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The Ministry of Corporate Affairs (MCA) has vide an
amendment dated 3rd January 2020 to the Companies (Appointment and Remuneration
of Managerial Personnel) Rules, 2014 amended the thresholds for applicability
of Secretarial Audit and the thresholds for mandatory appointment of Whole Time
Company Secretary. This amendment is applicable in respect of financial
years commencing on or after 1st April 2020.
A. Applicability of Secretarial Audit
audit is applicable to even
private companies which are heavily leveraged as mentioned
above (irrespective of whether it
is long term or short term borrowing).
2. From which year Secretarial Audit is applicable?
a. Companies which have already crossed the new
Since this Amendment is applicable in respect of
financial years commencing on or after 1st April 2020, in case of companies
(private or public) which already have outstanding loans or borrowings from
banks or public financial institutions of Rs. 100 crores or more, Secretarial
Audit will be applicable for the financial year 2020-21 onwards.
b. Companies which cross the new threshold after 1st
In the above Rules, an Explanation has been inserted to
the effect that the paid up share capital, turnover, or outstanding loans or
borrowings as the case may be, existing on the last date of latest audited
financial statement shall be taken into account.
Section 204 states that Secretarial Audit Report shall be
annexed to Board’s report, which happens post audit of financial statements of
a particular year. Hence, if Secretarial Audit is newly applicable to any
Company for a particular financial year, then Secretarial Audit must be
undertaken for that particular financial year only, and not beginning from the
next financial year.
B. THRESHOLDS FOR THE APPOINTMENT OF WHOLE TIME COMPANY
per Section 203 read with Rule 8 and Rule 8A of Companies (appointment and
managerial personnel) Rules 2014,
There was recent amendment which has been
Due to recent amendments, the limits for appointment of
whole time company secretary has been increased to double.
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