Markets regulator SEBI has revised its Listing Obligations and Disclosure Requirements (LODR) regulations to introduce detailed norms for the appointment, reappointment and removal of secretarial auditors in listed entities.
In practice, only a peer-reviewed company secretary or a firm of company secretaries can conduct a secretarial audit of a listed entity and its material unlisted subsidiaries incorporated in India, SEBI has now ruled.
The latest changes and resulting structural clarity are expected to redefine the position of the Secretarial Auditor in the corporate landscape, say industry observers.
With this move by SEBI, the entire process of obtaining shareholder approval for appointment as auditor secretary at an annual general meeting will be on par with that of statutory financial auditors, they noted.
The latest norms introduced by the market regulator are in response to the recommendations of the SEBI-appointed committee headed by SK Mohanty for facilitating ease of doing business for listed and prospective companies in India.
Currently, there are no provisions prescribed in the LODR Regulations or in the Companies Act 2013 specifying criteria for appointment, reappointment or removal for secretarial auditors of a listed entity.
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Cooling-off period
SEBI has now also prescribed a cooling-off period for secretarial accountants of a listed entity in its LODR regulations. A cooling-off period of five years is prescribed for reappointment of a person as a Secretarial Accountant and for reappointment of a secretarial accounting firm after two consecutive terms.
As per the latest LODR amendments, SEBI has specified that an individual can be appointed for a term of five years and a company can be appointed for a maximum of two terms of five years each, subject to approval by the shareholders in a general meeting.
Role of secretarial auditors
Secretarial auditors play a crucial role in strengthening corporate governance in India and ensuring companies adhere to legal and regulatory frameworks.
Secretarial audit is now mandatory for every listed company; any listed company with a paid-up share capital of at least ₹50 crore; any listed company with a turnover of at least ₹250 crore; any private limited company having paid up capital of at least ₹50 crore or turnover of at least ₹250 crore; any company with outstanding loans or borrowings of at least ₹100 crore with banks or public financial institutions.
SN Ananthasubramanian, former president of Institute of Company Secretaries of India and practicing company secretary, welcomed the latest SEBI LODR amendments and emphasized the need for revamping the format of secretarial audit report for listed companies.
He noted that the current format needs to be revised to reflect stakeholder expectations, making it more relevant and contemporary.
