Secretarial Auditor Appointment explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The company appoints, but the incoming auditor must write to the one being replaced before taking the work.
Secretarial auditor appointment by board resolution
As per Rule 8 of the Companies (Meetings of Board and its powers) Rules, 2014, Secretarial Auditor is required to be appointed by means of resolution passed at a duly convened Board meeting.
A circular resolution will not do. The appointment of a secretarial auditor joins the internal auditor and the other section 179 matters that must be decided with the board actually meeting.
Whenever a practicing company secretary is appointed as Secretarial Auditor in place of the existing Secretarial Auditor, he / she should communicate the appointment to the earlier incumbent in writing, in view of the provisions of clause (8) of Part I of the First Schedule to the Company Secretaries Act, 1980.
This is a professional obligation on the incoming auditor, not a company requirement — and it is enforced through professional misconduct provisions rather than the Companies Act.
Its purpose is protective in both directions. The outgoing auditor gets the chance to say why the appointment should not be accepted: unpaid fees, a disagreement with management, a matter they were prevented from examining, or pressure to modify a finding. The incoming auditor learns of it before committing.
Without the communication, a company dissatisfied with a rigorous secretarial auditor could simply replace them, and the successor would arrive knowing nothing of why. The requirement makes that harder, because the replacement is on notice that they should ask.
The equivalent obligation exists for statutory auditors under the corresponding professional rules. Both rest on the same principle: an auditor's independence is protected partly by the difficulty of quietly replacing one.
Note the related entitlement under Secretarial Standard 2: notice of every general meeting must be given to the Directors and Auditors of the company, to the Secretarial Auditor, to Debenture Trustees, if any. The secretarial auditor is entitled to attend the meeting where their report is laid before members, which is where a qualified report can be raised by any shareholder who has read it.
Secretarial auditor appointment: the steps
- Identify a company secretary in practice holding a certificate of practice.
- Where an existing secretarial auditor is being replaced, the incoming auditor communicates in writing to the earlier incumbent.
- The Board appoints by resolution at a duly convened meeting.
- Notice of the general meeting is given to the secretarial auditor under Secretarial Standard 2.
- The report in Form MR-3 is annexed to the Board's report.
Certification with qualifications
A Practicing Company Secretary can certify the Annual Return subject to certain reservations / qualifications by way of an annexure to his certificate.
This matters practically. A professional asked to certify a return that contains a defect is not put to a choice between certifying something inaccurate and refusing altogether — the reservation is recorded in an annexure, and the certificate stands with the qualification attached.
The same approach runs through the secretarial audit report itself, which reports on events and actions with a major bearing on the company's affairs rather than issuing a bare pass or fail.
Who receives notice of a general meeting
| Recipient | Source |
|---|---|
| Every member | Section 101 |
| Directors | Secretarial Standard 2 |
| Auditors | Secretarial Standard 2; and section 146 on attendance |
| Secretarial auditor | Secretarial Standard 2 |
| Debenture trustees, if any | Secretarial Standard 2 |
Common mistakes
- Making the secretarial auditor appointment by circular resolution instead of at a convened meeting.
- Accepting the engagement without writing to the outgoing incumbent.
- Omitting the secretarial auditor from the general meeting notice list.
- Refusing to certify a return that could be certified with a recorded qualification.