Introduction
For many companies, the day of listing marks the end of a long journey. Months of diligence, disclosures, and regulatory scrutiny finally culminate in the ringing of the bell. Yet, almost immediately after listing, a new phase begins, where the company transitions from being IPO‑compliant to being listed‑entity compliant.
It is during this transition that certain practical governance questions arise. One such question might be overlooked in the larger listing narrative, relates to the appointment of the Secretarial Auditor.
A company lists at a time when Annual General Meeting (‘AGM’) has been held and the next AGM is scheduled in next financial year. The Secretarial Auditor appointed prior to listing has completed the term. Meanwhile, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”) have become fully applicable, and the obligation to conduct Secretarial Audit continues.
At this point, the company is faced with a simple but unsettling question:
How should a Secretarial Auditor be appointed now?
This article examines that question by tracing the legal framework under the Companies Act, 2013 and the LODR Regulations, and by examining how these provisions interact in a post‑listing context.
The statutory foundation: Secretarial Audit under the Companies Act, 2013
Secretarial Audit was formally introduced under Section 2041 of the Companies Act, 2013. The provision reflects a legislative recognition that corporate compliance extends beyond financial reporting and requires an independent review of legal and regulatory adherence.
Section 204 mandates Secretarial Audit for every listed company, as well as for certain public companies meeting prescribed capital or turnover thresholds. The manner of appointment is addressed through Rule 92 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.
Under this framework, the appointment of the Secretarial Auditor is a matter for the Board of Directors. The statute does not prescribe shareholder approval, nor does it mandate a fixed tenure. In practice, Secretarial Auditors were appointed annually, and the compliance obligation was managed at the board level.
For several years, this system functioned smoothly, including for companies preparing to list.
A regulatory shift: The role of SEBI LODR Regulations
The compliance landscape changed with amendments to Regulation 24A3 of the LODR Regulations. The amended provision introduced four material requirements for listed entities.
First, the Secretarial Auditor must be a peer‑reviewed Company Secretary. Second, the appointment must be approved by shareholders at AGM. Third, the appointment must be for a continuous period of five years. Fourt, appointment with the approval of its shareholders in its Annual General Meeting.
This marked a clear departure from the Companies Act framework. The appointment of the Secretarial Auditor was no longer conceived as a routine annual board decision. Instead, it was elevated to a shareholder‑driven governance decision, comparable in importance to other long‑term oversight appointments.
The regulatory intent behind this shift appears to be to strengthen independence, ensure continuity, and enhance shareholder confidence in the Secretarial Audit process.
Where compliance timelines collide: Listing in the middle of the year
While Regulation 24A of LODR Regulations is conceptually clear, its application in practice is not always seamless.
If we look at the issue at hand stated earlier, many companies list in the middle of a financial year. Their Secretarial Auditor may have been appointed for a limited period, or the engagement may have ended prior to listing. Upon listing, the company immediately becomes subject to LODR Regulations and is required to submit a Secretarial Audit Report for the year.
At the same time, the next AGM which is the traditional forum for shareholder approval, may still be several months away. Regulation 24A of LODR Regulations does not expressly address how such timing gaps are to be handled.
The company, however, cannot remain without a Secretarial Auditor. Compliance obligations continue regardless of corporate calendars.
The article is written by Mr. Animesh Joshi – Research Associate – animeshjoshi@mmjc.in and the smae is published in Taxmann.