CHAPTER III - COMMON OBLIGATIONS OF LISTED ENTITIES
Whether the has appointed a qualified Company Secretary as the Compliance Officer.
(a) Whether the company manages the share transfer facility in-house.
(b) If the answer to above is "No", whether the has appointed a Share Transfer Agent..
(c) In case the total number of holders of securities of the listed entity has exceeded one lakh, whether it has registered with the Board as a Category II share transfer agent or has appointed Registrar to an issue and share transfer agent registered with the Board.
Whether the company has submitted a compliance certificate to the exchange, within one month of end of each half of the financial year, certifying compliance with the requirements of regulation 7(2)
Whether the entity has a policy for preservation of documents classifying those in two categories - (i) preservation of documents in permanent nature and (ii) these to be preserved for a period of 8 years from the date of the relevant transaction.
Whether the entity has put in place infrastructure as required for compliance with the requirements of e-filing of documents with the stock exchange(s).
Whether the entity is registered on the SCORES platform or such other electronic platform or system of SEBI, in order to handle investor complaints electronically.
(a) Weather the entity has filed with the stock exchange(s) on a quarterly basis, within twenty one days from the end of each quarter, a statement giving the number of investor complaints pending at the beginning of the quarter, those received during the quarter, disposed of during the quarter and those remaining unresolved at the end of the quarter.
(b) Weather the entity has placed the above referred statement before the board of directors of the entity on quarterly basis.
CHAPTER IV - OBLIGATIONS OF LISTED ENTITY WHICH HAS LISTED ITS SPECIFIED SECURITIES
‘Specified Securities’ means ‘equity shares’ and ‘convertible securities’ as defined under clause (zj) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009;
Whether the entity has complied with requirements of Corporate Governance. [Note: Engagement team should refer the separate compliance check list in respect of Corporate Governance]
17 to 27
Whether the entity obtained in-principle approval for issue of shares from all the exchanges where it is listed or proposed to be listed
Whether the entity has given prior intimation to the stock exchange of board meeting to be held for considerations of the following proposals :
atleast 5 days advance (excluding the date of intimation and date of meeting) for the following : (a) financial results
atleast 2 days advance for the following : (b) proposal for buyback of securities; (c) proposal for voluntary delisting by the listed entity from the stock exchange(s); (d) fund raising by way of further public offer, rights issue, ADR/ GDR/ FCCBs, QIPs, debt issue, preferential issue or any other method and for determination of issue price, including intimation for AGM/ EGM or postal ballot proposed to be held for obtaining shareholder approval for further fund raising indicating type of issuance. (e) declaration/recommendation of dividend, issue of convertible securities including convertible debentures or of debentures carrying a right to subscribe to equity shares or the passing over of dividend. (f) the proposal for declaration of bonus securities where such proposal is communicated to the board of directors of the listed entity as part of the agenda papers, if the declaration of bonus by the listed entity is on the agenda of the meeting of board of directors.
atleast 11 working days advance for the following : (a) any alteration in the form or nature of any of its securities that are listed on the stock exchange or in the rights or privileges of the holders thereof. (b) any alteration in the date on which, the interest on debentures or bonds, or the redemption amount of redeemable shares or of debentures or bonds, shall be payable.
(a) Whether the entity has framed a policy for determination of materiality, based on criteria specified in sub-regulation (4).
(b) Whether the policy as stated above approved by its board of directors and whether it is disclosed on the entity's website.
(c) Whether the entity has made disclosures of events and information as listed in schedule III to the Regulations (Refer tab "Appendix A" for the list of events and information to be disclosed in accordance with Schedule III to the Regulations)
Sch. III Part A
Refer tab "Appendix A"
Whether the entity has submitted statement showing holding of securities and shareholding pattern separately for each class of securities within the following timelines : (a) one day prior to listing of its securities on the stock exchange(s); (b) on a quarterly basis, within twenty one days from the end of each quarter; (c) within ten days of any capital restructuring of the listed entity resulting in case of a change exceeding two per cent of the total paid-up share capital
Whether the shareholding of promoter(s) and promoter group is in dematerialized form and whether the same is maintained on a continuous basis
Whether the shareholding of promoter(s) and promoter group is disclosed separately in the shareholding pattern appearing on the website
(a) In case of preferential issue/public issue /rights issue of shares, whether the entity has furnished quarterly statement to stock exchange indicating material deviations and category wise variation (capital expenditure, sales and marketing, working capital etc.) between projected utilisation of funds and/or projected profitability statement made by it in offer document/ explanatory statement.
(b) Whether the above statement has been placed before the audit committee
(c) Whether the explanations to variations explained in the directors' report
(d) Whether a certificate from the statutory auditors obtained in respect of an annual statement of funds utlised for purposes other than those stated in offer document, and whether the same has been placed before the audit committee
(a) Whether the results include the quarterly, year to date (YTD) and annual financial results and Whether these are prepared on accrual basis in accordance with uniform accounting practices for all periods.
(b) Whether the quarterly and YTD results are prepared in accordance with the recognition and measurement principles laid down in AS 25 or Ind AS 31 - Interim Financial Reporting
(c) Whether the standalone and consolidated results are prepared as per Indian GAAP
(d) Whether Review report given by the auditor of the entity is filed along with unaudited results.
(e) Whether the following disclosures made by the entity in its financial results :
33(1)(e) and part A to Sch.IV
(i) Changes in accounting policies in accordance with AS 5 or Ind AS 8
(ii) If the auditor has expressed any modification or other reservation in respect of audited financial results, whether the entity has disclosed such modification or other reservation and impact of the same on the profit or loss, net worth, total assets, turnover/total income, earning per share or any other financial item(s) impacted, while publishing or submitting such results.
(iii) If the previous year/ quarter limited review report or audit report included any modification or other reservation which has an impact on the current reporting period, whether the entity has included a note stating : (a) how the modification/ reservation has been resolved (b) if it is not resolved, the reason thereof and the steps which the entity intends to take in this matter.
(iv) Where the entity has changed its name suggesting any new line of business, whether it has disclosed the net sales or income, expenditure and net profit or loss after tax figures pertaining to the said new line of business separately in the financial results. [Note: The disclosure is required to be continued for the three years succeeding the date of change in name.]
(v) If the entity had not commenced commercial production or commercial operations during the reportable period, check whether the entity has disclosed the following : (a) details of amount raised (i.e. proceeds of any issue of shares or debentures made by the entity), (b) the portions thereof which is utilized and that remaining unutilized, (c) the details of investment made pending utilisation, (d) brief description of the project which is pending completion, (e) status of the project, and (f) expected date of commencement of commercial production or commercial operations.
(vi) Whether the details mentioned above are approved by the Board of Directors, based on certification by the Chief Executive Officer and Chief Financial Officer.
(vii) Whether Income and expenditure arising out of transactions of exceptional nature are disclosed separately.
(viii) Whether Extra ordinary items, if any, disclosed in accordance with AS 5
(ix) If the revenues of the entity are subject to material seasonal variations, whether there is appropriate disclosure of the seasonal nature of entity's activities. (The entity may also supplement their unaudited financial results into information for 12 month periods ended at the interim date (last day of the quarter) for the current and preceding years on a rolling basis.)
(x) Whether the entity disclosed any event or transaction which occurred during or before the quarter that is material to an understanding of the results for the quarter including but not limited to completion of expansion and diversification programmes, strikes and lock outs, change in management and change in capital structure. (Similar material events or transactions that take place subsequent to the end of the quarter shall also be disclosed.) [Similar requirement specified by Regulation 30 - Checklist given as an annexure to this checklist]
(xi) Whether the entity has given following information in respect of dividend paid or recommended for the year including interim dividends declared : (a) Amount of Dividend distributed or proposed distinguishing between different classes of shares and Dividend per share also indicating nominal value per share. (b) Where Dividend is paid or proposed pro-rata for shares allotted during the year, the date of allotment, number of shares allotted pro-rata amount of dividend per share and the aggregate amount of dividend paid or proposed on pro-rata basis.
(xii) Whether the entity has disclosed to stock exchange, the effect of changes in composition of the entity during the quarter, for instance business combinations, acquisitions or disposal of subsidiaries and long term investments, restructuring and discontinuing operations.
(xiii) Whether segment reporting is done in accordance with AS 17 or Ind AS 108 (whichever is applicable)
(f) Whether the entity has complied with all the applicable and notified accounting standards from time to time.
Approval and authentication
(a) Whether the CEO or CFO certified that the financial results do not contain any false or misleading statement or figures and no material facts are omitted. Further, verify that financial results were approved by the Board of Directors of the entity.
(b) Whether the financial results submitted to the stock exchange signed by the Chairperson or Managing Director or a Whole Time Director or in their absence by any director authorised by the Board of Directors
(c) Whether limited review report placed before the Board of Directors meeting approving the financial results
Submission to stock exchange
(a) Whether the quarterly and YTD results are submitted within 45 days from the end of the quarter.
(b) In case of audited annual financial results, whether they are submitted within 60 days from the end of the financial year.
(c) Whether last quarter results in the audited annual results are disclosed as balancing figures between audited figures in respect of full financial year and the published year to date figures upto the third quarter of the current financial year.
(d) Whether a statement of assets and liabilities submitted by way of a note as part of the standalone or consolidated results on a half-yearly basis.
(e) Whether the unaudited/ audited results submitted were accompanied by a limited review report/ audit report respectively
(f) If the entity has subsidiaries :
(i) has it opted in the first quarter of the financial year to submit consolidated quarterly and YTD results in addition to the standalone results
(ii) where opted whether the entity has also submitted quarterly and year to date consolidated financial results within forty five days from the end of the quarter.
(iii) whether comparable figures of the previous year also given along with current year figures, irrespective of whether the option was opted in the previous year or not
Note : The formats for submission of financial results and the limited review/ audit reports are not yet notified under the Regulations.
Form A/B Filing
(a) Whether Form A is duly filled up and signed by the engagement team in respect of unqualified report or a report containing an Emphasis of matter paragraph
(b) Whether National Technical team was consulted for inclusion of an Emphasis of matter paragraph in the audit report as per consultation policy
(c) Whether Form B is duly filled up and signed by the auditor in case of qualified audit reports or where the audit report includes both emphasis of matter paragraph and qualification.
(d) Whether National technical team was consulted for modifications in the audit report as per consultation policy.
(e) Whether impact of repetitive Emphasis of Matter/Qualifications in audit report assessed before issuing audit report [Note: As the requirements have not changed vis-a-vis those of the erstwhile Equity Listing Agreement, the engagement team may keep referring to Assurance Alert (AA) 38: Clause 31(a) of Equity Listing Agreement for guidance]
(f) Whether Management comments on modifications as included in Form B is consistent with comment included in the Board Report pursuant to the requirement of section 217(3) of the Companies Act, 1956 and the note included in the financial statement
Whether announcement of unaudited results made to the stock exchange within 30 minutes of the closure of the Board Meeting in which the unaudited financial results are approved.
30(6) second proviso
(a) Whether the entity has submitted Annual Report within 21 working days working days of it being approved and adopted in the AGM.
(b) Whether the following disclosures made in the Annual Report
(i) Audited Financial Statements
(ii) Audited Consolidated Financial Statements
(iii) Cash Flow Statemnet in accordance with AS 3 or Ind AS 7 Cash Flow Statement
(iv) Directors report
(v) Management discussion and analysis report
(vi) Business responsibility report
(vii) Related Party Disclosures
(viii) Any other disclosures as required by Companies Act, 2013
(ix) Business Responsibility Report including the initiatives taken by the entity for environmental, social and government perspective in the format prescribed by SEBI vide Circular No. CIR/CFD/CMD/10/2015 dated November 04, 2015. [This requirement is applicable only for for the top hundred listed entities based on market capitalization (calculated as on March 31 of every financial year)]
(a) Whether the entity has adequate system of disseminating information to the shareholders for instance: - sending soft copies of full report to email address of shareholders registered with the entity - hard copies of abridged financial statements in other cases. - hard copy of annual report to shareholders on request and those who has not furnished their email ids
(b) In case of appointment of a new director, whether information about the director proposed to be appointed like his resume, experience etc. are given to the shareholders
Whether the entity has submitted draft scheme of arrangement proposed to be filed before any Court or Tribunal in accordance with the applicable provisions of Companies Act, and whether it has obtained Observation Letter or No-objection letter from the stock exchange.
(a) Whether the entity closed its transfer books for the purposes agreed by the stock exchange including declaration of dividend/ issue of rights/bonus shares.
(b) Whether the entity has given at least 7 working days (excluding date of intimation and record date) notice in advance of the date of board meeting at which declaration of dividend/issue of convertible debentures/ rights issue/buyback of securities is due to be considered.
(c) Whether such recommendation of dividend or issue of rights shares is done at least five days before commencement of the closure of its transfer books or the record date fixed for this purpose.
Whether the entity has submitted details regarding the voting results within forty eight hours of conclusion of its General Meeting [The format for submission of the votig results has been prescribed by SEBI vide Circular No. CIR/CFD/CMD/8/2015 dated November 4, 2015]
Whether the entity has maintained a functional website containing basic information about the entity
Whether the entity has disseminated the following information on its website :
(a) details of its business;
(b) terms and conditions of appointment of independent directors;
(c) composition of various committees of board of directors;
(d) code of conduct of board of directors and senior management personnel;
(e) details of establishment of vigil mechanism/ Whistle Blower policy
(f) criteria of making payments to non-executive directors , if the same has not been disclosed in annual report;
(g) policy on dealing with related party transactions;
(h) policy for determining ‘material’ subsidiaries;
(i) details of familiarization programmes imparted to independent directors including the following details :- (i) number of programmes attended by independent directors (during the year and on a cumulative basis till date), (ii) number of hours spent by independent directors in such programmes (during the year and on cumulative basis till date), and (iii) other relevant details
(j) the email address for grievance redressal and other relevant details;
(k) contact information of the designated officials of the listed entity who are responsible for assisting and handling investor grievances;
(l) financial information including: (i) notice of meeting of the board of directors where financial results shall be discussed; (ii) financial results, on conclusion of the meeting of the board of directors where the financial results were approved; (iii) complete copy of the annual report including balance sheet, profit and loss account, directors report, corporate governance report etc;
(m) shareholding pattern;
(n) details of agreements entered into with the media companies and/or their associates, etc;
(o) schedule of analyst or institutional investor meet and presentations made
Whether the entity has published the following information in newspapers :
(a) financial results with modified opinion or reservation expressed by the auditors, within 48 hours of conclusion of the meeting of board of directors at which the financial results were approved.
(b) if the entity has submitted quarterly consolidated financial results, the following information on a standalone basis as a footnote : (i) Turnover (ii) Profit before tax (iii) Profit after tax (iv) reference to the places, such as the website of entity and stock exchange(s), where the standalone results of the entity are available.
(c) statements of deviation(s) or variation(s)
(d) notices given to shareholders by advertisement
(e) a reference to link of the website of listed entity and stock exchange(s), where further details are available.
(f) Whether the above information is published in at least one English national daily newspaper circulating in the whole or substantially the whole of India and in one daily newspaper published in the language of the region, where the registered office of the listed entity is situated.
ADDITIONAL MATTERS FOR CONSIDERATION
Whether the engagement team complied with the requirements of paragraph 61/62 of SRE 2410. [Refer ICAI-AASB announcement dated October 18,2011 wherein the Council of the Institute of Chartered Accountants of India, at its 308 the meeting, took a view that in order to comply with requirements of paragraphs 61 and 62 of SRE 2410, ensuring filing of report with respective stock exchanges would be construed as sufficient compliance]
Whether the engaged firm carrying out the statutory audit of listed entity holds a valid peer review certificate
CHECKLIST FOR SECRETARIAL AUDIT AS PER COMPANIES ACT 2013
The main purpose of this audit is to maintain corporate governance. Section 204 of the Companies Act, 2013 along with Rule 9 of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 states that all listed companies, all Public Limited Companies who has a paid-up share capital of 50 crores or more and all the Public Limited Companies who have a turnover of 250 crores or more.
The Secretarial Audit is done and carried by an individual professional of the company in MR-3 form. The secretarial audit should be signed by the secretarial auditor, in case of more than one auditor, everyone should sign. In default of filing, the person responsible i.e. the company auditor will be fined not less than 1 lakh and extend to 5 lakh. The secretarial audit is exempted for Private Limited Companies.
Secretarial Audit has been made mandatory for private companies and Small Public companies in case of total outstanding debt of Rs 100 crore or more to banks and financial institutions. Under the previous rules, public companies with a paid-up share capital of Rs 50 crore or more or those with a turnover of Rs 250 crore or more were required to submit secretarial audit reports along with their board reports. In a move aimed at boosting the ease of doing business, the threshold for paid up capital at which private companies are required to employ a company secretary was raised from Rs 5 crore to Rs 10 crore.
These companies may adopt secretarial audit practices for ensuring compliance and avoiding the risks associated with non-compliance.
Audit strengthens the image and goodwill of a company in the minds of regulators and stakeholders. It acts as an effective compliance risk management tool or a governance tool.
Secretarial audit checklist
Let’s dive into the secretarial audit checklist. The auditor has to check and comply with the documents on the basis of five specific laws.
The Companies Act and Rules, 2013,
Securities Contracts (Regulation) Act and Rules, 1956 (SCRA)
Depositories Act, 1996 and their bylaws
Foreign Exchange Management Act (FEMA) 1999
Securities and Exchange Board of India Act 1992(SEBI), its regulations and guidelines.
The auditor has to check whether the company has maintained all registers, returns, files under Companies Act 2013 and also the company should fulfil the provisions of Memorandum and Articles of Association of the company.
Documents to be checked
The auditor should check the following statutory reports under the Companies Act, 2013:
Register of investments
Under Section 49- When a company calls for further share capital, the details of the investors should be recorded.
2. Register of deposits
Under Rule 7 of the Companies (acceptance of deposits) Rule, 1975 – Whenever a company accepts deposits, the particulars of each depositor should be entered and maintained separately.
3. Register of charges
Under Section 143- The company has to maintain all the charges especially affecting the property of the company and also all the floating charges made for the company.
4. Register of members
Under Section 150- The company has to maintain one or more books of records regarding the details of each and every member, how many shares they hold etc.
5. Register and index of debenture holders
Under Section 152- The company has to record all the debenture holders. Also, the date when they cease the debentures should also be mentioned
6. Foreign registers of members or debenture holders
Under Section 157 – The company which has shares and issues the debentures outside India, any members who buy it is known as foreign registers members. The company should record within 30 days in the registrar office.
7. Registers and returns
Under Section 163 – The company has to file annual returns, annual accounts (balance sheet and profit and loss account), the return of allotment, and a notice of change in the situation of registered office. The court or CLB Order, Return of Appointment of MD/WTD/Manager, Return of Deposits, Registration of Resolutions and Agreements.
8. Minute’s book of meetings
Under Sec 118 – The company has to maintain a minute of all the meeting. It should contain the members, agenda, and all the matters discussed. The minute should be fairly drafted.
9. Books of accounts and cost records
Under Section 209 – Every company should have proper books of accounts for the particular financial year
10. Register of particulars of contracts
In which directors are interested under Section 301-The company should maintain a book of records of all the contracts the directors are interested. It should contain the date of the agreement, parties involved and time period (if any)
11. Register of directors, managing director, manager and secretary
Under Section 303 – The company should maintain the full details of its directors, manager etc. In the case of corporate being the member, its name should be recorded
12. Register of investments of loans made,
Guarantee given or security provided under Section 372A- It is nothing but Inter-Corporate loan and investment. The company should record the names where the company is borrowing/ making an investment
The auditor has to check the observance of Secretarial Standards i.e. they have to check whether there is any sundry items, remuneration of directors etc. Also, the auditor should have the record of any changes made in MOA and AOA.
The auditor should make sure that the company had an E-Filed MG-14 Form. After the resolution is passed, the form should be filed within 30 days.
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