do
we still a point or not so these are
just thoughts which keep on coming to us
when we are looking at it on a
aspects
there one more question which has
actually come here is it necessary that
the subsidiaries AGM approving the IR
account should be held before the
parents AGM approving the Consolidated accounts
accounts
yes there is no doubt about that yeah it
there is a Consolidated financials which
is placed for adoption in the AGM of the
parent company until and unless we have
the financials of the subsidary it is
not possible for
yes it is not possible for the holding
company to consolidate it accounts so we
need to have the final figures
of for
that the only thing is they have to get
their accounts audited before
consolidation takes place the AGM of
subsidary companies need not be held
before the AGM of the listed
entty they need not be adopted for the
purpose of consolidation they need not
be adopted in the respective subsidiary
company AGM only thing is that the
auditor the accounts are to be audited
and then thereafter the consolidation
can takes place as far as the listed
companies AGM is concerned that can be
held before the subsidary company agms
are concerned there is no bar answer
that yeah correct audited accounts need
right one yes go ahead because we are
already losing time and know because
there are already 114 1150 it is okay we
move on we'll take the question later
yeah okay sir uh so now moving on to
regulation 24 subregulation 4 uh which
is saying that the management of the
unlisted subsidiary shall periodically
bring to the notice of the board of
directors of the listed entity a
statement of all the significant uh
transactions and Arrangements entered
into by the unlisted subsidiary so again
uh there are few questions to answer
here first is what should be the
periodicity how do we ident identify the
significant transactions and who can be
the management for the listed entity so
in the previous slide also as we
discussed there was no specific timeline
mentioned for noting of the minutes so
even for this particular regulation
there is no specific period that has
been mentioned but significant
transaction has been very clearly
defined under the regulation so
significant uh transactions if we see it
it it is like any individual transaction
or Arrangement which is exceeding or it
might exceed to more than 10% of the
total revenue or the total expenses or
total assets or total liabilities so the
transaction or Arrangement can be either
of it so either of it as the case may be
if it is exceeding the threshold limit
of 10% of that unlisted subsidiary in
the immediately preceding accounting
year then the same has to be uh then the
same has to be noted by the board of
now this is again a very important uh uh
relevant regulation sub regulation five
and here we we have to again Focus that
the word material subsidiary has been
used for the previous two regulation it
was only subsidiary and for this it is
again a material subsidiary and for the
purpose of this regulation it is 10% so
a listed entity shall not dis dispose of
shares in its material subsidary which
will result in the reduction of its
shareholding either on its own or
together with other subsidiaries to less
than 50% or seize the exercise of
control over the subsidiary without
passing a special resolution in the
general meeting so if only if the
shareholders of the parent listed entity
is giving uh the approval of going for a
reduction of the sh share holding then
only that can happen otherwise apart
from that the listed entity on its own
accord cannot reduce it uh reduce its
shareholding Beyond uh 50% or Sease to
have the
control so we have two exceptions to
this so under these two circumstances
only the shareholders approval does not
uh become mandatory so first is if the
listed company is going for a reduction
of its share sh holding under a scheme
of arrangement which is duly approved by
the court of law or the tribunal or in
case a resolution plan has been approved
under the section 31 of the IBC and a
subsequent intimation to the stock
exchange has been made within the
timelines so only under these two
circumstances the prior approval of
shareholders is not required otherwise
in order to reduce the shareholding we
shareholders now now subregulation 6
talks about uh when the listed entity is
wanting to dispose of or sell or lease
the assets of the material subsidiary
and those uh those are amounting in
aggregate to more than
20% during a financial year then also a
prior approval of the shareholders
becomes mandatory so uh Whenever there
is a decision in the listed company for
a disposal which is amounting to more
than 20 % then it is mandatory for the
listed company to first go to their
shareholders take the approval by way of
a special resolution and then only they
can dispose it uh dispose the assets of
the material subsidiary then there is
again the exception to this sub
regulation as well so the uh the
exception stands same as the previous
one if there is a scheme of arrangement
or which has been duly approved by the
court or the tribunal or or a resolution
plan has been approved by the IBC then
and intimation has been made so under
these two circumstances the prior
required now this is a very interesting
uh sub regulation that is uh it is
talking about where a listed entity has
a listed subsidary so uh which is itself
a holding company then the provisions of
this regul ation shall apply to the
listed subsidiary in so far as its
subsidiaries are concerned so what we
have to focus uh on this very provision
is that for all the previous sub
regulations we were talking about
unlisted subsidiaries so by virtue of it
being an unlisted subsidiary the listed
company was responsible but here uh
supposedly we take an example ABC
limited is the parent holding company
and it is having eight subsidiaries so
out of the E
subsidiary ABC limited is the listed
subsidiary of XYZ limited now further if
ABC limited is having subsidiaries then
the ABC limited is bound to take note of
the minutes of the uh unlisted
subsidiaries the audit Committee of ABC
limited has to review the financials so
all the provisions that we have
discussed so far of Regulation 24
becomes applicable to that listed subsidiary
uh so now just to uh give a some just to
sum of the regulation 24 so it is like
at least one independent director of
listed entity shall be a director on the
board of the unlisted material
subsidiary audit committee shall review
the financials especially the investment
made by the unlisted subsidiary minutes
of the board meeting of unlisted
subsidiary shall be placed at the
meeting of the board of the listed
entity all significant transaction which
is crossing the threshold of 10% has to
be intimated to the board of the listed
entity and disposal of shares below 50%
or the selling or disposing of assets
more than 20% will have to require the
prior approval of the shareholders or
else it can be done through the two
exceptions now uh a very a very common
doubt which usually
might rise in the minds of the audience
is that regulation 24 is uh talking
about material subsidary in certain
places and only subsidary in certain
places so if we refer to the FAQs in the
icsi also which has been uh given so
there it is very clear that whichever
regulation is reading as material it has
to be considered as material whichever
is only unlisted subsidiary then for
that for that purpose it will be read as
subsidiary uh now moving forward to
regulation 24a which is secretarial
audit and uh secretarial compliance
report so now uh secretarial audit uh as
per regulation 24a secretarial audit uh
shall be undertaken by every listed
company and its material unlisted
subsidiaries which are Incorporated in
India and a secretarial audit report is
given given by a PCS shall be annexed
with the annual report of the company so
uh let us understand one thing here when
we are discussing this regulation we we
can go back to uh section 204 of the
companies act so companies act also
mandates certain classes of companies
which has to mandatorily undergo a
secretarial audit so when we refer to
these material unlisted subsidiaries so
it is it is contributing to more than
10% of the Consolidated income or the
turnover of the listed entity not
necessarily that this material unlisted
Subs uh subsidiary will fall under the
criteria of section 204 but even if it
is not having a borrowing or it is not
having those Capital that is paid up
capital and turnover under 204 and it is
falling under 24a then that entity is
mandatorily required to undergo a secretarial
secretarial audit
audit
uh then uh it is like it is uh another
very important uh thing that we need to
understand here is that since the audit
is not getting triggered due to
company's act the company's act
Provisions does not get applicable to
the unlisted subsidiary company here for
example even if there is a secretarial
audit report issued to the material
unlisted subsidiary it need not
necessarily file with the ROC along with
the director's report because this is
something which is germinating purely
out of the sebi regulations hence the
ROC or the company's Act is not coming
into picture and similarly when this
audit report is given by a PCS it shall
company uh now coming to the secretarial
compliance report uh so what is uh it's
saying that every listed entity shall
submit a secretarial comp liance report
in the specified format to the stock
exchange within 60 days from the end of
each Financial year so I think a lot
have already been discussed about why uh
why is there a need of the secretarial
compliance report uh even when there is
a secretarial audit mandated and we have
deliberated quite for some time on that
so now we will move ahead so uh going
for the secretarial audit report
format uh when a PCS is conducting a
secretarial audit so let us understand a
few points here uh it is again there are
categories of companies for which the
audits are conducted so it can be a
listed company it can be a public
company it can be a private company so
according to the category in which the
compan is fall falling so we will have
to look at all the regulations which has
been pre pre predefined by the MCA or by
the companies Act and the specific
format so there is the companies Act
Securities contract act depositories act
for the listed companies all the SEI
regulations whichever becomes applicable
to them during the course of audit those
have to be kept open and the rest can be struck
struck
off uh now we come to the very important
part that is the point number six that
is we will have to mention all the other
laws that is specifically applicable to
the company so here we are trying to
focus on the sector specific or the
industry specific law so uh basically
here the responsibility is both on the
shoulders of the management or the
audity company as well as the PCS who is
conducting the audit because it uh every
company uh needs to undertake a thorough
analysis of the laws that is getting
applicable to it and then they have to
ensure a timely compliance of that so
during the course of audit uh what is uh
what is to be done is probably uh the
audity company and the auditor can get
into a meeting wherein the different
laws which is applicable can be figured out it can be uh investigated upon and
out it can be uh investigated upon and then the specific compliances of those
then the specific compliances of those laws can be checked upon but one very
laws can be checked upon but one very important thing again to uh Focus here
important thing again to uh Focus here is that as a PCS we should not take it
is that as a PCS we should not take it on the face value of what is being given
on the face value of what is being given to us from the audity side supposedly
to us from the audity side supposedly there is a list of 10 laws which is
there is a list of 10 laws which is given To Us by the auditing company as a
given To Us by the auditing company as a auditor we have a separate
auditor we have a separate responsibility attached to find out
responsibility attached to find out actually what are the laws which is
actually what are the laws which is applicable to the company so uh this as
applicable to the company so uh this as a PCS we we have certain documents on
a PCS we we have certain documents on which we can rely upon uh the most
which we can rely upon uh the most important of being uh of it being the
important of being uh of it being the memorandum of Association so uh when we
memorandum of Association so uh when we go through a memorandum of Association
go through a memorandum of Association of a company the object laws is very
of a company the object laws is very very particular as to what are the
very particular as to what are the objects that a company is trying to uh
objects that a company is trying to uh pursue during its course of business so
pursue during its course of business so when we go through that we are able to
when we go through that we are able to understand the basic sector or the
understand the basic sector or the industry into which the companies
industry into which the companies falling then uh again if we go see the
falling then uh again if we go see the kind of financial information that is
kind of financial information that is available probably the balance sheet or
available probably the balance sheet or the pnl account which we have of the uh
the pnl account which we have of the uh company so there also we can see from
company so there also we can see from where the revenue is getting generated
where the revenue is getting generated so as a PCS we can rely on these
so as a PCS we can rely on these documents to understand the nature of
documents to understand the nature of business so it might so happen that
business so it might so happen that companies might have a single line of
companies might have a single line of business so if they have a single line
business so if they have a single line of business then the sector specific
of business then the sector specific laws can be identified very easily if
laws can be identified very easily if there are multiple businesses which is
there are multiple businesses which is being done so we will have to first
being done so we will have to first understand or what is the kind of uh uh
understand or what is the kind of uh uh income contribution or the revenue
income contribution or the revenue contribution that each of the activities
contribution that each of the activities is doing and then accordingly those
is doing and then accordingly those activities have to be focused upon so
activities have to be focused upon so basically this is a joint joint kind of
basically this is a joint joint kind of activity between the audity company and
activity between the audity company and the auditor wherein the laws are
the auditor wherein the laws are actually uh identified and then the
actually uh identified and then the requisite compliances are checked
upon I would like to add only one thing here that if you see in this report the
here that if you see in this report the the MR3 secretarial auditor is giving a
the MR3 secretarial auditor is giving a report that I we have also examined the
report that I we have also examined the compliance with the applicable Clauses
compliance with the applicable Clauses of the following that is secretary
of the following that is secretary standards issued by icsi now off late if
standards issued by icsi now off late if You observe the register of companies is
You observe the register of companies is pointing out several companies that they
pointing out several companies that they are not complying with the ss1 as well
are not complying with the ss1 as well as
as SS2 now wherever the cases the secretary
SS2 now wherever the cases the secretary auditor has given a clean cheit that he
auditor has given a clean cheit that he has given a clean report in the MR3 and
has given a clean report in the MR3 and subsequently the regulator observed that
subsequently the regulator observed that secret standards are not complied with
secret standards are not complied with at the same point of time along with the
at the same point of time along with the secret audits secretary standard not
secret audits secretary standard not compliance he may take the company to
compliance he may take the company to toask as well as the secretarial auditor
toask as well as the secretarial auditor for giving a wrong reporting also so the
for giving a wrong reporting also so the company secretaries are to be very
company secretaries are to be very careful while they are certifying that
careful while they are certifying that about the compliances whether it is a
about the compliances whether it is a listing regulations or whether it is
listing regulations or whether it is secret standards
ahead so ad I will just like to add one what you said on uh Point number six is
what you said on uh Point number six is that yes every company has to also every
that yes every company has to also every listed company we need to place before
listed company we need to place before our audit committee and the board the
our audit committee and the board the list of compliances status of
list of compliances status of compliances and I feel that that is a
compliances and I feel that that is a very right document when we share it
very right document when we share it with our practicing company secretaries
with our practicing company secretaries or when they doing their audit so that
or when they doing their audit so that you know they have because everything
you know they have because everything you cannot they will be laws while we
you cannot they will be laws while we are doing the factories act there will
are doing the factories act there will be boilers there'll be rubber act
be boilers there'll be rubber act there'll be so many acts which are
there'll be so many acts which are becoming applicable which we might not
becoming applicable which we might not as um you might not have the details
as um you might not have the details about but when we have to report the
about but when we have to report the same compliances to the board and if we
same compliances to the board and if we share it with the company secretaries uh
share it with the company secretaries uh who are doing the the audit then it
who are doing the the audit then it becomes very easy but at the same time
becomes very easy but at the same time time you cannot always always depend
time you cannot always always depend always for everything on the company we
always for everything on the company we also look on the guidance so that
also look on the guidance so that everything it's a it's it's a
everything it's a it's it's a two-way communication here
to yeah in fact M I would like to say that especially the company secretaries
that especially the company secretaries who are in service because they amount
who are in service because they amount of responsibilities what what have been
of responsibilities what what have been interested upon them as key manager
interested upon them as key manager person these days it is always advisable
person these days it is always advisable that they have to have a strong
that they have to have a strong secretarial auditor with them so that
secretarial auditor with them so that the strong secretarial auditor is going
the strong secretarial auditor is going to insulate the company secretary who is
to insulate the company secretary who is the KMP from his responsibilities so one
the KMP from his responsibilities so one should not take audit as in a negative
should not take audit as in a negative way only and auditor is going to trouble
way only and auditor is going to trouble me so that let me have the soft auditor
me so that let me have the soft auditor so that he will not ask me anything and
so that he will not ask me anything and he will not trouble me anything and uh
he will not trouble me anything and uh at the same point of time in fact let me
at the same point of time in fact let me also say that several times it may so
also say that several times it may so happen when we are appointing the
happen when we are appointing the secretarial
secretarial auditor if I am in the company I should
auditor if I am in the company I should not think that I'm doing a kind of an
not think that I'm doing a kind of an what's called as I'm giving an
what's called as I'm giving an obligation and okay by appointing him it
obligation and okay by appointing him it is not so you need a secretarial auditor
is not so you need a secretarial auditor so you are appointing that is what the
so you are appointing that is what the company secretaries who are in service
company secretaries who are in service have to law at the same point of time
have to law at the same point of time they too have to realize that the
they too have to realize that the secretarial auditor equally having his
secretarial auditor equally having his own responsibilities and
own responsibilities and accountabilities towards the regulator
accountabilities towards the regulator as well as towards the Institute so
as well as towards the Institute so wherever they have to say that if it is
wherever they have to say that if it is if it is imperative for them to qualify
if it is imperative for them to qualify the report or to make adverse
the report or to make adverse observations and all those things
observations and all those things according to me the company secr in
according to me the company secr in service they should not put over
service they should not put over pressure on the secretary auditor to
pressure on the secretary auditor to compromise
compromise because if not today tomorrow if not
because if not today tomorrow if not tomorrow day after certainly if any
tomorrow day after certainly if any non-compliances especially major
non-compliances especially major non-compliances are there they will come
non-compliances are there they will come out not necessarily the regulator has to
out not necessarily the regulator has to take the action immediately he may take
take the action immediately he may take the action down the line two years after
the action down the line two years after also so better always to have as strong
also so better always to have as strong a sec auditor as possible and if that
a sec auditor as possible and if that secretary auditor is troubling your
secretary auditor is troubling your department so you should be happy that
department so you should be happy that yes he is doing his job properly though
yes he is doing his job properly though sometimes it may easy to say and it is
sometimes it may easy to say and it is difficult but at least till the time I
difficult but at least till the time I was working in Reliance we used to have
was working in Reliance we used to have the same now wherever and whenever we
the same now wherever and whenever we were appointing the people we used to
were appointing the people we used to always see that who are the people do
always see that who are the people do the appropriate and proper secretary
the appropriate and proper secretary loic without any kind of
loic without any kind of compromise in fact sud when we had
compromise in fact sud when we had actually gone for the all the applicable
actually gone for the all the applicable laws to the company for the first time
laws to the company for the first time the board has actually asked do you have
the board has actually asked do you have a list of all the applicable laws with
a list of all the applicable laws with you obviously I have actually generated
you obviously I have actually generated one at that particular Point time we
one at that particular Point time we were a medium siiz chemical manufactured
were a medium siiz chemical manufactured company situated around two locations I
company situated around two locations I have identified something about 85 laws
have identified something about 85 laws in one location and 87 laws in the other
in one location and 87 laws in the other locations and I played to them these are
locations and I played to them these are the identify laws which are applicable
the identify laws which are applicable to our company the next question asked
to our company the next question asked by the board of director is that the
by the board of director is that the 100% law which are applicable
100% law which are applicable to I said sir to the best of my
to I said sir to the best of my knowledge I have generated this I am not
knowledge I have generated this I am not very sure whether it is 100% or not
very sure whether it is 100% or not maybe something I think we need to take
maybe something I think we need to take some expert to run through the check
some expert to run through the check that is what I actually suggested
that is what I actually suggested ultimately we are actually engage a
ultimately we are actually engage a outside expert especially a practicing
outside expert especially a practicing company
company secretary and we have told them you
secretary and we have told them you visit this location you go through you
visit this location you go through you find out whatever the things are
find out whatever the things are V2 what has happened is the final
V2 what has happened is the final outcome of that
outcome of that is three more laws which we were not
is three more laws which we were not aware at all because due to the specific
aware at all because due to the specific because one of the unit was situated in
because one of the unit was situated in a village where some PCH related
a village where some PCH related compliances were applicable in that area
compliances were applicable in that area which we are not at all aware at all we
which we are not at all aware at all we never knew also that actually came out
never knew also that actually came out another requirement which came out was
another requirement which came out was in respect of the inside one power
in respect of the inside one power Generations there was a particular thing
Generations there was a particular thing which was required to be submitted
which was required to be submitted periodically what is the number of units
periodically what is the number of units of the power generation some s amount to
of the power generation some s amount to be paid Etc and other thing and all that
be paid Etc and other thing and all that also actually came out so really really
also actually came out so really really speaking as you rightly said that we are
speaking as you rightly said that we are all routinely carrying out the job ex
all routinely carrying out the job ex something we may tend to miss out so we
something we may tend to miss out so we cannot just look at lightly we know to
cannot just look at lightly we know to take the expert ansers wherever required
take the expert ansers wherever required because I have a great respect to the
because I have a great respect to the practicing people because they have the
practicing people because they have the wor experience they are dealing with the
wor experience they are dealing with the multiple different variety of the
multiple different variety of the industry Etc they are really really
industry Etc they are really really helpful in assist we should actually
helpful in assist we should actually look upon they complimenting to our job
look upon they complimenting to our job rather than you know they trying to
rather than you know they trying to finding the fault and trying the thing
finding the fault and trying the thing that should not be the
case fact we used to have a practice that whenever the complaints officer is
that whenever the complaints officer is placing the complaint certificate before
placing the complaint certificate before the board along with the complaint
the board along with the complaint certificate we also used to give the
certificate we also used to give the applicable law to the company how many
applicable law to the company how many laws are there and which are the laws
laws are there and which are the laws applicable to that so that the directors
applicable to that so that the directors have an idea that how many laws are
have an idea that how many laws are applicable to the listed entity as such
applicable to the listed entity as such you know and I'm sure that several uh
you know and I'm sure that several uh good companies might be following the
good companies might be following the same
same practice yeah that is true that is
yes yes sir uh so obviously as is there in the report we have to report the
in the report we have to report the specific non-compliances or observations
specific non-compliances or observations or or the audit qualifications so I
or or the audit qualifications so I think we have deliberated enough on that
think we have deliberated enough on that because since The Regulators what in one
because since The Regulators what in one line if I put it since The Regulators
line if I put it since The Regulators are putting the faith in us as Auditors
are putting the faith in us as Auditors and the uh company secretaries who are
and the uh company secretaries who are in employment as compliance officers so
in employment as compliance officers so it is a joint venture kind of we can say
it is a joint venture kind of we can say to March towards uh governance
to March towards uh governance practices well said well
screen yes sir uh so uh towards the end of the report we will have to uh report
of the report we will have to uh report about any specific activities which is
about any specific activities which is had a kind of effect on the company's
had a kind of effect on the company's Affairs so something which during the
Affairs so something which during the course of audit if we feel has had a
course of audit if we feel has had a impact on the financials or the
impact on the financials or the company's Affairs for example it might
company's Affairs for example it might be a rights issue or a preferential
be a rights issue or a preferential issue or major decisions which are taken
issue or major decisions which are taken by the members so anything that we come
by the members so anything that we come across during the course of audit that
across during the course of audit that has to be uh kind of it forms a part of
has to be uh kind of it forms a part of the
MR3 uh uh so now moving on to the annual a
a before one minute before you go for this
before one minute before you go for this compl certificate also please well upon
compl certificate also please well upon this management representation letter
this management representation letter which the PCS always asks the company's
which the PCS always asks the company's secretaries okay so what sort of a
secretaries okay so what sort of a management representation you require
management representation you require sometimes the company secretary in
sometimes the company secretary in service always feel that uh they're
service always feel that uh they're asking more than what they require so
asking more than what they require so both you as auditor and M as audit both
both you as auditor and M as audit both are there why can't we discuss about
are there why can't we discuss about that for about 3 to four minutes on that
that for about 3 to four minutes on that aspect also right sir very right sir so
aspect also right sir very right sir so uh so basically management
uh so basically management representation letter is kind of a
representation letter is kind of a representation that we as Auditors seek
representation that we as Auditors seek from the management uh that is very
from the management uh that is very right that often we do come across
right that often we do come across situations wherein you know the Audi
situations wherein you know the Audi company is like uh uh why do you need to
company is like uh uh why do you need to take all those representations because
take all those representations because you've already audited the entire set of
you've already audited the entire set of documents or uh like whatever has been
documents or uh like whatever has been uh given given to you as per the
uh given given to you as per the checklist uh but as an auditor being on
checklist uh but as an auditor being on other side of the table I would just say
other side of the table I would just say there are certain things to which we do
there are certain things to which we do not have an access for example I can
not have an access for example I can tell you if we look at the books of
tell you if we look at the books of accounts so books of accounts are
accounts so books of accounts are prepared in good faith by the statutory
prepared in good faith by the statutory Auditors so that is that is a area
Auditors so that is that is a area wherein we do not have an access or we
wherein we do not have an access or we are maybe I can put it in this way that
are maybe I can put it in this way that we do not have that entire Financial
we do not have that entire Financial knowledge to understand each and every
knowledge to understand each and every step or each and everything that they
step or each and everything that they have done in the financials so that has
have done in the financials so that has to be as per the accounting standards
to be as per the accounting standards and all of all the regulations
and all of all the regulations applicable has to be followed so in
applicable has to be followed so in these certain matters we can just maybe
these certain matters we can just maybe look out to the management that if they
look out to the management that if they can give us a representation to
can give us a representation to specifically those areas where which we
specifically those areas where which we are auditing after almost you can say
are auditing after almost you can say the entire Financial year is over so it
the entire Financial year is over so it is like an annual audit that we do post
is like an annual audit that we do post the 31st of March so during the course
the 31st of March so during the course whatever has happened to which we do not
whatever has happened to which we do not have a direct access as an external
have a direct access as an external because Auditors are uh necessarily
because Auditors are uh necessarily required to be Outsiders to the
required to be Outsiders to the organization and we have to audit it
organization and we have to audit it independently so that is why we seek an
independently so that is why we seek an kind of representation from the
kind of representation from the management so manuri you can come on
management so manuri you can come on your comments on the
your comments on the same so ad as you said yes there are a
same so ad as you said yes there are a few things which you are not readily
few things which you are not readily available
available for you to access you can ask
for you to access you can ask representations but at times we feel
representations but at times we feel that we have to give representations for
that we have to give representations for like a few days few uh uh minutes back
like a few days few uh uh minutes back we discussed whether the minutes have
we discussed whether the minutes have been signed off at the right time or
been signed off at the right time or there is uh um or the the data has been
there is uh um or the the data has been circulated the notices have been
circulated the notices have been circulated on the right time so we get
circulated on the right time so we get requests like that also to be put in
requests like that also to be put in into the manage uh letter so yes there
into the manage uh letter so yes there are certain things which we can support
are certain things which we can support you uh the but there are at times the
you uh the but there are at times the requests which come in are very
requests which come in are very unreasonable also so the right balance
unreasonable also so the right balance has to be maintained and more than that
has to be maintained and more than that I would say that the disclosure
I would say that the disclosure requirements have become so strict right
requirements have become so strict right now with under the the new LOD
now with under the the new LOD regulations that everything whatever has
regulations that everything whatever has to be disclosed we are as compliance
to be disclosed we are as compliance officers we are already obligated to
officers we are already obligated to discl goes to them on the stock
discl goes to them on the stock exchanges even for if you say if you say
exchanges even for if you say if you say that our quarterly results our half
that our quarterly results our half results everything has been prepared and
results everything has been prepared and put up so I feel that yes you can for
put up so I feel that yes you can for for your records have some
for your records have some representations but we have to be very
representations but we have to be very reasonable in what we are being asked
reasonable in what we are being asked with because as it is with the
with because as it is with the disclosure requirements we are already
disclosure requirements we are already putting whatever and I think on an
putting whatever and I think on an average listic company in a quarter not
average listic company in a quarter not less than 50 to 60 disclosures we are
less than 50 to 60 disclosures we are doing to the stock exchanges so if you
doing to the stock exchanges so if you compile and you look at all that we have
compile and you look at all that we have already disclosed signed off by the MD
already disclosed signed off by the MD signed off by the in the limited riew
signed off by the in the limited riew and placed
and placed it for at least for listed companies
it for at least for listed companies this letter is taking things to the next
this letter is taking things to the next level add to
level add to what ad what you and M have said just to
what ad what you and M have said just to add to that by merely having a repres
add to that by merely having a repres management representation letter you are
management representation letter you are not gaining anything tomorrow regulator
not gaining anything tomorrow regulator when he is asking you as a secretarial
when he is asking you as a secretarial auditor you are not discharge your
auditor you are not discharge your responsibilities or accountabilities
responsibilities or accountabilities that point of time this management
that point of time this management representation letter according to me
representation letter according to me only a piece of paper oh yes you rightly
only a piece of paper oh yes you rightly said that c everything you may not be
said that c everything you may not be able to do it say for example the
able to do it say for example the company has placed the name boats at all
company has placed the name boats at all its Branch offices and that kind of
its Branch offices and that kind of stuff you may not be able to do it there
stuff you may not be able to do it there a benefit of Doubt will be given
a benefit of Doubt will be given certainly to you but not everywhere
certainly to you but not everywhere number one number two I have said this
number one number two I have said this in several forums as a secretarial
in several forums as a secretarial auditor what exactly you have to do
auditor what exactly you have to do while you are discharging your
while you are discharging your responsibilities in fact when I joined
responsibilities in fact when I joined my chared accountancy on the first week
my chared accountancy on the first week itself we have been I have been told by
itself we have been I have been told by my principal that when you go for an
my principal that when you go for an audit you have to see through your ears
audit you have to see through your ears and you have to listen through your eyes
and you have to listen through your eyes I was confused at that time
I was confused at that time you through my through my eyes means
you through my through my eyes means what what the client is showing you
what what the client is showing you don't see that only go beyond that
don't see that only go beyond that similarly what client is telling you
similarly what client is telling you don't hear that only go beyond that that
don't hear that only go beyond that that means what when you are going for a
means what when you are going for a secretarial audit as m has rightly said
secretarial audit as m has rightly said that the listed entities have to
that the listed entities have to disseminate lot of information so the
disseminate lot of information so the exchanges the the are the websites of
exchanges the the are the websites of the companies having a repository of the
the companies having a repository of the information during that Financial year
information during that Financial year so the secretarial auditor has to do his
so the secretarial auditor has to do his homework before he is going for the
homework before he is going for the audit and asking that already what is
audit and asking that already what is available in the public domain if you
available in the public domain if you are again asking the company to give you
are again asking the company to give you that information and taking that as the
that information and taking that as the face value is not correct so in fact you
face value is not correct so in fact you know suppose if I am the the on the
know suppose if I am the the on the other side of the thing suppose if I am
other side of the thing suppose if I am the company secretary in service I will
the company secretary in service I will assess your performance that when you
assess your performance that when you come to my uh this thing to my company
come to my uh this thing to my company for audit how well you prepared are and
for audit how well you prepared are and similarly we know that very well unlike
similarly we know that very well unlike statut Auditors our appointment is not
statut Auditors our appointment is not for a period of five years at one go it
for a period of five years at one go it is an year to year based renew so we are
is an year to year based renew so we are appointing you only for one year so it
appointing you only for one year so it is the responsibility of the company
is the responsibility of the company secretaries who are in service also when
secretaries who are in service also when I'm looking for a strong secretarial
I'm looking for a strong secretarial auditor one of the parameters I will see
auditor one of the parameters I will see is that how well the auditor is prepared
is that how well the auditor is prepared before he is stepping into my company to
before he is stepping into my company to conduct the audit or ad this is also one
conduct the audit or ad this is also one message to you please ensure that your
message to you please ensure that your team is well prepared before
you and and I would add to what sir said is that we also look at you for guidance
is that we also look at you for guidance because you have audited so many
because you have audited so many companies so you are much more aware of
companies so you are much more aware of what could be the risk not now going
what could be the risk not now going forward so we so rather we would say
forward so we so rather we would say that we should get a good checklist from
that we should get a good checklist from you which will prepare us for the coming
you which will prepare us for the coming audits also and it should come to us on
audits also and it should come to us on a not at the end of the year but during
a not at the end of the year but during the course of the year so that when you
the course of the year so that when you come we are able to say that yes you've
come we are able to say that yes you've done a great job you have provided us
done a great job you have provided us with all the right support and here we
with all the right support and here we are happy to share our uh this report
are happy to share our uh this report with you so that you know you can tell
with you so that you know you can tell us where we can become better see there
us where we can become better see there is no point of doing postmortem after
is no point of doing postmortem after the end of the year you have been
the end of the year you have been appointed it is the board who appoints
appointed it is the board who appoints you in the beginning of the year you
you in the beginning of the year you will come for the audit at the end of
will come for the audit at the end of the year that is a different thing but
the year that is a different thing but during this 8 to nine months if we get
during this 8 to nine months if we get the right support and the right guidance
the right support and the right guidance then if we miss we are also
then if we miss we are also like too many things coming up
like too many things coming up management is also expecting us to be
management is also expecting us to be always at the helm of things so we
always at the helm of things so we expect that you would guide us and tell
expect that you would guide us and tell us where we should maintain caution and
us where we should maintain caution and what are the things we should do it and
what are the things we should do it and what are the timelines also so if you do
what are the timelines also so if you do that then obviously your job as
that then obviously your job as secretarial Auditors at the end of the
secretarial Auditors at the end of the year will be very
year will be very simple in fact M just to add to that you
simple in fact M just to add to that you know I have said that what just
know I have said that what just secretarial auditor has to do it at the
secretarial auditor has to do it at the same point of time as a corporate
same point of time as a corporate secretary what we can also do is that I
secretary what we can also do is that I can share my experience in Reliance what
can share my experience in Reliance what we used to do was that we used to
we used to do was that we used to prepare the quarterly uh what's called
prepare the quarterly uh what's called as know files of keeping that because
as know files of keeping that because you know in my listed entity in r as
you know in my listed entity in r as such we used to have a quarterly audit
such we used to have a quarterly audit and for other companies we used to have
and for other companies we used to have half yearly audits so what we used to do
half yearly audits so what we used to do was before we called the secretary
was before we called the secretary auditor we used to keep the files ready
auditor we used to keep the files ready and know every information is there in
and know every information is there in that so that it should be self exlan net
that so that it should be self exlan net that means the secretary auditor should
that means the secretary auditor should be able to conduct based on the
be able to conduct based on the documents we are giving it maybe 10 15%
documents we are giving it maybe 10 15% only it's not like know by that
only it's not like know by that everything he has to ask then only I
everything he has to ask then only I will produce that it is wasted of both
will produce that it is wasted of both sides you know the the time the precious
sides you know the the time the precious time will be wasted in that so what Al
time will be wasted in that so what Al my advice piece of advice to the
my advice piece of advice to the participants is that whenever a
participants is that whenever a secretari audit is going to take place
secretari audit is going to take place if you you are the PCS form please go
if you you are the PCS form please go prepared see the website of the stock
prepared see the website of the stock exchanges see the websites of the
exchanges see the websites of the company at the same point of time keep
company at the same point of time keep your ears and eyes open as far as the
your ears and eyes open as far as the media is concerned and if anything H is
media is concerned and if anything H is happening in your client company and at
happening in your client company and at the same point of time if you are the
the same point of time if you are the corporate secretary before you invite
corporate secretary before you invite the audit to conduct the audit keep the
the audit to conduct the audit keep the files ready and you as a company
files ready and you as a company secretary know that what exactly is the
secretary know that what exactly is the auditor is looking into keep the things
auditor is looking into keep the things ready so that you know that the audit
ready so that you know that the audit will happen within not time otherwise
will happen within not time otherwise what happened is it may take months
what happened is it may take months together or days together the audit is
together or days together the audit is going on frustrating both
going on frustrating both sides yeah yeah go
ahead okay so so I think we put it very nicely so this battle goes on but yes uh
nicely so this battle goes on but yes uh as regards I would just tell one thing
as regards I would just tell one thing as regards letting know of the
as regards letting know of the compliances well before so know we are
compliances well before so know we are also Bound by certain scope and
also Bound by certain scope and everything so like auditing around the
everything so like auditing around the entire year becomes a kind of task but
entire year becomes a kind of task but yes as far as possible definitely as
yes as far as possible definitely as Auditors we also want to guide so that
Auditors we also want to guide so that no non-compliances are seen in the
no non-compliances are seen in the audities company
audities company side uh okay so we'll now go to the
side uh okay so we'll now go to the annual secretarial compliance uh
report uh so annual secretarial compliance report is uh just a
compliance report is uh just a germination of Regulation 24 a and the
germination of Regulation 24 a and the relevant law is only sebi lodr and it
relevant law is only sebi lodr and it has no mention of it in the companies
has no mention of it in the companies act so just to give a brief of the scope
act so just to give a brief of the scope that is followed in this report so since
that is followed in this report so since a lot of discussions has already
a lot of discussions has already happened that if there is a MR3 y againa
happened that if there is a MR3 y againa a uh acsr so basically the reason behind
a uh acsr so basically the reason behind the intention or rather the intention of
the intention or rather the intention of sebi to have this report in place is as
sebi to have this report in place is as we just now discussed there are a lot of
we just now discussed there are a lot of uh there are a lot of kind of
uh there are a lot of kind of intimations that we are doing to stock
intimations that we are doing to stock exchanges so in a way the stock exchange
exchanges so in a way the stock exchange or the authority has a database of all
or the authority has a database of all the non-compliances that a listed entity
the non-compliances that a listed entity is actually doing so as so we have this
is actually doing so as so we have this additional responsibility of bringing
additional responsibility of bringing into light that once again in front of
into light that once again in front of the management so when this report goes
the management so when this report goes to the board of directors they are also
to the board of directors they are also in a position to understand where they
in a position to understand where they have gone wrong because we might might
have gone wrong because we might might well feel that we might not uh kind of
well feel that we might not uh kind of give out a non-compliance or we get into
give out a non-compliance or we get into settlements but on the other hand sebi
settlements but on the other hand sebi there as the authority he has a list or
there as the authority he has a list or the database of all the non-compliances
the database of all the non-compliances that is taking place so therefore this
that is taking place so therefore this ACS report is very specific to only the
ACS report is very specific to only the sebi regulations and circulars and one
sebi regulations and circulars and one important thing that this report focuses
important thing that this report focuses uh on is of the previous year's
uh on is of the previous year's non-compliances
non-compliances when we talk about a secretarial audit
when we talk about a secretarial audit it is very very specific to the period
it is very very specific to the period during review so it is for a One
during review so it is for a One Financial year supposedly
Financial year supposedly 20223 but when we do the ACs report it
20223 but when we do the ACs report it is for the financial year 20223 visis
is for the financial year 20223 visis what has been done in 2122 that is the
what has been done in 2122 that is the non-c compliances which was reported in
non-c compliances which was reported in the previous years also needs to be
the previous years also needs to be taken care of in this
report uh so applicability is it is to the equity listed entities and high
the equity listed entities and high value debt listed entities a format a
value debt listed entities a format a format has undergone a change for this
format has undergone a change for this Current financial year onwards so
Current financial year onwards so previously it was a it was something
previously it was a it was something which was not very exhaustive now now
which was not very exhaustive now now when we go through the format we'll be
when we go through the format we'll be in a better position to
in a better position to understand uh so then coming to
understand uh so then coming to inclusion in the annual report so uh we
inclusion in the annual report so uh we know that annual report is something
know that annual report is something which is out of of companies act and
which is out of of companies act and therefore this report need not form a
therefore this report need not form a part of the annual report it is only an
part of the annual report it is only an intimation that has to be given to the
intimation that has to be given to the stock exchange and it need not to be
stock exchange and it need not to be included in the annual report as such
included in the annual report as such then timelines for submission is within
then timelines for submission is within 60 days from the end of financial year
60 days from the end of financial year and who can furnish so uh it has to be a
and who can furnish so uh it has to be a peer reviewed practicing company
peer reviewed practicing company secretary so now why the focus on peer
secretary so now why the focus on peer reviewed company secretary is when the
reviewed company secretary is when the audit firm itself is undergoing an audit
audit firm itself is undergoing an audit so they also have their documentations
so they also have their documentations in place so it gives an additional
in place so it gives an additional responsibility on the PCS when a peer
responsibility on the PCS when a peer reviewed firm is actually giving out
reviewed firm is actually giving out this report so uh now uh maybe we can go
this report so uh now uh maybe we can go through few of the sources through which
through few of the sources through which we can get to see the compliances I
we can get to see the compliances I think most of it has been previously
think most of it has been previously discussed if we see the certificate with
discussed if we see the certificate with manjuri very rightly pointed out about
manjuri very rightly pointed out about the compliance certificate which is
the compliance certificate which is placed before the board so there is is a
placed before the board so there is is a compliance certificate which needs to be
compliance certificate which needs to be placed before the board which gives a
placed before the board which gives a detailed uh I mean detailed report of
detailed uh I mean detailed report of all the laws that is applicable so that
all the laws that is applicable so that can be checked minutes is obviously like
can be checked minutes is obviously like the uh it's like the G for us so we get
the uh it's like the G for us so we get to know about a company from the minutes
to know about a company from the minutes only so the minutes of the board the
only so the minutes of the board the Committees and the shareholders meetings
Committees and the shareholders meetings then the terms of reference of the
then the terms of reference of the Committees so even in the previous uh
Committees so even in the previous uh lodr Master Class we had we had focused
lodr Master Class we had we had focused on what is the importance of the
on what is the importance of the Committees so the importance of
Committees so the importance of committees are also growing day by day
committees are also growing day by day because there are certain things which
because there are certain things which has to be necessarily rooted only
has to be necessarily rooted only through those committees so the terms of
through those committees so the terms of reference can be checked of those
reference can be checked of those committees then the certificates the
committees then the certificates the director's disclosures also become
director's disclosures also become important we have to see whether uh
important we have to see whether uh particularly the disclosures with
particularly the disclosures with regards to the PIP regulations or their
regards to the PIP regulations or their change in interest of directors during
change in interest of directors during the year if that has been given then an
the year if that has been given then an updated list of related parties I think
updated list of related parties I think a lot has been spoken about the uh
a lot has been spoken about the uh related parties adjudication order that
related parties adjudication order that has been received off late wherein the
has been received off late wherein the secretarial auditor the statutory
secretarial auditor the statutory auditor all have been penalized because
auditor all have been penalized because they were not in a position or they have
they were not in a position or they have not identified the related parties so it
not identified the related parties so it is very important for us to have an
is very important for us to have an updated list of related parties and go
updated list of related parties and go through all the transactions that the
through all the transactions that the companies entering into with them and uh
companies entering into with them and uh also additionally to check if the proper
also additionally to check if the proper approvals for the same transactions have
approvals for the same transactions have taken place or
not uh so now uh uh structured digital database I think uh yes again on the
database I think uh yes again on the audity side I can tell you this was a
audity side I can tell you this was a kind of a huge thing that had come in
kind of a huge thing that had come in for the financial year 2223 where we as
for the financial year 2223 where we as an auditor have faced a lot of issues
an auditor have faced a lot of issues because there were understanding
because there were understanding barriers there were no CL Clarity
barriers there were no CL Clarity regarding it but of course as on date
regarding it but of course as on date everybody is on the same page and we
everybody is on the same page and we know that there has to be a sdd for the
know that there has to be a sdd for the listed entities and so we have to go
listed entities and so we have to go through I mean we take a virtual walk
through I mean we take a virtual walk through that STD whether all the upsi
through that STD whether all the upsi have been captured or not uh then the
have been captured or not uh then the codes and policies which are not
codes and policies which are not available on website uh needs to be
available on website uh needs to be taken then documents of previous years
taken then documents of previous years as for the preservation policy relevant
as for the preservation policy relevant confirmations from the
confirmations from the company
company uh so for this particular uh ascr so one
uh so for this particular uh ascr so one thing to focus is most of the things
thing to focus is most of the things that we report in this uh annual
that we report in this uh annual secretarial compliance report are
secretarial compliance report are available in the public domain itself so
available in the public domain itself so when we talk about an annual report for
when we talk about an annual report for the listed entity it becomes mandatory
the listed entity it becomes mandatory for them to have the annual reports
for them to have the annual reports hosted on the website so the website of
hosted on the website so the website of the company is one stop place where we
the company is one stop place where we can get almost all the compliances that
can get almost all the compliances that we want to look at so uh the the it has
we want to look at so uh the the it has become mandatory for all the listed
become mandatory for all the listed entities to have a functional website
entities to have a functional website and they have to uh host a kind of
and they have to uh host a kind of plethora of things in that website from
plethora of things in that website from where the auditor can also pull out the
where the auditor can also pull out the documents that is required uh then of
documents that is required uh then of course is the stock exchange disclosures
course is the stock exchange disclosures and intimations that is available in the
and intimations that is available in the nsse and BSE and once we get to know the
nsse and BSE and once we get to know the name of the company we are in a position
name of the company we are in a position to kind of see what are the disclosures
to kind of see what are the disclosures and the intimations and the timelines
and the intimations and the timelines whether it has has been followed or not
whether it has has been followed or not then the penalties imposed by BC and NSC
then the penalties imposed by BC and NSC and sebi so this is something uh which
and sebi so this is something uh which is again hosted in the website so as an
is again hosted in the website so as an auditor I think these are the places or
auditor I think these are the places or these are the documents which should be
these are the documents which should be specifically relied upon because even if
specifically relied upon because even if the company in a is not in a position to
the company in a is not in a position to disclose or the company says that
disclose or the company says that probably we have not been penalized
probably we have not been penalized maybe to cross verify what the company
maybe to cross verify what the company is saying just to be in the line with
is saying just to be in the line with what we want to to do this is the place
what we want to to do this is the place where we can find all of these
where we can find all of these compliances and website of the company
compliances and website of the company holds the at most importance where we
holds the at most importance where we can get through almost all the things
can get through almost all the things that is
required uh so now moving on to the format of the annual secretarial
format of the annual secretarial compliance report so as we've already
compliance report so as we've already discussed that it is only specific to
discussed that it is only specific to sebi lodr so first and it is not only it
sebi lodr so first and it is not only it is germinating out of sebi lodr but to
is germinating out of sebi lodr but to note her it is not only taking into
note her it is not only taking into consideration SEI lodia regulations it
consideration SEI lodia regulations it does take into reg account all of the
does take into reg account all of the other acts also which might get
other acts also which might get applicable for example if a listed
applicable for example if a listed company has done a buyback of Securities
company has done a buyback of Securities so accordingly the SE buyback
so accordingly the SE buyback regulations becomes applicable so a
regulations becomes applicable so a Prohibition of insider trading
Prohibition of insider trading regulations become applicable so all of
regulations become applicable so all of these have to be taken care of uh now
these have to be taken care of uh now moving on specifically to the format
moving on specifically to the format that this is the new format which has
that this is the new format which has been given for the financial year
been given for the financial year 2223 so as we know we've been
2223 so as we know we've been deliberating on the importance of
deliberating on the importance of Secretarial standards and here it is as
Secretarial standards and here it is as the first point which itself shows why
the first point which itself shows why secretarial standards are important so
secretarial standards are important so when we go back to the MR3 or the
when we go back to the MR3 or the secretarial audit report we are giving a
secretarial audit report we are giving a declaration that we are complying with
declaration that we are complying with the secretarial standards the same thing
the secretarial standards the same thing has been followed by sebbi also that we
has been followed by sebbi also that we will have to give a declaration very
will have to give a declaration very specifically about the secretarial
specifically about the secretarial standards being in place so as an
standards being in place so as an auditor I would reach out or I would say
auditor I would reach out or I would say the Audi company where we feel that
the Audi company where we feel that maybe a numbering has been missed or a
maybe a numbering has been missed or a summary has not been announced by the
summary has not been announced by the chairman during a VC meeting we might uh
chairman during a VC meeting we might uh we might feel that these are very little
we might feel that these are very little little compliances which need not be
little compliances which need not be maybe uh I mean qualified in a report
maybe uh I mean qualified in a report but again when we go back to a ascr for
but again when we go back to a ascr for a listed entity we have to give a
a listed entity we have to give a compliance status so it can be either a
compliance status so it can be either a yes or no for secretarial standards na
yes or no for secretarial standards na is obviously not applicable because one8
is obviously not applicable because one8 makes it mandatory for all companies to
makes it mandatory for all companies to uh I mean to follow the secretarial
uh I mean to follow the secretarial standards
standards uh yeah just one minute adti since know
uh yeah just one minute adti since know you Ted up on my uh what's called a soft
you Ted up on my uh what's called a soft nve you know whenever I talk about secet
nve you know whenever I talk about secet standards I became very passionate and
standards I became very passionate and emotional the reason being I am
emotional the reason being I am associated with this right from 2016
associated with this right from 2016 with the SSB board that point of time
with the SSB board that point of time onwards I used to say that if any the
onwards I used to say that if any the best installation for a company
best installation for a company secretary as a KMP as well as the board
secretary as a KMP as well as the board of directors are
of directors are concerned in comparison to the companies
concerned in comparison to the companies act
act 2013 the responsibilities and
2013 the responsibilities and accountabilities which have been
accountabilities which have been interested upon the the directors as
interested upon the the directors as well as the company secretary because SS
well as the company secretary because SS one and two are more of procedural War
one and two are more of procedural War oriented so people used to have a
oriented so people used to have a difficulty in compliance with the
difficulty in compliance with the procedure know like taking attendance
procedure know like taking attendance sheets leing know that keeping the
sheets leing know that keeping the uh reports and all these things whereas
uh reports and all these things whereas in fact you know by having all these
in fact you know by having all these things it is bringing a kind of
things it is bringing a kind of discipline into the secretari department
discipline into the secretari department prior to SS one in fact the compete
prior to SS one in fact the compete secur used to struggle to put the agenda
secur used to struggle to put the agenda in place and circulate it before to the
in place and circulate it before to the directors even one night before before
directors even one night before before they used to push it to the directors
they used to push it to the directors the company secretaries used to struggle
the company secretaries used to struggle a lot because the other departments were
a lot because the other departments were not cooperating with them that kind of a
not cooperating with them that kind of a situation used to be there whereas now
situation used to be there whereas now it is mandatory for the company
it is mandatory for the company secretaries to circulate the
secretaries to circulate the agenda days before the board meeting in
agenda days before the board meeting in view of that a kind of a discipline has
view of that a kind of a discipline has been brought in in the companies and all
been brought in in the companies and all even across the Departments wherever
even across the Departments wherever they want any kind of board approvals
they want any kind of board approvals they have to give the board notes and
they have to give the board notes and the information to the secretary
the information to the secretary Department much before that at the same
Department much before that at the same point of time if I am a director and if
point of time if I am a director and if I'm suppose I'm asking for the minutes
I'm suppose I'm asking for the minutes of the previous meetings before my
of the previous meetings before my induction as a director I mean my
induction as a director I mean my appointment as a director or after my
appointment as a director or after my session as a
session as a director when the company secretary has
director when the company secretary has been asked by the management are we Duty
been asked by the management are we Duty bound to provide the minutes because the
bound to provide the minutes because the law was not clear so the company
law was not clear so the company secretary was also not very clear
secretary was also not very clear whether to advise the management whether
whether to advise the management whether the director has a legal right to ask
the director has a legal right to ask for the minutes certified copy of the
for the minutes certified copy of the minutes or even the inspection of the
minutes or even the inspection of the minutes the law was not clear now after
minutes the law was not clear now after ss1 has
ss1 has come I been appointed as a director on
come I been appointed as a director on your board today I can see the minutes
your board today I can see the minutes of the I can inspect the minutes of the
of the I can inspect the minutes of the company right from its Inception if I'm
company right from its Inception if I'm ceased to be a director still I can ask
ceased to be a director still I can ask for the inection of the as the certified
for the inection of the as the certified cies during my tenure as a director of
cies during my tenure as a director of the company so there are n number of
the company so there are n number of benefits out there these things the
benefits out there these things the regulator is more intelligent than us
regulator is more intelligent than us they know that okay secret the
they know that okay secret the importance of the secretary standards
importance of the secretary standards that's why right from the beginning the
that's why right from the beginning the amount of importance what they have
amount of importance what they have given our
given our fraternity given ACC to but of course
fraternity given ACC to but of course off late we are falling in line because
off late we are falling in line because as I told you in MR3 it is there now the
as I told you in MR3 it is there now the secret comport also it has been brought
secret comport also it has been brought in so you have no option but to fall in
in so you have no option but to fall in line we have to comply with the
line we have to comply with the standards and of course at the end of
standards and of course at the end of the day it is according to me for the
the day it is according to me for the benefit of the company secretar only
benefit of the company secretar only okay whether you have to give a serial
okay whether you have to give a serial number to every meeting but similarly
number to every meeting but similarly you have to what's called as okay page
you have to what's called as okay page numbering is to be there after the
numbering is to be there after the chairman signs he has to put the DAT he
chairman signs he has to put the DAT he has to put the place ear even the
has to put the place ear even the chairmans were not signing and in the
chairmans were not signing and in the comp secret what they were doing is they
comp secret what they were doing is they us to put the date with a different pen
us to put the date with a different pen in fact now if you do that you know the
in fact now if you do that you know the r may say this is that the chairman has
r may say this is that the chairman has not done so it is a non-compliance you
not done so it is a non-compliance you don't know so these are all certain fine
don't know so these are all certain fine points which company secretaries have to
points which company secretaries have to understand that and also to sensitize
understand that and also to sensitize the both managements like your CFO CEOs
the both managements like your CFO CEOs directors whatever anybody has to do it
directors whatever anybody has to do it they have to do it there is no other
they have to do it there is no other option yeah go
option yeah go ahead uh sir so if I can add here also
ahead uh sir so if I can add here also as you rightly said so uh one of the
as you rightly said so uh one of the experiences that we've had that the
experiences that we've had that the agenda point which you just now
agenda point which you just now mentioned so in fact we've come across
mentioned so in fact we've come across situations where the secretarial
situations where the secretarial Department actually reaches us to
Department actually reaches us to reaches out to us saying that you
reaches out to us saying that you knowingly put it as an observation so
knowingly put it as an observation so that we are able to put it to the
that we are able to put it to the management that yes this has become that
management that yes this has become that important because there are situations
important because there are situations we as Auditors also understand that they
we as Auditors also understand that they are not able to persuade the management
are not able to persuade the management of why it has to be done so in fact
of why it has to be done so in fact secretarial standards has also formed a
secretarial standards has also formed a part of our observation when we've
part of our observation when we've issued
reports in fact as you rightly say Aditi and the secr certificates when the SEC
and the secr certificates when the SEC standards was introduced and things we
standards was introduced and things we used to call the secal auditor to be
used to call the secal auditor to be present in the board meeting and we
present in the board meeting and we wanted to board of director to hear from
wanted to board of director to hear from him apart from what he has put in his
him apart from what he has put in his report what other things he has got the
report what other things he has got the observations what other things he what
observations what other things he what is the suggestion we he has got we used
is the suggestion we he has got we used to make the directors to listen from him
to make the directors to listen from him directly initially we were doing
that so the next point is adoption and timely updation of the policies so I
timely updation of the policies so I think we've also dwelt upon this fact
think we've also dwelt upon this fact how important policies are becoming day
how important policies are becoming day by day so for example materiality of uh
by day so for example materiality of uh related parties now that has become very
related parties now that has become very important and every day we see new
important and every day we see new changes coming into those regulations so
changes coming into those regulations so we need to have a specific policy for
we need to have a specific policy for that as well as uh uh preservation
that as well as uh uh preservation policy or the CSR policy so we have to
policy or the CSR policy so we have to check in detail whether the required
check in detail whether the required approvals have been given by respective
approvals have been given by respective committees the same has been approved by
committees the same has been approved by the board or not uh then Website
the board or not uh then Website Maintenance and closures on the website
Maintenance and closures on the website be it a listed company or a debt listed
be it a listed company or a debt listed company for that matter Equity or debt
company for that matter Equity or debt so they have separate regulations
so they have separate regulations wanting them to uh have these certain
wanting them to uh have these certain information which which has to be there
information which which has to be there in the website and accordingly timely
in the website and accordingly timely dissemination of that has to be done
dissemination of that has to be done under a separate section so that is also
under a separate section so that is also checked and if if at all we find
checked and if if at all we find something as missing then we kind of
something as missing then we kind of adise the management to have that uh
adise the management to have that uh uploaded on
time uh so disqualification of directors uh then none of the directors are
uh then none of the directors are disqualified is what we have to certify
disqualified is what we have to certify details related to subsidiaries of
details related to subsidiaries of listed entities have been examined so
listed entities have been examined so this this is completely a uh duplication
this this is completely a uh duplication or we may say a copy of Regulation 24
or we may say a copy of Regulation 24 which we right now discussed so we need
which we right now discussed so we need to identify which are the material uh
to identify which are the material uh subsidiary and accordingly we will have
subsidiary and accordingly we will have to check whether all the compliances
to check whether all the compliances relating to that has been done or not
relating to that has been done or not then preservation of documents again has
then preservation of documents again has become mandatory and we as a listed
become mandatory and we as a listed entity we uh you need to have a
entity we uh you need to have a preservation policy in place and that
preservation policy in place and that again has to find itself in the website
again has to find itself in the website of the
of the company uh performance evaluation so I
company uh performance evaluation so I think performance evaluation of the
think performance evaluation of the board is very important so in order to
board is very important so in order to understand whether the board of
understand whether the board of directors are actually functioning in
directors are actually functioning in the right direction or not so it is kind
the right direction or not so it is kind of evaluation being done to the board
of evaluation being done to the board independent directors and the Committees
independent directors and the Committees at the start of every Financial year so
at the start of every Financial year so that also has to be checked whether this
that also has to be checked whether this has been done or not then uh related
has been done or not then uh related party transactions as we discussed uh
party transactions as we discussed uh there are certain uh so listed companies
there are certain uh so listed companies have to PRI prior they have to go to the
have to PRI prior they have to go to the audit committee to seek the approvals so
audit committee to seek the approvals so whether that listed entity has taken the
whether that listed entity has taken the uh requisite approvals or not and then
uh requisite approvals or not and then what are the details and they have to
what are the details and they have to quantify there is a statement of related
quantify there is a statement of related party transactions that has to be placed
party transactions that has to be placed before the audit as well as the board
before the audit as well as the board then quantification of those
then quantification of those transactions so all of these have to be
transactions so all of these have to be checked then disclosure of events or
checked then disclosure of events or information so this is regulation 30
information so this is regulation 30 wherein we have to give an intimation to
wherein we have to give an intimation to the stock exchange so whether all of
the stock exchange so whether all of these informations if at all uh if at
these informations if at all uh if at all when we go through the minutes of an
all when we go through the minutes of an company we get to see there are certain
company we get to see there are certain events that has occurred so we have to
events that has occurred so we have to cross check whether the requisite
cross check whether the requisite information has gone out to the stock
information has gone out to the stock exchanges or
exchanges or not then prohibition of insider trading
not then prohibition of insider trading so probably as an auditor I would say
so probably as an auditor I would say this was one point that we could reach
this was one point that we could reach out to when the auditor when the audity
out to when the auditor when the audity was of a opinion that this is not
was of a opinion that this is not applicable or probably we were not aware
applicable or probably we were not aware of so this was one point where we
of so this was one point where we focused as Auditors that sebbi has
focused as Auditors that sebbi has mandatory
mandatory brought up this point in the report
brought up this point in the report wherein we have to disclose the
wherein we have to disclose the compliance status as regards to the pit
compliance status as regards to the pit regulations uh similarly the actions
regulations uh similarly the actions taken by sebi or Stock Exchange so as
taken by sebi or Stock Exchange so as discussed earlier we we should not be
discussed earlier we we should not be only depending on what the uh audity
only depending on what the uh audity company is giving us with we have this
company is giving us with we have this sebbi website wherein these penalties
sebbi website wherein these penalties and the fines imposed by them are
and the fines imposed by them are recorded and so we can refer back to
recorded and so we can refer back to those actions taken and that has to be
those actions taken and that has to be again uh given in this report and the
again uh given in this report and the additional non-compliances if any so
additional non-compliances if any so what I feel in the 11 points that has
what I feel in the 11 points that has been covered so most of the important
been covered so most of the important compliances which is required for a
compliances which is required for a listed entity has been covered so apart
listed entity has been covered so apart from these 11 points even if we come
from these 11 points even if we come across any additional non-compliances
across any additional non-compliances that has to be again
reported uh so now this is uh which is compliances relating to the appointment
compliances relating to the appointment or reappointment of Auditors of the
or reappointment of Auditors of the listed entities and the material
listed entities and the material subsidiaries so when it comes to auditor
subsidiaries so when it comes to auditor again I will uh come I mean I will come
again I will uh come I mean I will come across one of the experiences that we
across one of the experiences that we have had so appointment of auditor is
have had so appointment of auditor is something which is very clearly
something which is very clearly mentioned in the act and as a listed
mentioned in the act and as a listed entity rotation of statutory Auditors
entity rotation of statutory Auditors becomes mandatory so a lot of times it
becomes mandatory so a lot of times it so happens that there is a Casual
so happens that there is a Casual Vacancy uh During the period of five
Vacancy uh During the period of five years but then we have to consider that
years but then we have to consider that as one tenure so uh so these are the few
as one tenure so uh so these are the few questions and answers that needs to be
questions and answers that needs to be done during a period during the audit or
done during a period during the audit or maybe when we are issuing this report so
maybe when we are issuing this report so that might be the intent because of
that might be the intent because of which this specific auditor related
which this specific auditor related compliances have also formed a part of
compliances have also formed a part of this report so uh if an auditor has
this report so uh if an auditor has resigned within 45 days then a limited
resigned within 45 days then a limited review has to be given if are resigning
review has to be given if are resigning after 45 days then for the next quarter
after 45 days then for the next quarter the reports have to be given so all of
the reports have to be given so all of that with regards to Casual vacancies or
that with regards to Casual vacancies or a change in position of the auditor has
a change in position of the auditor has to be
reported uh now coming to a few uh points which has now been included so in
points which has now been included so in 2019 when the format has format had come
2019 when the format has format had come in for this annual secretarial
in for this annual secretarial complaints it was not so exhaustive it
complaints it was not so exhaustive it was kind of very much limited to the
was kind of very much limited to the non-c compliances that had happened in
non-c compliances that had happened in the last year that that we were
the last year that that we were reporting and it was very much
reporting and it was very much restricted to few of the things as
restricted to few of the things as compared to the one which we are seeing
compared to the one which we are seeing now so uh there are three three four
now so uh there are three three four sections which have been newly added for
sections which have been newly added for example there is a fine amount there is
example there is a fine amount there is a type of action that the listed entity
a type of action that the listed entity is taking when they are deviating from
is taking when they are deviating from the compliances that is required to be
the compliances that is required to be done then there is an observation or
done then there is an observation or remarks of the practicing company
remarks of the practicing company secretary and the management response to
secretary and the management response to that so here also I can just say maybe
that so here also I can just say maybe there are certain uh situations wherein
there are certain uh situations wherein it is beyond the listed companies uh
it is beyond the listed companies uh control that they are being
control that they are being non-compliant for example mostly if we
non-compliant for example mostly if we take into uh account government
take into uh account government companies so in government companies it
companies so in government companies it is usually not the board who has the
is usually not the board who has the authority to appoint directors so most
authority to appoint directors so most of the board composition in government
of the board composition in government companies is uh either short of an
companies is uh either short of an independent director or that of a woman
independent director or that of a woman director so in these cases it is
director so in these cases it is actually not the management or the
actually not the management or the audity company's fault but then in the
audity company's fault but then in the management response we can take a note
management response we can take a note of that of the actual condition as to
of that of the actual condition as to why the vard composition is not
correct uh so along with that we will have to provide a list of all the
have to provide a list of all the observations in the report for the
observations in the report for the previous year along with the actions uh
previous year along with the actions uh taken by the listed
taken by the listed entity
entity uh now this I uh we have just discussed
uh now this I uh we have just discussed upon all this the existing tables which
upon all this the existing tables which which the new additions that has come up
which the new additions that has come up in the annual secretarial compliance
in the annual secretarial compliance report is the type of action the fine
report is the type of action the fine amount and the management response any
amount and the management response any deviation which is found from the
deviation which is found from the compliances that has to be necessarily
compliances that has to be necessarily reported in the annual secretarial
reported in the annual secretarial compliance report uh now coming to the
compliance report uh now coming to the amendment so post this uh amendment that
amendment so post this uh amendment that has recently come in previously it was
has recently come in previously it was only the PDF copy of the ascr which was
only the PDF copy of the ascr which was required to be filed so now they've made
required to be filed so now they've made it mandatory to be filed in the xbrl
it mandatory to be filed in the xbrl mode as well so for the the for the
mode as well so for the the for the current year it was the uh due date was
current year it was the uh due date was June 30th 2023 and for the upcoming uh
June 30th 2023 and for the upcoming uh years it would be 15th of June 20 uh I
years it would be 15th of June 20 uh I mean 15th of June henceforth for which
mean 15th of June henceforth for which it is going to be
applicable uh so now we can take a few case
case uh in which we we can understand the
uh in which we we can understand the importance of the secretarial standards
importance of the secretarial standards that we were focusing or the role and
that we were focusing or the role and responsibilities of the secretarial
responsibilities of the secretarial auditor on the
auditor on the whole uh sir would you like to take it I
whole uh sir would you like to take it I mean casewise
mean casewise how so uh if we refer to this one as
how so uh if we refer to this one as case one that is the ROC uh of Delhi and
case one that is the ROC uh of Delhi and harana what the we have come AC come
harana what the we have come AC come across penalties so this was an order of
across penalties so this was an order of 19 January
2022 in the matter of Polaris India private limited so we uh as the company
private limited so we uh as the company had not kind of followed the secretarial
had not kind of followed the secretarial standards we we were kind of uh
standards we we were kind of uh discussing on the secretarial standards
discussing on the secretarial standards at large so the penalties are also not
at large so the penalties are also not very less if we look at the amount so it
very less if we look at the amount so it is kind of huge penalties which is being
is kind of huge penalties which is being levied for non-compliance of Secretarial
levied for non-compliance of Secretarial standards
standards so the the company and all the officers
so the the company and all the officers in default even the past director who
in default even the past director who had been in default during that course
had been in default during that course of action was penalized because of the
of action was penalized because of the non-compliance with regards to
non-compliance with regards to secretarial
standards so similarly we have other cases as well the ROC Pune has also
cases as well the ROC Pune has also taken a stricter view of uh
taken a stricter view of uh non-compliance of Secretarial standards
non-compliance of Secretarial standards with regards to uh Clause 7.14 when
with regards to uh Clause 7.14 when there was a non-compliance so that was
there was a non-compliance so that was also penalty was levied by The ROC Pune
also penalty was levied by The ROC Pune so that also was a heavy amount like
so that also was a heavy amount like 45,000 was penalized to the officers in
45,000 was penalized to the officers in default and the com directors
default and the com directors each so similarly we have quoted I mean
each so similarly we have quoted I mean we are running through a few cases
we are running through a few cases wherein uh case studies wherein the
wherein uh case studies wherein the secretarial standards and the role of
secretarial standards and the role of the Auditors to bring in to light these
the Auditors to bring in to light these non-c compliances is growing in import
non-c compliances is growing in import import day by
day so uh so this is like different roc's uh what we've covered here is
roc's uh what we've covered here is there are different roc's first was the
there are different roc's first was the ROC Delhi then was the ROC Pune now is
ROC Delhi then was the ROC Pune now is Roc Chennai so all the roc's are taking
Roc Chennai so all the roc's are taking into consideration the importance of the
into consideration the importance of the secretarial standards and they are
secretarial standards and they are penalizing the company under different
penalizing the company under different Clauses of the uh secretarial standard
Clauses of the uh secretarial standard one or two as is the non compliance
prevailing so that's all from my side thank you everyone for your patient uh
thank you everyone for your patient uh hearing wonderful Aditi very
hearing wonderful Aditi very nicely you have done the
nicely you have done the presentation and very precisely you have
presentation and very precisely you have covered and brought in all the
covered and brought in all the aspects very
aspects very nice just to go back to one slide
in particular case of madas fertilizers we have talked in the past also I again
we have talked in the past also I again tend to emphasize on this particular
tend to emphasize on this particular case this is relating to gift
case this is relating to gift distribution done at the AGM by the
distribution done at the AGM by the madas fertilizations Company Limited
madas fertilizations Company Limited initially the ROC has actually penalized
initially the ROC has actually penalized company and the director and the file
company and the director and the file was very heavy and they made an appeal
was very heavy and they made an appeal and went to the A
and went to the A when AI was reviewing the case we
when AI was reviewing the case we categorically said is a responsibility
categorically said is a responsibility of the company secretary and the company
of the company secretary and the company secretary alone to ensure the
secretary alone to ensure the secretarial complaints which is required
secretarial complaints which is required as per the secretarial standard so in
as per the secretarial standard so in which case what he has done is he has
which case what he has done is he has set the whole order against the penalty
set the whole order against the penalty Leed upon the company and the director
Leed upon the company and the director he issued instruction to the
he issued instruction to the adjudication officer to initiate
adjudication officer to initiate separate proding only the company
separate proding only the company security and conduct the case so here he
security and conduct the case so here he has referred actually the second
has referred actually the second standard he has referred the guance to
standard he has referred the guance to he has said what is the role of the
he has said what is the role of the company secretary that really a very
company secretary that really a very highlighting case showing the importance
highlighting case showing the importance of the company secretary what we are all
of the company secretary what we are all supposed to do and again needless to
supposed to do and again needless to mention Mr sudagar has been repeatedly
mention Mr sudagar has been repeatedly saying in every seminar about the import
saying in every seminar about the import of the second standard the guidance Etc
of the second standard the guidance Etc which we have to take care of it that is
which we have to take care of it that is the only point I want to add at this
the only point I want to add at this Junction I think we can take the
Junction I think we can take the questions
now I think we left it with the material subsid you stop sharing
what of our listed entity foreign subsidy the minutes are not placed in
subsidy the minutes are not placed in the listed entity because the law and
the listed entity because the law and act are different how they will follow
act are different how they will follow their local laws and acts need not be
their local laws and acts need not be given in the proper formats and
given in the proper formats and maintaining are different in this case
maintaining are different in this case how we can consider unlisted foreign
how we can consider unlisted foreign subsidary please comment on
this let me take it in this manner that it is your unlisted foreign subsidiary
it is your unlisted foreign subsidiary so when when and it is your obligation
so when when and it is your obligation to follow the listing agreement so
to follow the listing agreement so whenever you are follow incorporating a
whenever you are follow incorporating a subsidary in any foreign location you
subsidary in any foreign location you have to understand not only their laws
have to understand not only their laws you have to also see how you will
you have to also see how you will implement or you will ensure that your
implement or you will ensure that your governance is done for that listed
governance is done for that listed subsidary so you will follow you will
subsidary so you will follow you will make everything according to that
make everything according to that country's law as well as ensure that
country's law as well as ensure that whatever governance you need to do for
whatever governance you need to do for the Indian under the Indian regulations
the Indian under the Indian regulations that are also followed because finally
that are also followed because finally it is it gets comes and gets
it is it gets comes and gets Consolidated in India so we have to
Consolidated in India so we have to ensure that governance is maintained at
ensure that governance is maintained at any cost wherever the location of the
any cost wherever the location of the company till the time it is a part of
company till the time it is a part of your group governance has to be done as
your group governance has to be done as per the regulations which are followed
per the regulations which are followed in India so practical
in India so practical difficulties Cann not be a reason for
difficulties Cann not be a reason for which governance is not done so I agree
which governance is not done so I agree with you if borrowing of the private
with you if borrowing of the private limited company
limited company 31323 is more than 100 CR secret auditor
31323 is more than 100 CR secret auditor is applicable for the year 2223 or 23 24
is applicable for the year 2223 or 23 24 since the wording of the section says
since the wording of the section says capital turnover borrowing existing on
capital turnover borrowing existing on the date of the latest audited financial
the date of the latest audited financial statement that has to be taken into
statement that has to be taken into account yeah it is actually when you say
account yeah it is actually when you say 31323 that means the latest audited
31323 that means the latest audited balance sheets is actually
balance sheets is actually 2223 so if it is 2223 based on that
2223 so if it is 2223 based on that because when the audit is get over then
because when the audit is get over then only you'll know so in which case it
only you'll know so in which case it will be applicable in the subsequent
will be applicable in the subsequent year because based on the previous
year generally I note that the secret auditor appointment and the audit report
auditor appointment and the audit report is placed only at the board meeting
is placed only at the board meeting should the secret auditor appointment
should the secret auditor appointment audit process be the report of the
audit process be the report of the rooted through the audit committee first
rooted through the audit committee first before it is recommended to the board
before it is recommended to the board second I am informed in some of the
second I am informed in some of the cases second auditor performs the audit
cases second auditor performs the audit remotely without even visiting the
remotely without even visiting the office is this
acceptable uh sir I would like to answer this question uh so first part of the
this question uh so first part of the question is again I will tell you it's a
question is again I will tell you it's a gray area because when we look at the
gray area because when we look at the functions of the audit committee there
functions of the audit committee there it has been mentioned as appointment of
it has been mentioned as appointment of Auditors so we as Auditors we always
Auditors so we as Auditors we always want that it is to be rooted so in a lot
want that it is to be rooted so in a lot of cases we are of an opinion that it
of cases we are of an opinion that it should be rooted through the audit
should be rooted through the audit committee and uh since it is uh like
committee and uh since it is uh like auditing of all the records of an
auditing of all the records of an organization it should be rooted but
organization it should be rooted but then again uh sir you can give your
then again uh sir you can give your comments on that because we we as
comments on that because we we as Auditors we feel that it should be
Auditors we feel that it should be rooted through the audit committee the
rooted through the audit committee the appointment thank you no before this
appointment thank you no before this program actually I did a
program actually I did a survey uh to find out the practices in
survey uh to find out the practices in about five six companies that I was
about five six companies that I was aware of uh at least three of them said
aware of uh at least three of them said that they don't do it they do it
that they don't do it they do it directly at the board uh because I think
directly at the board uh because I think if there is any qualification then it
if there is any qualification then it has to be addressed in the board's
has to be addressed in the board's report uh the second aspect they also
report uh the second aspect they also the two other companies said they always
the two other companies said they always rooted uh through the audit committee
rooted uh through the audit committee irrespective of the fact that it is an
irrespective of the fact that it is an annual exercise and the term terms of
annual exercise and the term terms of reference does not specifically talk
reference does not specifically talk about it but my point basically to all
about it but my point basically to all of you is that the cost audit comes to
of you is that the cost audit comes to the audit committee the staty auditor
the audit committee the staty auditor comes to the audit committee the
comes to the audit committee the internal auditor comes to the audit
internal auditor comes to the audit committee so why should the secretarial
committee so why should the secretarial audit be excluded just because it is not
audit be excluded just because it is not specified there the role of the audit
specified there the role of the audit committee if you look at it terms of
committee if you look at it terms of reference it talks about compliance and
reference it talks about compliance and legal your regulations everything it
legal your regulations everything it goes through the audit committee first
goes through the audit committee first and then only it goes to the board I
and then only it goes to the board I agree that the board will not recommend
agree that the board will not recommend anything in this case but at least the
anything in this case but at least the board will not have the time to actually
board will not have the time to actually look at how the appointment is made the
look at how the appointment is made the internal auditor is also appointed by
internal auditor is also appointed by the board the staty auditor is appointed
the board the staty auditor is appointed by the members but still it goes through
by the members but still it goes through the process now somebody told me that
the process now somebody told me that the secretary auditor does not have any
the secretary auditor does not have any engagement with the audit committee now
engagement with the audit committee now I think that is a very weak argument
I think that is a very weak argument because uh it is true that just because
because uh it is true that just because you are having an engagement every
you are having an engagement every quarter it should go through the audit
quarter it should go through the audit committee but if you don't have an
committee but if you don't have an engagement every quarter then you don't
engagement every quarter then you don't go through the audit committee I think
go through the audit committee I think that's a very weak argument from my
that's a very weak argument from my perspective if you want good governance
perspective if you want good governance we have to look at the Spirit of the law
we have to look at the Spirit of the law and it is not practically possible to
and it is not practically possible to look at every situation there are many
look at every situation there are many times when the board has to take a
times when the board has to take a decision and still the management
decision and still the management believes let us take it through the
believes let us take it through the audit committee at least one of the
audit committee at least one of the Committees I'm not saying more than one
Committees I'm not saying more than one committee so I think from my perspective
committee so I think from my perspective uh it is important for uh any
uh it is important for uh any audit uh to go through the audit
audit uh to go through the audit committee especially when it relates to
committee especially when it relates to compliance uh and things like that
compliance uh and things like that because that is primarily the
because that is primarily the responsibility of the audit committee to
responsibility of the audit committee to oversee because after all the role of
oversee because after all the role of the audit committee is oversight right
the audit committee is oversight right so unless and the board will not have
so unless and the board will not have that much time because if you're looking
that much time because if you're looking at strategy and many other things merg
at strategy and many other things merg Acquisitions the big ticket items uh why
Acquisitions the big ticket items uh why should the board get into the process
should the board get into the process now the second part of my question is uh
now the second part of my question is uh the PCS that you mentioned in the two
the PCS that you mentioned in the two cases I was told that they do remotely I
cases I was told that they do remotely I mean every document is sent through
mean every document is sent through email that person has never visited the
email that person has never visited the office never interacted with other
office never interacted with other management Personnel so my question was
management Personnel so my question was actually around it to say you know I
actually around it to say you know I mean I'm not saying that the guy has to
mean I'm not saying that the guy has to come everywhere but at least should they
come everywhere but at least should they not be one meeting with the management
not be one meeting with the management other than the secretarial other than
other than the secretarial other than the company
secretary uh what is your experience I mean when you do secretarial audit when
mean when you do secretarial audit when you are appointed do you have at least
you are appointed do you have at least one meeting even if not physically do
one meeting even if not physically do you do it virtually right that that's
you do it virtually right that that's exactly what I was coming to so see uh
exactly what I was coming to so see uh we have all gone through the coid phase
we have all gone through the coid phase which has made us believe in the virtual
which has made us believe in the virtual presence right so it is I would say
presence right so it is I would say prior to the co phase it was all
prior to the co phase it was all physical audits only which was being
physical audits only which was being conducted so that was the way how it was
conducted so that was the way how it was nobody actually knew of sharing of
nobody actually knew of sharing of documents over emails and all of that so
documents over emails and all of that so there was a physical audit which was
there was a physical audit which was being conducted but as you said uh
being conducted but as you said uh definitely when we are onboarded by an
definitely when we are onboarded by an uh management of a company to conduct
uh management of a company to conduct their audit it becomes the atmost
their audit it becomes the atmost responsibility to have a preliminary
responsibility to have a preliminary introductory meeting with them to
introductory meeting with them to understand their operations because
understand their operations because until and unless we get a proper
until and unless we get a proper background of the company for whom we
background of the company for whom we are auditing then probably we are
are auditing then probably we are missing out on a lot of compliances that
missing out on a lot of compliances that might get applicable to it yes so uh
might get applicable to it yes so uh yeah so it becomes very important that
yeah so it becomes very important that we have a preliminary meeting with them
we have a preliminary meeting with them probably uh their entire team with whom
probably uh their entire team with whom we are going to be coordinating in the
we are going to be coordinating in the due course of time similarly a
due course of time similarly a introduction of uh the head auditor and
introduction of uh the head auditor and the audit audit team also who is going
the audit audit team also who is going to perform the audit or conduct the
to perform the audit or conduct the audit and then we take it ahead as per
audit and then we take it ahead as per the convenience of the audit committee
the convenience of the audit committee if they prefer sharing it over the mail
if they prefer sharing it over the mail or having a v transfer whatever is the
or having a v transfer whatever is the mode if they prefer electronic transfer
mode if they prefer electronic transfer that is also agreed and if they want a
that is also agreed and if they want a physical audit or physical presence in
physical audit or physical presence in the office so that is again mutually
the office so that is again mutually agreed that's fine may actually go one
agreed that's fine may actually go one step ahead yes I will actually think
step ahead yes I will actually think widely if the statutory auditor
widely if the statutory auditor appointment is subject to the
appointment is subject to the shareholders approval why not the
shareholders approval why not the secretarial Auditors appointment also
secretarial Auditors appointment also subject to be a shareholders approval
subject to be a shareholders approval why differently we are treating sir
why differently we are treating sir there are geographies which have taken
there are geographies which have taken this and in Bangladesh I know of the
this and in Bangladesh I know of the secretarial auditor is appointed by the
secretarial auditor is appointed by the shareholders okay so this is already uh
shareholders okay so this is already uh it is how the how it is uh taken as but
it is how the how it is uh taken as but that's and I would also like to add one
that's and I would also like to add one thing is uh what we have been discussing
thing is uh what we have been discussing uh also is limited review is also done
uh also is limited review is also done by the our uh statutary Auditors
by the our uh statutary Auditors secretarial Auditors also should
secretarial Auditors also should actually
actually start conducting reviews if not
start conducting reviews if not quarterly at least six monthly so that
quarterly at least six monthly so that at the end of the time when the report
at the end of the time when the report has to be done everything does not just
has to be done everything does not just pile up so we should also consider this
pile up so we should also consider this as a good governance practice if limited
as a good governance practice if limited review of Secretarial a
review of Secretarial a can also be done yeah I will ask
can also be done yeah I will ask actually sud sud what is your view
actually sud sud what is your view actually why not the secret La should be
actually why not the secret La should be appointed by the shareholders of the
company this particular thing was discussed at the I mean Ministry level
discussed at the I mean Ministry level while companies act 2013 was there so
while companies act 2013 was there so though the proposal was
though the proposal was there in the I mean it was felt that
there in the I mean it was felt that this is not a right time for the I not
this is not a right time for the I not to put it to the
to put it to the shareholders no reason r or reason for
shareholders no reason r or reason for that but uh recently the SSB board we
that but uh recently the SSB board we have given some good practices for the
have given some good practices for the audit Committee in that we have
audit Committee in that we have recomended
recomended that the secondary auditor appointment
that the secondary auditor appointment is to be rooted through audit committee
is to be rooted through audit committee but as on date it is not mandatory yeah
but as on date it is not mandatory yeah I also Wily think because when you talk
I also Wily think because when you talk about the auditor let it be the cost
about the auditor let it be the cost auditor let it inter auditor SEC auditor
auditor let it inter auditor SEC auditor auditor is the auditor everybody should
auditor is the auditor everybody should have the same disclination anyway today
have the same disclination anyway today law stands this way only but as M puts
law stands this way only but as M puts it in Bangladesh it is subject to the
it in Bangladesh it is subject to the shareholders approval it's a very good
shareholders approval it's a very good practice I would say really speaking
thing one practical question can a subsidary company write in their letter
subsidary company write in their letter head XY is limited into bracket and ABC
head XY is limited into bracket and ABC group holding
company I don't know what to answer gives because I have not seen any such
gives because I have not seen any such letter head Etc I have seen people
letter head Etc I have seen people saying that this is the company and they
saying that this is the company and they write in which group there are that they
write in which group there are that they normally
normally wrate a group company of
XYZ I know rpt has been done many times earlier but one small doubt is there
earlier but one small doubt is there kindly clarify in time permits when
kindly clarify in time permits when subsidy of the rpt where listed company
subsidy of the rpt where listed company is not a party more than 10% of the
is not a party more than 10% of the Standalone 10 hour requests audit
Standalone 10 hour requests audit committee approval listed company so is
committee approval listed company so is this criteria the rpt with a related
this criteria the rpt with a related parties or with a single related party
parties or with a single related party when it exceeds the
threshold even if it is a single related party when it exceeds the threshold it
party when it exceeds the threshold it requires the audit committee approval of
requires the audit committee approval of the
the list
list okay there is a suggestion has come
okay there is a suggestion has come actually he says that sir one more
actually he says that sir one more request as you successfully conducting
request as you successfully conducting the webinar series of the p and also
the webinar series of the p and also conducting lodia why not you kindly
conducting lodia why not you kindly conduct on S regulations yeah we will
conduct on S regulations yeah we will take subst substantial acquisition take
take subst substantial acquisition take over I think yeah we will do that at
over I think yeah we will do that at appropriate time okay certainly we will
appropriate time okay certainly we will do
do that my presentation wonderful
that my presentation wonderful presentation can secretarial
presentation can secretarial auditor file and certify various eforms
auditor file and certify various eforms in
ad can the secret auditor certify various e forms in R that's what you ask
various e forms in R that's what you ask me so uh sir here again the corporate
me so uh sir here again the corporate governance Norms comes in so uh What uh
governance Norms comes in so uh What uh what should be done is basically a firm
what should be done is basically a firm can do it but not the secretarial
can do it but not the secretarial auditor by a firm what I mean is if we
auditor by a firm what I mean is if we are following a Chinese wall policy
are following a Chinese wall policy wherein teams are not intersecting with
wherein teams are not intersecting with each other so so in that case uh the
each other so so in that case uh the form uh like certification of the forms
form uh like certification of the forms can be done and the secretarial audit
can be done and the secretarial audit team is quite different from the ones
team is quite different from the ones who are certifying the
who are certifying the form the company has actually filed the
form the company has actually filed the SSP with the prescribed time but based
SSP with the prescribed time but based on the query from the stock exchanges
on the query from the stock exchanges regarding some
regarding some reclassification it files the Revis SSP
reclassification it files the Revis SSP post to the prescribed for is already
post to the prescribed for is already over is it the matter of reporting the
over is it the matter of reporting the ACR for the delay of filing the
SHP I don't think it is so know because that company is not listed by that time
that company is not listed by that time so hence SC is not applicable to that at
so hence SC is not applicable to that at all okay it is still in the process of
all okay it is still in the process of listing stage only
listing stage only correct not even listing it not even
correct not even listing it not even listing it is at the IPO
listing it is at the IPO yeah correct because the scr comes into
yeah correct because the scr comes into play only when the company becomes
play only when the company becomes listed
listed company sir I'm being unmuted can I talk
company sir I'm being unmuted can I talk for yeah sure yeah thanks thanks sir uh
for yeah sure yeah thanks thanks sir uh actually sir my answer I was not getting
actually sir my answer I was not getting you know one of we have just put in
you know one of we have just put in money in our one of a company and they
money in our one of a company and they are becoming our subsidiary actually and
are becoming our subsidiary actually and they are struggling with their
they are struggling with their establishment of Brands and all but they
establishment of Brands and all but they are they are actually you know in a
are they are actually you know in a letterheads and and all they are willing
letterheads and and all they are willing to write our name uh while they are you
to write our name uh while they are you know establishing their brand and they
know establishing their brand and they are giving to any agencies they are
are giving to any agencies they are putting our brand as a group company
putting our brand as a group company that is why I was specifically asked so
that is why I was specifically asked so I have said as for law they can write an
I have said as for law they can write an associate company but uh group company
associate company but uh group company they are putting you know my company
they are putting you know my company name as a group company name so will
name as a group company name so will there be a right in doing
there be a right in doing this see the of the company also so
this see the of the company also so governed by the companies act you cannot
governed by the companies act you cannot have letter the way you want to have it
have letter the way you want to have it so you have to have the bare minimum
so you have to have the bare minimum whatever the requirements are there
whatever the requirements are there comply with that after that over and
comply with that after that over and above you can do whatever you feel like
above you can do whatever you feel like as far as The Branding is concerned but
as far as The Branding is concerned but this group company concept that is only
this group company concept that is only there but you cannot to the best of my
there but you cannot to the best of my knowledge you cannot bring the group
knowledge you cannot bring the group concept company I sry aspect on the
concept company I sry aspect on the letter of the company at
least okay thank you thank you sir why SEC auditor is not certifying
sir why SEC auditor is not certifying the form because by certifying he can
the form because by certifying he can audit the forms and can see all the
audit the forms and can see all the compliances of that level and
compliances of that level and appropriate time somebody is saying that
appropriate time somebody is saying that it is the conflict of interest nothing
it is the conflict of interest nothing else it is a conflict of interest that's
else it is a conflict of interest that's why they should not do it yeah correct
why they should not do it yeah correct according to me it should not be
according to me it should not be actually as put if the company is having
actually as put if the company is having a Chinese concept the teams are
a Chinese concept the teams are different a different team can but
different a different team can but auditing person should not that's what I
auditing person should not that's what I also feel
also feel strongly I think that is all the
strongly I think that is all the questions I have nothing else is
questions I have nothing else is there I think it is we are already at
there I think it is we are already at one
one t still I can see more than 100 people
t still I can see more than 100 people are
are all so yeah
yes but before we conclude before we conclude B let me say that next week
conclude B let me say that next week being CH Diwali we don't have the
being CH Diwali we don't have the webinar on that day and we will will
webinar on that day and we will will have the next webinar on 18th only okay
have the next webinar on 18th only okay and we will continue with master class
and we will continue with master class and the the flyer will be circulated an
and the the flyer will be circulated an appropriate time and thanks very much M
appropriate time and thanks very much M once again for your gracious presence in
once again for your gracious presence in our webinar and I'm sure that in future
our webinar and I'm sure that in future also at an appropriate time we will
also at an appropriate time we will invite you and accept you will accept
invite you and accept you will accept our invite at that point of time thank
our invite at that point of time thank you so much and AD is an excellent
you so much and AD is an excellent presentation and uh your experience of
presentation and uh your experience of your thank you so ad you experience of
your thank you so ad you experience of your secretary Audits and complaints
your secretary Audits and complaints report it is very much visible and it is
report it is very much visible and it is an excellent presentation once again and
an excellent presentation once again and I'm sure the participants got benefited
I'm sure the participants got benefited thanks very much Bala for your
thanks very much Bala for your moderation and thanks each and every
moderation and thanks each and every participant uh I mean that for your
participant uh I mean that for your presence and uh thank you and goodbye
presence and uh thank you and goodbye God bless you all thank you thanks a lot
God bless you all thank you thanks a lot to everybody I wish you all well in
to everybody I wish you all well in advance our Diwali greetings to you have
advance our Diwali greetings to you have a great time have a good Festival we
a great time have a good Festival we meet after Dali thank you
meet after Dali thank you thank you everyone thank
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