Of all the gatekeepers a listed company answers to, the secretarial auditor is the quietest and, since December 2024, the hardest to remove. Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 takes the secretarial audit that the Companies Act, 2013 already demanded of bigger companies and bolts onto it a securities-law overlay: a separate annual secretarial compliance report, an extension to material unlisted subsidiaries, and now a full appointment-tenure-removal architecture borrowed from the way financial auditors are governed. This chapter unpacks the provision section by section, traces its lineage from the Kotak Committee to the 2024 reforms, and explains why a regulation that began life as a single sentence in 2018 has become one of the most consequential governance levers in the listing framework.

Genesis: from the Companies Act to the listing framework

Secretarial audit is not a SEBI invention. Its statutory root is Section 204 of the Companies Act, 2013, which requires every listed company, and every company belonging to the classes prescribed in Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, to annex to its Board's report a secretarial audit report given by a company secretary in practice in Form MR-3. Rule 9 extends the obligation beyond listed companies to every public company with paid-up share capital of fifty crore rupees or more, or turnover of two hundred fifty crore rupees or more, and to companies with outstanding borrowings from banks or public financial institutions of one hundred crore rupees or more.

SEBI's contribution, layered on top, came through Regulation 24A, inserted into the LODR by the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018 and made effective from 1 April 2019, so that the first reports landed for the financial year ended 31 March 2019. The amendment implemented the recommendations of the Committee on Corporate Governance chaired by Uday Kotak (the Kotak Committee, which reported in October 2017). Where Section 204 fastens the audit to a company's own board report, Regulation 24A fastens it to the listing relationship and, crucially, drags material unlisted Indian subsidiaries into the net. To see how this sits within the broader scheme of continuous obligations, read it alongside the common obligations of listed entities and the foundational scope and definitions chapter.

The Kotak Committee's reasoning bears repeating because it explains the entire design. The Committee observed that the secretarial audit existed only at the level of the listed entity itself, leaving a structural blind spot wherever a listed company conducted significant business through unlisted subsidiaries. It recommended both that secretarial audit be extended to material unlisted Indian subsidiaries and that a securities-law-specific compliance report be introduced so that the exchanges, and through them SEBI, would receive an independent professional's view of the entity's compliance with the securities-law universe rather than relying solely on management's self-certification. Regulation 24A is the textual expression of those two ideas, and almost every later refinement, including the 2024 reforms, can be read as a working-out of the same governance logic: an assurance function is only as valuable as the independence of the person who performs it and the breadth of the entities it touches.

The text of Regulation 24A as it now stands

In its current form Regulation 24A has two functional limbs. Sub-regulation (1) provides that every listed entity and its material unlisted subsidiaries incorporated in India shall undertake secretarial audit and shall annex with its annual report a secretarial audit report given by a company secretary in practice, in such form as may be specified, with effect from the year ended 31 March 2019. Sub-regulation (2) provides that every listed entity shall submit a secretarial compliance report to the stock exchanges, in such form as may be specified, within sixty days from the end of each financial year.

The 2018 text was deliberately spare. The detailed machinery, what the compliance report must cover, who may sign it, how the auditor is appointed, came later through SEBI circulars and, decisively, the December 2024 amendment. The provision therefore reads today as a skeleton in the Regulations fleshed out by subordinate instruments, a structure students should hold in mind because exam questions frequently test the distinction between what the bare regulation says and what the circulars add. The audit interlocks with board-level governance covered in board of directors composition and audit committee.

Two distinct documents: MR-3 versus the compliance report

The single most examined point under this topic is that Regulation 24A generates two separate reports, not one. The first is the secretarial audit report in Form MR-3, the same instrument mandated by Section 204 and Rule 9. Its scope is broad: it covers compliance with the Companies Act, 2013, the Securities Contracts (Regulation) Act, 1956, the Depositories Act, 1996, the Foreign Exchange Management Act, 1999 to the extent of overseas direct investment and external commercial borrowings, the specified SEBI regulations, the Secretarial Standards issued by the ICSI, and the listing agreement and LODR. MR-3 is annexed to the annual report.

The second is the annual secretarial compliance report under sub-regulation (2), introduced operationally by SEBI circular CIR/CFD/CMD1/27/2019 dated 8 February 2019. Its scope is narrower and securities-law specific: it is confined to compliance with all applicable SEBI Act regulations and the circulars and guidelines issued thereunder. It is filed with the stock exchanges within sixty days of the financial year-end, separately from the annual report. A useful shorthand: MR-3 asks "is the company obeying all its laws?" while the compliance report asks the tighter question "is the company obeying SEBI?" Both are signed by a practising company secretary, but they answer to different masters and travel to different destinations.

The duplication is not accidental redundancy. MR-3 is a creature of company law, addressed primarily to shareholders through the annual report and policed by the Registrar of Companies and the National Company Law Tribunal ecosystem. The compliance report is a creature of securities law, addressed to the stock exchanges and SEBI, and policed by the listing-enforcement machinery. A non-compliance with, say, the insider-trading code might be reported in both documents, but only the compliance report places it directly before the market regulator within the tight sixty-day window. Aspirants who blur the two, or who imagine that filing one discharges the obligation to produce the other, miss the most basic structural point of the regulation. The safest mental model is two parallel pipes carrying overlapping but differently-scoped water to two different reservoirs.

Anatomy of the annual secretarial compliance report

The 8 February 2019 circular prescribes the format and content of the annual secretarial compliance report. The practising company secretary examines the listed entity's compliance across the full sweep of SEBI regulations, the LODR, the Issue of Capital and Disclosure Requirements Regulations, the Substantial Acquisition of Shares and Takeovers Regulations, the Prohibition of Insider Trading Regulations, the Buy-back Regulations, the Depositories and Participants Regulations and the Share Based Employee Benefits Regulations, among others. The report records observations on whether the entity has complied, lists deviations, and tracks the status of actions taken on observations made in the previous year's report and on any deviations flagged by SEBI, the stock exchanges or other regulatory authorities.

The report is principally a tool of continuous accountability. By requiring the auditor to follow up on prior-year observations, it prevents a listed entity from treating each year's compliance certificate as a clean slate. The disclosure logic here mirrors the broader scheme discussed in principles governing disclosures: compliance is a running account, not an annual snapshot. The sixty-day deadline aligns the filing with the financial-results calendar so that the exchanges receive the compliance picture while the year's numbers are still fresh.

The reach into material unlisted subsidiaries

Regulation 24A's most distinctive feature, relative to Section 204, is that it pulls material unlisted Indian subsidiaries into the audit net. The materiality threshold sits in Regulation 16(1)(c), which the 2018 amendment tightened: a subsidiary is material if its income or net worth exceeds ten per cent of the consolidated income or net worth of the listed entity and its subsidiaries in the immediately preceding accounting year, down from the earlier twenty per cent threshold. This lowering deliberately widened the population of subsidiaries that must themselves undergo secretarial audit.

The policy rationale is that misconduct and non-compliance at a listed parent is frequently routed through unlisted subsidiaries that escape direct listing discipline. By requiring the material subsidiary to undergo its own secretarial audit and annex the MR-3 to the parent's annual report, SEBI closes a structural gap. This dovetails with the parallel governance reforms requiring an independent director of the listed parent to sit on the board of material unlisted subsidiaries, a cross-board oversight mechanism examined further in the board composition chapter.

The December 2024 reforms: from a sentence to a regime

The most significant change to Regulation 24A since its birth came through the SEBI (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2024, notified on 12 December 2024 and effective for appointments, re-appointments and continuations of secretarial auditors with effect from 1 April 2025. Until then, neither the LODR nor the Companies Act prescribed any criteria for the appointment, reappointment or removal of a secretarial auditor of a listed entity, a striking gap given the elaborate machinery that governs financial auditors under Sections 139 to 142 of the Companies Act.

The amendment imported a similar architecture into the secretarial sphere: eligibility conditions, fixed tenure caps, shareholder approval, cooling-off, and casual-vacancy mechanics. The transformation is qualitative, not merely cosmetic. A document that listed companies had treated as a routine compliance formality became a board-and-shareholder governance event, and the auditor acquired a measure of the independence and security of tenure that makes meaningful audit possible. The reform belongs to the same governance philosophy that animates the audit committee regime.

Eligibility: the peer-reviewed company secretary

The 2024 amendment inserted sub-regulation (1A), which provides that a person is eligible for appointment as secretarial auditor of a listed entity only if such person is a Peer Reviewed Company Secretary and has not incurred any of the disqualifications specified by the Board. A Peer Reviewed Company Secretary is a company secretary in practice, whether practising individually, as a sole proprietor, or as a partner of a peer-reviewed practice unit, holding a valid certificate of peer review issued by the ICSI.

Where a firm is appointed, sub-regulation (1B) requires that the majority of its partners practising in India hold valid certificates of practice, and only a peer-reviewed partner may sign the report. Eligibility is a continuing condition: if the auditor incurs a disqualification after appointment, the office is automatically vacated and the resulting gap is treated as a casual vacancy. The peer-review requirement is the gatekeeping device, ensuring that only practitioners whose own quality systems have been independently examined by the Institute can certify the compliance of a listed entity.

Tenure caps and the cooling-off period

The amendment fixed tenure for the first time. An individual secretarial auditor may be appointed for not more than one term of five consecutive years. A secretarial audit firm may be appointed for not more than two terms of five consecutive years each. In both cases the appointment requires the approval of shareholders in a general meeting, with appointments to be made at the annual general meeting for periods beginning with the financial year 2025-26.

A five-year cooling-off period follows the completion of the maximum term: an individual who has completed the five-year term, or a firm that has completed its two terms, is ineligible for re-appointment in the same listed entity for five years from the completion of that term. To prevent circumvention through partner-shuffling, a firm that shares common partners with an outgoing firm as on the date of appointment is also barred for the same five-year window. The model is consciously parallel to the financial-auditor rotation regime in Section 139(2) of the Companies Act, and it answers the long-standing criticism that an auditor who can be re-appointed indefinitely at the board's pleasure is structurally compromised.

The asymmetry between individuals and firms, one term for the former, two for the latter, mirrors the rotation logic of Section 139(2), under which an individual auditor rotates after one term of five years and an audit firm after two. The premise is that a firm carries institutional safeguards, multiple partners, internal review, and a reputational stake larger than any single engagement, that an individual practitioner cannot replicate, so a longer permissible association is tolerable for firms. The transitional relief is also worth noting: associations with the listed entity before 31 March 2025 do not count toward the tenure calculation, so the clock effectively starts fresh from the financial year 2025-26, preventing the new caps from forcing en-masse displacement of incumbents on day one. For exam purposes the safest formulation is: individual, one five-year term; firm, two five-year terms; both followed by a five-year cooling-off; all subject to shareholder approval in general meeting.

Appointment, removal and casual vacancy

Three procedural mechanics complete the regime. Appointment is by the shareholders in general meeting on the audit committee's and board's recommendation, a shift from the earlier practice of board-level appointment with no shareholder voice. Removal before the expiry of the term requires the approval of shareholders, importing into the secretarial sphere the protection that prevents a board from quietly dismissing an auditor who has begun asking awkward questions.

A casual vacancy, arising from resignation, death or disqualification, is filled by the board of directors within three months from the date of the vacancy, and the auditor so appointed holds office until the conclusion of the next annual general meeting, at which the shareholders ratify or replace the appointment. These provisions transplant, almost verbatim in structure, the casual-vacancy logic that already governs financial auditors, and they reflect SEBI's deliberate choice to treat the secretarial auditor as a genuine independent assurance provider rather than a vendor of a compliance certificate.

What the secretarial audit actually examines

The substantive content of the MR-3 secretarial audit is wide. The practising company secretary examines the company's books, papers, minute books, forms and returns, and the systems and processes by which compliance is achieved. The report must state whether the company has complied with the Companies Act, 2013 and the rules made thereunder; the Securities Contracts (Regulation) Act, 1956; the Depositories Act, 1996; the relevant provisions of FEMA, 1999; the specified SEBI regulations; the applicable Secretarial Standards; and the listing obligations.

Beyond ticking statutory boxes, MR-3 requires the auditor to report on the constitution and processes of the board: whether board composition was proper, whether adequate notice was given for meetings, whether dissent was recorded, and whether the company maintained systems commensurate with its size to ensure compliance. The auditor must record specific qualifications, reservations or adverse remarks paragraph by paragraph, and the board, under Section 134(3) read with Section 204(3), must explain each such remark in its report. This forces non-compliance into the open rather than letting it be buried in a footnote.

The reporting on board processes is more than form-filling. By requiring the auditor to comment on whether adequate notice was given, whether agenda and notes were circulated in advance, and whether dissent was captured in the minutes, MR-3 effectively converts the procedural discipline of the Secretarial Standards into an audited matter. The auditor is also expected to take note, in a separate section, of specific events and actions during the year that had a major bearing on the company's affairs in pursuance of the laws, rules, regulations and guidelines referred to above, for instance a major preferential allotment, a scheme of arrangement, or a regulatory action, so that the reader of the annual report can locate the year's significant corporate events against the compliance backdrop. The cumulative effect is that a diligent MR-3 reads not as a clean chit but as a reasoned compliance narrative, with any gaps explained and any significant transactions surfaced.

A secretarial audit cannot be understood without the Secretarial Standards, because they supply much of the yardstick against which compliance is measured. Under Section 118(10) of the Companies Act, 2013, every company, save a one-person company with a single director and a Section 8 company, must observe the secretarial standards on board and general meetings issued by the ICSI and approved by the Central Government. SS-1 governs meetings of the board of directors and SS-2 governs general meetings; revised versions took effect from 1 April 2024.

The significance for Regulation 24A is that Section 118(10) makes these standards legally mandatory, not advisory, so a deviation from SS-1 or SS-2 is a genuine non-compliance that the secretarial auditor must flag in MR-3. The standards thus operate as the detailed procedural code that the audit polices, covering notice periods, quorum, recording of minutes, and the conduct of meetings. For a listed entity, the standards intersect directly with the board and committee procedures explored in the audit committee chapter.

Enforcement and consequences of non-compliance

Two enforcement tracks run in parallel. Under the Companies Act, Section 204(4) provides that if a company or any officer of the company or the company secretary in practice contravenes the section, the company, every officer in default and the company secretary in practice who is in default is liable to a penalty, a provision that places direct statutory exposure on the auditor as well as the company.

Under the LODR, failure to file the annual secretarial compliance report within sixty days, or failure to undertake the secretarial audit, is a breach of the listing obligations enforceable through the standard machinery: the stock exchanges' Standard Operating Procedure for non-compliance, which prescribes graded fines and may escalate to freezing of promoter holdings or suspension of trading, and SEBI's own powers under Sections 11, 11B and 15HB of the SEBI Act, 1992 to issue directions and impose monetary penalties. The compliance report itself, by tracking prior-year observations, ensures that a non-compliance once flagged cannot simply disappear, which is precisely the continuous-monitoring discipline that the broader LODR framework, surveyed in specific listing obligations for equity, is built to enforce.

Practical significance and exam framing

For the judiciary and CLAT-PG aspirant, Regulation 24A is best remembered as the bridge between company-law assurance and securities-law assurance. The examinable core is the trio of distinctions: which document (MR-3 versus the compliance report), which source (Section 204 and Rule 9 versus Regulation 24A and the 8 February 2019 circular), and which destination (annexed to the annual report versus filed with the exchanges within sixty days).

The second examinable cluster is the 2024 reform: the five-year individual term, the two-five-year firm terms, the five-year cooling-off, the peer-review eligibility gate, shareholder appointment and removal, and the three-month casual-vacancy window, all effective from 1 April 2025. Candidates should be able to articulate why the reform happened, namely the absence of any prior appointment-removal code for secretarial auditors and the consequent vulnerability of the function to board capture, and to draw the analogy with the financial-auditor regime under Sections 139 to 142 of the Companies Act. Return to the SEBI LODR hub to see how this chapter connects to the wider continuous-disclosure architecture.

Frequently asked questions

What is the difference between the secretarial audit report and the annual secretarial compliance report?

They are two distinct documents under Regulation 24A. The secretarial audit report in Form MR-3, rooted in Section 204 of the Companies Act, 2013, covers compliance with a broad range of laws, the Companies Act, securities laws, FEMA, depository law, SEBI regulations and Secretarial Standards, and is annexed to the annual report. The annual secretarial compliance report, introduced by SEBI's circular of 8 February 2019 under Regulation 24A(2), is narrower: it concerns only SEBI regulations and circulars, and is filed with the stock exchanges within sixty days of the financial year-end.

From when did Regulation 24A take effect and what prompted it?

Regulation 24A was inserted by the SEBI (LODR) (Amendment) Regulations, 2018 and took effect from 1 April 2019, so the first reports covered the year ended 31 March 2019. It implemented the recommendations of the Kotak Committee on Corporate Governance, which reported in October 2017.

Which subsidiaries must undergo secretarial audit under Regulation 24A?

Material unlisted subsidiaries incorporated in India must undergo secretarial audit and annex the MR-3 to the listed parent's annual report. Materiality is tested under Regulation 16(1)(c): a subsidiary is material if its income or net worth exceeds ten per cent of the consolidated income or net worth of the listed entity and its subsidiaries in the immediately preceding accounting year, a threshold reduced from twenty per cent by the 2018 amendment.

What did the December 2024 amendment change about secretarial auditors?

The SEBI (LODR) (Third Amendment) Regulations, 2024, notified on 12 December 2024 and effective from 1 April 2025, created an appointment-tenure-removal regime that previously did not exist. It requires a peer-reviewed company secretary, caps an individual's tenure at one term of five years and a firm's at two terms of five years each, mandates shareholder approval for appointment and removal, imposes a five-year cooling-off period, and requires casual vacancies to be filled by the board within three months.

Are the Secretarial Standards (SS-1 and SS-2) mandatory for the audit to test against?

Yes. Under Section 118(10) of the Companies Act, 2013, every company other than a one-person company with a single director and a Section 8 company must observe the Secretarial Standards on board meetings (SS-1) and general meetings (SS-2) issued by the ICSI and approved by the Central Government. Because they are legally mandatory, any deviation is a genuine non-compliance that the secretarial auditor must flag in MR-3. Revised SS-1 and SS-2 took effect from 1 April 2024.

What are the consequences of failing to comply with Regulation 24A?

There are two tracks. Under Section 204(4) of the Companies Act, the company, every officer in default and the practising company secretary in default are liable to a penalty. Under the LODR, non-filing of the compliance report within sixty days or failure to undertake the audit is enforced through the stock exchanges' Standard Operating Procedure, which prescribes graded fines and can escalate to freezing of promoter holdings or trading suspension, and through SEBI's powers under Sections 11, 11B and 15HB of the SEBI Act, 1992.