Who must get a secretarial audit?
Who section 204 of the Companies Act, 2013 requires to annex a Form MR-3 secretarial audit report, the rule 9 thresholds of ₹50 crore, ₹250 crore and ₹100 crore, and the ₹2,00,000 penalty for default.
In this guide
Section 204 requires every listed company, and the class in rule 9, to annex a Form MR-3 secretarial audit report to the Board's report. Rule 9 covers a public company with paid-up capital of ₹50 crore or turnover of ₹250 crore, and any company with bank or public financial institution borrowings of ₹100 crore. Figures are taken on the last date of the latest audited financial statement. Default draws a penalty of ₹2,00,000.
Who must get a secretarial audit?
Every listed company must get one, and so must every company in the class rule 9 prescribes. Section 204(1)of the Companies Act, 2013 says that company shall annex a secretarial audit report, given by a company secretary in practice, to the Board's report under section 134(3). The prescribed form is Form MR-3.
A listed company, in section 2(52), is a company which has any of its securities listed on a recognised stock exchange. That test sits in the section itself. Rule 9 does not have to be met before a listed company is in.
Which companies does rule 9 cover?
Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 sets the other class. A company is in if any one limb is met. The limbs are alternatives, not a combined test.
| Who | Threshold | Limb |
|---|---|---|
| Listed company | Any listed security | Section 204(1), not rule 9 |
| Public company | Paid-up share capital of ₹50 crore or more | Rule 9(1)(a) |
| Public company | Turnover of ₹250 crore or more | Rule 9(1)(b) |
| Any company | Outstanding loans or borrowings from banks or public financial institutions of ₹100 crore or more | Rule 9(1)(c) |
The ₹100 crore borrowing limb was inserted by the Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2020, with effect from 1 April 2020. Before that date the prescribed class was the two public-company tests only.
Does a private company ever qualify?
Yes, on borrowings. Limbs (a) and (b) say public company. Limb (c) says every company. A private company with outstanding bank or public-financial-institution borrowings of ₹100 crore or more annexes Form MR-3 even though it has no public shareholders and is not listed.
The explanation to rule 9 fixes the date. Paid-up share capital, turnover, or outstanding loans or borrowings, as the case may be, are taken as they stood on the last date of the latest audited financial statement. Do not average the year, and do not use a provisional figure from a later month.
What must the Board explain?
Every qualification, in full. Section 204(3) requires the Board, in the report under section 134(3), to explain in full any qualification, observation or other remark made by the company secretary in practice. A line that says "noted" is not an explanation.
Section 204(2) is the company's side of the same engagement. The company must give the practising company secretary all assistance and facilities for auditing the secretarial and related records. Last year's minute book is not a substitute for that access.
The report sits with the Board's report, not in a side letter to the auditor. If the section 134 board report goes to members without MR-3, or without the explanation section 204(3) asks for, the annexure duty is missed even if a secretarial auditor was appointed.
What is the section 204 penalty?
₹2,00,000 on each person in default. Section 204(4), substituted by the Companies (Amendment) Act, 2020 with effect from 21 December 2020, makes the company, every officer of the company who is in default, and the company secretary in practice who is in default, each liable to a penalty of ₹2,00,000.
That substitution replaced the earlier fine, which ran from ₹1,00,000 to ₹5,00,000. The operative consequence is the fixed penalty. Confirm the substituted text on India Code before you quote the old band in a board note.
How do I test rule 9?
- Check whether any security is listed on a recognised stock exchange. If yes, section 204 applies without rule 9.
- Take paid-up share capital, turnover, and outstanding bank or PFI borrowings from the latest audited financial statement, as at its last date.
- If the company is public, test ₹50 crore capital and ₹250 crore turnover. Either one is enough.
- For every company, including a private company, test ₹100 crore of outstanding loans or borrowings from banks or public financial institutions.
- If any limb is met, annex Form MR-3 to the section 134(3) report and explain every qualification in full.
Where is a rule 9 change notified?
Rule 9 moves by MCA amendment, not by a practice note. The borrowing limb itself arrived that way on 1 April 2020. Read section 204 next to rule 9, and track the notification on the MCA updatesfeed before you drop a company out of the class because last year's checklist said it was out.
Practical checks
Common questions
Does a private company need a secretarial audit?
Only if it hits the borrowing limb. Rule 9(1)(a) and (b) are limited to public companies: paid-up share capital of ₹50 crore or more, or turnover of ₹250 crore or more. Rule 9(1)(c) says every company, so a private company with outstanding loans or borrowings from banks or public financial institutions of ₹100 crore or more must annex Form MR-3 as well.
A listed company is below ₹50 crore. Does section 204 still apply?
Yes. Section 204(1) names every listed company on its own, before the prescribed class. Listing is not a rule 9 threshold. A company with any of its securities listed on a recognised stock exchange annexes the secretarial audit report even if capital, turnover and borrowings all sit below the rule 9 figures.
Which date do I use for the ₹50 crore and ₹100 crore tests?
The last date of the latest audited financial statement. Rule 9's explanation says paid-up share capital, turnover, or outstanding loans or borrowings, as the case may be, existing on that date are the figures that count. A spike after the balance-sheet date does not pull the company in for that year's report.
Can the Board note a qualification in one line?
No. Section 204(3) says the Board, in the report under section 134(3), shall explain in full any qualification, observation or other remark in the secretarial audit report. A cross-reference that does not explain the remark does not meet that sentence.
What is the penalty if MR-3 is missing?
₹2,00,000. Section 204(4), as substituted by the Companies (Amendment) Act, 2020 with effect from 21 December 2020, makes the company, every officer in default, and the company secretary in practice who is in default each liable to a penalty of ₹2,00,000. It is a fixed penalty, not a fine band.
Who signs the secretarial audit report?
A company secretary in practice, in Form MR-3. Section 204(1) does not allow the company's own company secretary, or a chartered accountant, to give that report. Section 204(2) puts the duty on the company to give that practising company secretary access to the secretarial records.
Does a secretarial auditor also report fraud?
Yes, on the same pattern as the statutory auditor. Section 143(14) applies section 143 to the person conducting the secretarial audit under section 204. Fraud of ₹1 crore or more goes to the Central Government in Form ADT-4. A smaller fraud goes to the audit committee or the Board within two days. Rule 13 of the Companies (Audit and Auditors) Rules, 2014 sets those steps.
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How this guide was prepared
This guide is published by the Complied AI research desk. Its source list and stated position were checked against the official records shown below on 24 September 2026.
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