Compliance with secretarial audit in effect from July; stricter board meet, AGM rules

Corporate governance compliance is getting stricter.

Going beyond merely disclosing a tiny list of how many board members attended meetings or some other equally irrelevant information, companies would soon have a major headache as compliance with secretarial audit is coming into effect soon.

Even things like composition of a board meet have to be recorded and audited under the new rules.

"There would be set standards for most of the activities of a corporate body: how to conduct board meets and annual general meetings. The audit would ensure fair play, exercise risk mitigation, build confidence among stakeholders including investors as they would feel that the particular company is compliant in all respects," Institute of Company Secretaries chief executive officer Sutanu Sinha told dna said.

The standards were finalised last week and would become effective from July, Sinha said.

Not just listed companies, every public company having a paid-up share capital of Rs 50 crore or more or every public company having a turnover of Rs 200 crore or more would have to adopt the audit.

The audit will help prevent malpractices like removal of directors in private limited companies.

"Many a times directors in private companies are removed without their knowledge. Now a professional would audit and certify such events," he said.

The audit is also good news for independent directors too, as many shortcomings for which they could have been held responsible would get identified through this audit.

Around 8 lakh companies in India will have to comply with these secretarial standards to be fully compliant under Companies Act.

Norms would require companies to disclose whether board is duly constituted with proper balance of executive directors, non-executive and independent directors; changes in composition of board of during period under review; whether adequate notice is given to all directors among other things.