Chapter XIII - Appointment and Remuneration of Managerial Personnel
Section 204
Section 204: secretarial audit for bigger companies
Every listed company and every company in a prescribed class must annex a secretarial audit report, given by a company secretary in practice, to its Board’s report.
On this page
Need advice on Section 204?
This article is for general information. Refer to the Companies Act, 2013 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) Every listed company and a company belonging to other class of companies as may be prescribed shall annex with its Board’s report made in terms of sub-section (3) of section 134, a secretarial audit report, given by a company secretary in practice, in such form as may be prescribed.
(2) It shall be the duty of the company to give all assistance and facilities to the company secretary in practice, for auditing the secretarial and related records of the company.
(3) The Board of Directors, in their report made in terms of sub-section (3) of section 134, shall explain in full any qualification or observation or other remarks made by the company secretary in practice in his report under sub-section (1).
(4) If a company or any officer of the company or the company secretary in practice, contravenes the provisions of this section, the company, every officer of the company or the company secretary in practice, who is in default, shall be liable to a penalty of two lakh rupees.
Introduction
Section 204 adds an independent check on compliance with secretarial and related records. The company must assist the auditor, and the Board must fully explain any qualification, observation or other remark in its report.
Since 21 December 2020, the Companies (Amendment) Act, 2020 has made contravention a civil penalty of two lakh rupees for the company, every officer in default and the company secretary in practice.
Key takeaways
Who
Listed companies and prescribed classes of companies.
By whom
A company secretary in practice, in the prescribed form.
Board response
The Board explains every qualification, observation or remark in its section 134(3) report.
Check applicability
Section 204 applies to every listed company and to prescribed classes. Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 prescribes the classes and the report format, Form No. MR.3. As first notified, it covered public companies above paid-up capital and turnover thresholds. The rule text cited here is the version first notified in 2014; MCA has amended these Rules since, so confirm the current consolidated rule before relying on any figure or form.
- India Code — consolidated Companies Act, 2013, section 204
- eGazette — MCA notification S.O. 902(E), 26 March 2014 (commencement from 1 April 2014)
- eGazette — Companies (Amendment) Act, 2020 (29 of 2020)
- eGazette — MCA notification S.O. 4646(E), 21 December 2020 (commencement of parts of Act 29 of 2020)
- MCA — Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as notified by G.S.R. 249(E)
Appoint and assist the auditor
The secretarial audit report must be given by a company secretary in practice. The company must give that auditor all assistance and facilities to audit its secretarial and related records.
Annex and respond
Annex the report to the Board’s report under section 134(3). In that report, the Board must explain in full any qualification, observation or other remark made by the company secretary in practice.
Penalty
If the company, any of its officers or the company secretary in practice contravenes the section, each of them who is in default is liable to a penalty of two lakh rupees.
Practical checklist
Do
- Confirm applicability each year under the current rule.
- Give the secretarial auditor full access to minutes, registers and filings.
- Draft the Board’s explanations for every qualification.
Avoid
- Do not file the Board’s report without the secretarial audit report where section 204 applies.
- Do not leave observations unexplained.
Illustrative example
Hypothetical: a qualified report
A listed company’s secretarial auditor notes that a register was not updated within the required time.
Receive
The report in the prescribed form records the observation.
Explain
The Board explains the observation in full in its section 134(3) report.
Annex
The secretarial audit report is annexed to the Board’s report.
Outcome
- Shareholders see both the auditor’s observation and the Board’s explanation.
Glossary
- Company secretary in practice
- A company secretary in practice as defined in section 2(25) of the Act.
- Secretarial audit
- An audit of the company’s secretarial and related records for compliance.
Frequently asked questions
Does every company need a secretarial audit?
No. Listed companies and prescribed classes do. Check rule 9 of the 2014 Managerial Personnel Rules as currently amended.
Who can conduct it?
Only a company secretary in practice.
What is the penalty?
Two lakh rupees for the company, every officer in default and the company secretary in practice, under sub-section (4) as amended in 2020.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026