Secretarial Audit Applicability: Who Needs MR-3 (2026)

By SCORE Editorial Team · Prepared by SCORE’s audit, tax and advisory practice · Law stated as on 24 August 2026

Quick answer: Secretarial audit applicability is set by Section 204 and Rule 9. The audit is mandatory for every listed company. It also applies to public companies with paid-up capital of ₹50 crore or turnover of ₹250 crore or more. Any company with bank or PFI borrowings of ₹100 crore or more is covered. A practising company secretary reports in Form MR-3.

What is a secretarial audit?

A secretarial audit checks whether a company follows corporate and allied laws. It is done by an independent company secretary in practice (PCS). The PCS issues the report in Form MR-3, which is annexed to the Board’s Report.

Think of it as the compliance counterpart to the statutory audit. The statutory auditor tests the numbers. The secretarial auditor tests the processes, approvals and filings behind them.

Which companies need a secretarial audit under Rule 9?

Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 sets the classes below.

Company	Secretarial audit is mandatory if
Listed company	Always
Public company	Paid-up share capital of ₹50 crore or more
Public company	Turnover of ₹250 crore or more
Any company, including a private company	Outstanding loans or borrowings from banks or public financial institutions (PFIs) of ₹100 crore or more
Material unlisted Indian subsidiary of a listed company	Required by Regulation 24A of SEBI’s LODR Regulations

Rule 9 says to take the figures as they stand on the last date of the latest audited financial statements. In practice, monitor them during the year too, so a crossing does not catch you late.

The borrowing trigger was added by a 2020 amendment, effective 1 April 2020. It counts only loans from banks and public financial institutions. Inter-corporate loans and loans from directors do not count toward the ₹100 crore.

Is secretarial audit mandatory for a private company?

Yes, in two situations.

1. The borrowing trigger. A private company with bank or public financial institution borrowings of ₹100 crore or more needs a secretarial audit.
2. Deemed public company. A private company that is a subsidiary of a public company is treated as a public company under Section 2(71). If it crosses the ₹50 crore paid-up or ₹250 crore turnover test, the audit applies.

A small company will rarely cross these tests. Small company limits since 1 December 2025 are ₹10 crore paid-up capital and ₹100 crore turnover.

Applicability decision checklist

Run this test each year, before the Board approves the next year’s audit plan:

• ☐ Are any of our securities listed on a recognised stock exchange?
• ☐ Are we a public company, or a private subsidiary of a public company?
• ☐ Is our paid-up share capital ₹50 crore or more?
• ☐ Is our turnover ₹250 crore or more?
• ☐ Are our outstanding bank and public financial institution borrowings ₹100 crore or more?
• ☐ Are we a material unlisted subsidiary of a listed company?

One “yes” in the right combination means a secretarial audit is due for the year.

Who can conduct a secretarial audit, and how is the auditor appointed?

Only a company secretary in practice can sign Form MR-3. For listed companies and their material unlisted subsidiaries, the auditor must also be peer reviewed by ICSI.

For unlisted companies, the Board appoints the secretarial auditor at a Board meeting under Rule 8 of the Companies (Meetings of Board and its Powers) Rules, 2014. Circular resolutions are not allowed for this. Take the auditor’s written consent first and issue an appointment letter.

Public companies file the Board resolution in Form MGT-14. Private companies are exempt from filing Board resolutions passed under Section 179(3), under the June 2015 exemption notification.

What does the secretarial auditor examine?

Form MR-3 covers compliance with:

• The Companies Act, 2013 and its rules: meetings, registers, filings, related party approvals and CSR.
• The Securities Contracts (Regulation) Act, 1956 and the rules under it.
• The Depositories Act, 1996.
• FEMA and its rules, for foreign direct investment, overseas direct investment and external commercial borrowings.
• SEBI regulations, for listed companies.
• Secretarial Standards SS-1 (Board meetings) and SS-2 (general meetings) issued by ICSI.
• Other laws specifically applicable to the company’s industry.

The auditor also comments on Board composition, notices, agendas, minutes and the system for tracking applicable laws.

What extra rules apply to listed companies?

SEBI amended Regulation 24A of the LODR Regulations on 12 December 2024. The key changes, effective from 1 April 2025, are:

• Shareholders appoint the secretarial auditor at the AGM, on the Board’s recommendation.
• An individual can serve one term of five consecutive years.
• A firm can serve up to two terms of five consecutive years each.
• The auditor must be a peer-reviewed company secretary.
• The AGM notice must disclose the proposed fees and the basis of recommendation.

Listed entities also file an annual secretarial compliance report. That report is separate from Form MR-3.

What is the penalty for not complying with Section 204?

Under Section 204(4), the company, every officer in default and the PCS each face a penalty of ₹2 lakh. The Companies (Amendment) Act, 2020 replaced the earlier criminal fine with this civil penalty.

Section 204(3) also requires the Board’s Report to explain every qualification, observation or adverse remark in the MR-3. A weak explanation invites questions from lenders, investors and the ROC.

How do you make a secretarial audit uneventful?

Most observations come from a few repeat gaps. Close them before the auditor arrives.

Area	What the auditor checks	Common gap
Meetings	Notices, quorum, minutes under SS-1 and SS-2	Minutes signed late or not page-numbered
Event-based filings	DIR-12, MGT-14, PAS-3, SH-7, CHG-1	Filed after the due date with no condonation
Related party approvals	Section 188 approvals and AOC-2	Ordinary course claim not documented
Loans and investments	Sections 185 and 186	Interest below the benchmark rate
CSR	Policy, spend, unspent transfers, CSR-2	Unspent amount not transferred on time
FEMA	FDI, ODI and ECB reporting	Late FC-GPR or annual return on foreign liabilities

Two habits help most. Keep a live compliance tracker for event-based forms. Close last year’s observations with evidence before the new audit starts.

Frequently asked questions

Is secretarial audit mandatory for private companies?

Yes, if the company has outstanding bank or public financial institution borrowings of ₹100 crore or more. A private subsidiary of a public company is treated as public, so the paid-up and turnover tests can also apply. Most other private companies are outside Rule 9.

Who can conduct a secretarial audit?

Only a company secretary in practice. For listed companies and their material unlisted subsidiaries, the auditor must also hold an ICSI peer review certificate. The company’s own employee company secretary cannot sign Form MR-3.

What is Form MR-3?

Form MR-3 is the prescribed format of the secretarial audit report. It covers the Companies Act, securities laws, FEMA on FDI, ODI and ECB, Secretarial Standards and industry laws. The report is annexed to the Board’s Report.

Is the secretarial audit report filed separately with the ROC?

No separate form is filed for MR-3. It is annexed to the Board’s Report, which goes to the ROC with Form AOC-4.

Which date is used to test secretarial audit applicability?

Rule 9 uses paid-up capital, turnover and borrowings as on the last date of the latest audited financial statements. Track the numbers through the year as well. That avoids a late appointment if a threshold is crossed.

What is the penalty for not conducting a secretarial audit?

The company, each officer in default and the practising company secretary each face a penalty of ₹2 lakh under Section 204(4). Unexplained qualifications in the report also damage credibility with lenders and investors.

How SCORE helps

SCORE runs a pre-audit compliance health check and closes gaps in meetings, filings, related party approvals, CSR and FEMA reporting before your secretarial auditor begins. Ask us for our Secretarial Compliance Checklist to run the test yourself.

Want a clean MR-3 this year? Book an annual compliance review with SCORE.

Sources

• Secretarial Audit (presentation, 11 May 2022) – ICSI
• Companies Act, 2013 and rules (India Code)
• Ministry of Corporate Affairs

This article is general information, not professional advice.