Secretarial Audit (Form MR-3) by a Practising Company Secretary
A secretarial audit is a yearly check, by a company secretary in practice, of whether your company has followed company law, reported in Form MR-3. Section 204 makes it compulsory for every listed company, for public companies with paid-up capital of ₹50 crore or turnover of ₹250 crore or more, and for any company owing ₹100 crore or more to banks or public financial institutions.
What it is
A secretarial audit checks your company’s legal housekeeping, not its numbers. A company secretary in practice goes through your minutes, statutory registers, ROC filings and board processes. The report says whether the company complied with the Companies Act, 2013, its rules, the secretarial standards and the other laws that apply to your business. Your statutory audit tests the accounts; this one tests compliance.
The duty comes from Section 204(1) of the Companies Act, 2013, read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Rule 9(2) prescribes the format: Form MR-3. The signed report is annexed to the board’s report under Section 134(3), which reaches the ROC with your financial statements in Form AOC-4 on the MCA V3 portal.
Who it applies to
Your shares are listed
Section 204(1) applies to every listed company, whatever its size.
You run a larger public company
Rule 9(1) covers every public company with paid-up share capital of ₹50 crore or more, or turnover of ₹250 crore or more. Either test alone is enough.
You owe banks ₹100 crore or more
Since 1 April 2020, Rule 9(1)(c) also covers every company, private ones included, with outstanding loans or borrowings of ₹100 crore or more from banks or public financial institutions.
Check the thresholds
| Test | Limit | Which companies | Where it sits |
|---|---|---|---|
| Listing | Any listed company | Listed companies | Section 204(1) |
| Paid-up share capital | ₹50 crore or more | Public companies | Rule 9(1)(a) |
| Turnover | ₹250 crore or more | Public companies | Rule 9(1)(b) |
| Outstanding loans or borrowings from banks or public financial institutions | ₹100 crore or more | Every company, private included | Rule 9(1)(c) |
The figures are taken as they stand on the last date of your latest audited financial statement (Explanation to Rule 9(1)): your last audited balance sheet, not a mid-year trial balance.
Picture a Faridabad auto-components maker, a private company, that has funded a new plant with a term loan and a cash-credit limit from its banks. Not being public, it escapes the capital and turnover tests. But once its audited balance sheet shows ₹100 crore or more outstanding to those banks, the borrowing test does, and Form MR-3 becomes part of its board’s report.
Here is the catch: the borrowing test counts loans from banks or public financial institutions only. One more trap. Say a Faridabad family company sells a majority stake to a public company. As its subsidiary, it is now treated as public under the proviso to Section 2(71), and the capital and turnover tests apply to it too.
Why it matters
Catch gaps before the ROC does
Say a director joined in November but nobody filed DIR-12. The audit catches it while you can still file with an additional fee. Better to pay that now than explain the gap later.
Put the board’s answers on record
Section 204(3) requires the board to explain in full any qualification, observation or remark in the report. Section 134(3)(f)(ii) puts those explanations in the board’s report itself.
Expect lenders to read it
The report travels with your board’s report into the ROC’s records. Lenders and investors who pull your filings from the MCA portal can read it.
Documents required
Pull your meeting records
- Minutes of board, committee and general meetings
- Notices, agendas and attendance records
- Statutory registers: members, directors and KMP, charges, loans and investments
- MBP-1 and DIR-8 disclosures from directors
Gather the year’s ROC filings
- SRNs and challans for every ROC form filed in the year
- DIR-3 KYC status of every director
- Your DPT-3 return of deposits
- Last year’s MR-3, if there was one
List the other laws you follow
- Industry-specific laws and your licences under them
- FEMA filings for any foreign investment or borrowing
- Labour-law registrations and returns
- Stock exchange filings, if listed
How it works
Test applicability on your audited figures
We read paid-up capital, turnover and bank borrowings off your latest audited balance sheet. Then we tell you whether Section 204 applies.
Take the appointment by board resolution
Your board appoints a company secretary in practice as secretarial auditor. We give written consent and an engagement letter setting the scope.
Audit records, filings and processes
We check minutes against the secretarial standards SS-1 and SS-2, and registers against filings. Every ROC form is matched to its due date. Then we move to the other laws that govern your industry.
Share findings while they can be fixed
You see a draft list of observations first. A pending form filed now, or a register brought up to date, lets the report record the gap as rectified rather than open.
Sign MR-3 and draft the board’s replies
We sign Form MR-3 and help draft the board’s explanation for every remark, as Section 134(3)(f)(ii) requires, before the board approves its report.
Timelines
Start soon after the year closes
Start once the books close on 31 March. The signed report must be ready before the board meeting that approves the accounts and the board’s report. In practice, we aim to sign MR-3 a week or two before that meeting, so the board has time to draft its replies.
Hold the AGM by 30 September
Under Section 96, the AGM falls within six months of the year-end. For FY 2026-27 that means by 30 September 2027. The board’s report, with MR-3 annexed, goes before the members.
File AOC-4 within 30 days of the AGM
Section 137 gives 30 days from the AGM to file AOC-4 with the board’s report attached. Late filing costs ₹100 a day in additional fees, with no cap. We fold this into your annual ROC filings.
What happens if you skip the audit
Pay ₹2 lakh under Section 204(4)
The penalty falls on the company, on every officer in default, and on the company secretary in practice if the default is theirs. This fixed penalty has applied since 21 December 2020.
Pay ₹3 lakh for a silent board’s report
If the board’s report leaves out explanations of the auditor’s remarks, Section 134(8) allows ₹3 lakh on the company and ₹50,000 on each officer in default. In June 2026 the ROC Gwalior imposed exactly that on a listed company and its managing director, over one unexplained remark about a delayed IEPF filing.
Leave a hole in your annual filing
Without MR-3, the board’s report you attach to AOC-4 is incomplete, and that gap sits on the public record until you fix it.
Frequently asked questions
Is secretarial audit mandatory for a private limited company?
Only if it crosses the borrowing test. Rule 9(1)(c) covers every company, private ones included, with outstanding loans or borrowings of ₹100 crore or more from banks or public financial institutions. The paid-up capital and turnover tests apply only to public companies, but a private company that is a subsidiary of a public company counts as public under Section 2(71). If none of these fits, the audit is voluntary, though some boards still choose it as a yearly health check.
Who can conduct a secretarial audit?
Only a company secretary in practice, under Section 204(1): a member of the Institute of Company Secretaries of India who holds a certificate of practice. Your statutory auditor, or any chartered accountant, cannot sign Form MR-3. Under Section 204(2), the company must give the secretarial auditor all assistance and facilities to audit its records. Our practising company secretary signs MR-3 for our clients.
On which date are the thresholds checked?
On the last date of your latest audited financial statement. The Explanation to Rule 9(1) says paid-up capital, turnover and outstanding loans or borrowings existing on that date are taken into account. So a company that crosses ₹100 crore of bank borrowings in the middle of a year is tested on its audited balance sheet, not its monthly figures. We check it the day your accounts are signed, so nothing is left to the last week.
What is Form MR-3, and is it filed separately?
Form MR-3 is the secretarial audit report in the format prescribed by Rule 9(2), signed by the company secretary in practice. It is not a separate e-form. It is annexed to the board’s report under Section 134(3), and the board’s report goes to the ROC attached to Form AOC-4 within 30 days of the AGM. Keep MR-3 signed before the board meeting and the rest follows.
What must the board do if the report has a qualification?
Explain it in full in the board’s report. Section 204(3) requires the board to explain every qualification, observation or other remark of the secretarial auditor, and Section 134(3)(f)(ii) places that explanation in the board’s report. Leaving it out can cost ₹3 lakh for the company and ₹50,000 for each officer in default under Section 134(8). A short, factual reply is enough: what happened, what was fixed and when.
What is the penalty for not getting a secretarial audit?
₹2 lakh under Section 204(4). It applies to the company, to every officer in default, and to the company secretary in practice where the default is theirs. The Companies (Amendment) Act, 2020 turned the earlier fine into this fixed penalty from 21 December 2020, so the ROC adjudicates it. The cleanest course is to get the current year audited before the board approves its report, and explain any past gap plainly.
Do loans from directors count towards the ₹100 crore limit?
No. Rule 9(1)(c) counts only outstanding loans or borrowings from banks or public financial institutions. Unsecured loans from directors, relatives or group companies sit outside the test, however large. Add up the term loans and drawn working-capital limits on your latest audited balance sheet. Below ₹100 crore, a private company is outside Rule 9 unless it is deemed public.
Is a secretarial audit the same as MGT-8 certification?
No, they are separate. MGT-8 certifies the annual return in Form MGT-7 and is needed for listed companies and for companies with paid-up capital of ₹10 crore or more or turnover of ₹50 crore or more, under Section 92(2) and Rule 11(2). The secretarial audit under Section 204 reviews compliance across the whole year. A larger company often needs both, and one practising company secretary can handle the two.
Does a small listed company need a secretarial audit?
Yes. Section 204(1) applies to every listed company, with no capital, turnover or borrowing floor, so even a small company with listed shares must annex Form MR-3 to its board’s report. The Rule 9 thresholds matter only for unlisted companies. We plan the audit around your board calendar and results dates.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
There is no separate government fee for Form MR-3. It reaches the ROC inside your AOC-4, whose normal fee runs from ₹200 to ₹600 depending on nominal share capital, plus ₹100 a day if AOC-4 is filed late.
Ready to begin?
Send us your latest audited balance sheet, and we will confirm whether Section 204 applies to you and what your MR-3 audit will cover.