Secretarial audit, explained
| Term | What it means |
|---|---|
| Section 204 | Requires the prescribed companies to annex a secretarial audit report to the board's report, and carries a ₹2,00,000 penalty in default. |
| CS in practice | A member of the Institute of Company Secretaries of India holding a certificate of practice. For a listed entity, from 1 April 2025 the secretarial auditor must also be peer reviewed. |
| MR-3 | The secretarial audit report, annexed to the board's report. It is not an MCA e-form filed on its own, so it carries no filing fee. |
Section 204 applicability: the three thresholds
Work through this table on your latest audited figures. If any row applies, you need a secretarial audit for the year.
| Who | Test | Source |
|---|---|---|
| Every listed company | Applies regardless of size | Section 204(1) |
| Every public company | Paid-up share capital of ₹50 crore or more | Rule 9(1)(a) |
| Every public company | Turnover of ₹250 crore or more | Rule 9(1)(b) |
| Every company, private companies included | Outstanding loans or borrowings from banks or public financial institutions of ₹100 crore or more | Rule 9(1)(c), for financial years beginning on or after 1 April 2020 |
Which year's figures? Rule 9(2) settles it: the paid-up share capital, turnover, or outstanding loans or borrowings as the case may be, existing on the last date of the latest audited financial statement. That means the test for the year you are in is applied on last year's audited numbers, so applicability is knowable in advance and can be planned for.
The limb that catches people. The capital and turnover tests are limited to public companies. The borrowing test is not. A private limited company with ₹100 crore or more of outstanding bank debt needs a secretarial audit even though it is unlisted, closely held and has no public shareholders. It was added by the Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2020, notified on 3 January 2020 and applicable for financial years beginning on or after 1 April 2020. Companies that crossed ₹100 crore of debt during a growth phase are the group we most often find in default.
"Outstanding" is read on the closing figure in the audited balance sheet, not the sanctioned limit and not the peak drawn during the year.
What the audit actually examines
A secretarial audit is a compliance audit, not a financial one. The MR-3 report is expressed against a defined set of laws and records.
| Area | What is examined |
|---|---|
| Companies Act, 2013 and its rules | Board and general meetings, resolutions, statutory registers, related-party transactions, charges, deposits, directors' appointments and KYC, ROC filings for the year |
| Securities Contracts (Regulation) Act, 1956 | Compliance to the extent applicable |
| Depositories Act, 1996 and its regulations | Dematerialisation, ISIN records, beneficial ownership |
| FEMA | Foreign direct investment, overseas direct investment and external commercial borrowings, to the extent applicable |
| SEBI regulations | Those applicable to the company, listing obligations included |
| Laws specific to the industry | Identified with management and named in the report |
| Secretarial standards | SS-1 on board meetings and SS-2 on general meetings |
Findings are discussed with management, which has the chance to respond, before the report is finalised. Where a qualification or an observation remains, section 204(3) requires the board to explain it in full in the board's report, so an unresolved point becomes a public disclosure, not a private note.
How the audit runs, step by step
- Applicability. We confirm applicability against the listing status and the figures in your latest audited financial statement, which is the basis Rule 9(2) prescribes.
- Scoping. We read the previous year's report, your registers and your filing history, then fix the scope, the timetable and a fixed fee.
- Review. Board and general meeting records, statutory registers, ROC filings, charges and deposits, FEMA position, and the laws specific to your industry, including the SEBI LODR appointment requirements that apply from 1 April 2025 for listed entities.
- Management discussion. Findings put to management in writing, with a chance to respond before the report is settled.
- MR-3 issued. The report is given to the company and annexed to the board's report.
Share the registers, minutes and filings by email or secure transfer. We work from the previous year's report and your filing history, and raise queries in writing.
Listed companies: what changed on 1 April 2025
SEBI rewrote who may sign a listed entity's secretarial audit report. The December 2024 amendments to the SEBI Listing Obligations and Disclosure Requirements Regulations apply from 1 April 2025.
- The secretarial auditor must be a peer reviewed company secretary, holding a valid peer review certificate from the Institute of Company Secretaries of India. Where a firm is appointed, its partners must hold peer review certification as well.
- The appointment or reappointment must be approved by the shareholders at the annual general meeting.
- Term limits: an individual may serve one term of five consecutive years; a firm may serve up to two terms of five consecutive years each. A five-year cooling-off follows.
- Tenure already served does not count. Any appointment or association before 31 March 2025 is left out of the tenure calculation.
- A casual vacancy is filled by the board within three months, and the replacement holds office until the next annual general meeting.
Listed entities also give their secretarial audit report for material unlisted Indian subsidiaries, and file an annual secretarial compliance report with the stock exchanges.
What we take on. Our engagements are for unlisted companies within section 204 and Rule 9, which in practice means large public companies and companies caught by the ₹100 crore borrowing limb. If you are a listed entity, the signing requirement above applies and the appointment has to go through your AGM, so tell us at the first call and we will confirm whether we can sign before any scoping work begins.
Fees
Our professional fee starts at ₹9,999 and is scoped before we begin. There is no government fee.
| What | Amount |
|---|---|
| Regikart professional fee: applicability assessment, compliance review across the applicable laws, management discussion and the MR-3 report | From ₹9,999 |
| Applicability opinion only, for a company that wants to know whether section 204 bites | Quoted separately, and credited against the audit fee if you proceed |
| Government fee on MR-3 | No government fee. MR-3 is an annexure to the board's report, not a standalone e-form |
| MCA fee to file the board's report with the financial statements | ₹200 to ₹600 by authorised capital, on AOC-4 |
Professional fees exclude GST at 18%. Government fees, where they apply, are paid at actuals to the department and are shown separately. Fees verified on 22 September 2026.
Why the fee is a range. A single-location unlisted company with one bank lender and a clean filing history is a matter of weeks of work. A listed group with several registrations, subsidiaries and a FEMA history is not. We read your previous year's report, your registers and your filing history, then give a fixed fee for the engagement. That is more useful than a number on a card.
The penalty for going without one
Section 204(4) provides a penalty of ₹2,00,000. It is not a fee, it is not capped by a per-day formula, and it does not fall on the company alone.
| Who is liable | Penalty |
|---|---|
| The company | ₹2,00,000 |
| Every officer of the company in default | ₹2,00,000 each |
| The company secretary in practice in default | ₹2,00,000 |
This is being adjudicated. Registrars have passed orders imposing ₹2,00,000 on the company and ₹2,00,000 on each of several directors for failing to obtain and annex the report, with the default measured from the date the financial statements were adopted until the report was finally obtained.
There is a second cost that does not appear in any order. A missing MR-3 is a disclosed gap in the board's report, and it is the first thing a lender's or an acquirer's diligence team finds. See our legal and secretarial due diligence page for what that review looks like from the other side.
Secretarial audit, statutory audit, internal audit
| Secretarial audit | Statutory audit | Internal audit | |
|---|---|---|---|
| Who conducts it | Company secretary in practice | Chartered accountant appointed under section 139 | An internal auditor appointed by the board under section 138 |
| What it covers | Compliance with corporate and securities laws | Whether the financial statements show a true and fair view | Systems and controls, as the board defines the scope |
| Where the report goes | Form MR-3, annexed to the board's report | Auditor's report attached to the financial statements | To the board or its audit committee |
| Who needs it | The classes in section 204 and Rule 9 | Every company | The classes prescribed for internal audit under section 138 |
All three can apply to the same company in the same year. For the statutory auditor's appointment and ADT-1, see auditor appointment.
Not sure whether section 204 applies to you? Send us your last audited balance sheet figures for paid-up capital, turnover and borrowings, and we will tell you in writing.