Run the routes separately
Section 204 of the Companies Act, 2013 requires every listed company and prescribed other classes to annex a secretarial audit report by a company secretary in practice to the Board's report. Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 prescribes public-company capital and turnover routes and an every-company borrowing route. Do not combine them into a single requirement that all thresholds must be met. ICSI statutory text: Rule 9, secretarial audit.
Apply the public-company capital and turnover thresholds
Rule 9(1)(a) refers to every public company with paid-up share capital of ₹50 crore or more; clause (b) refers to every public company with turnover of ₹250 crore or more. Equality is included. Verify the company's actual status and relevant audited figures rather than substituting authorised capital, net worth or an estimated next-year sales budget. The examples assume unlisted companies so the separate statutory listed-company route does not obscure the threshold analysis. ICSI statutory text: Rule 9, secretarial audit.
Check banks and public financial institutions for every company
Clause (c) covers every company with outstanding loans or borrowings from banks or public financial institutions of ₹100 crore or more. It is not restricted to public companies. Build a lender-wise classification and amount schedule; a group company's loan is not automatically a bank or public-financial-institution borrowing. Equally, do not omit qualifying facilities merely because their ledger caption is not term loan. ICSI statutory text: Rule 9, secretarial audit.
Use the measurement date specified in the explanation
The explanation requires the paid-up capital, turnover or outstanding loans or borrowings existing on the last date of the latest audited financial statement to be taken into account. A current bank utilisation peak and a closing audited balance are not interchangeable for this Rule 9 test. Preserve the latest applicable audited statement and the date-based reconciliation. Do not borrow a peak-borrowing methodology from a different compliance rule. ICSI statutory text: Rule 9, secretarial audit.
Prepare the report workflow once covered
Rule 9(2) specifies Form MR.3. Section 204 requires the company to provide assistance and facilities for auditing secretarial and related records, and requires the Board's report to explain in full the qualifications, observations or other remarks in the secretarial auditor's report. The applicability working should lead to an engagement and record-access plan; it is not satisfied merely by placing a threshold calculation in an audit file. ICSI statutory text: Rule 9, secretarial audit.
Keep exclusions and other assurance work distinct
Confirm statutory listed status and any actually applicable exemption or modification separately; do not infer an exemption solely from a label such as private, small or subsidiary. Secretarial audit, statutory financial audit, internal audit and cost audit use different provisions. This guide does not certify securities-law compliance, prescribe an unverified appointment deadline or treat absence of one Rule 9 trigger as proof that every other obligation is absent. ICSI statutory text: Rule 9, secretarial audit.
Applicable primary references
ICSI statutory text: Rule 9, secretarial audit ICSI statutory text: Companies Act section 204
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Public company at the capital threshold
Assume an unlisted public company with relevant audited paid-up capital ₹50 crore, turnover ₹100 crore and qualifying borrowings ₹20 crore. ₹50 crore equals the capital threshold, so clause (a) is met even though the other two amounts are lower.
Illustrative example 2: Public company at the turnover threshold
Assume an unlisted public company with paid-up capital ₹49 crore, turnover ₹250 crore and qualifying borrowings ₹30 crore at the relevant measurement basis. Clause (b) is met at equality; the capital amount is ₹1 crore below its separate threshold.
Illustrative example 3: Private company below the borrowing threshold
Assume an unlisted private company with capital ₹70 crore, turnover ₹300 crore and qualifying borrowings ₹99.99 crore. The public-company routes do not apply to it on these facts, and qualifying borrowings are ₹0.01 crore, or ₹1 lakh, below ₹100 crore. This conclusion assumes no separate listed-status or other applicable route.
Illustrative example 4: Combine qualifying lenders
Assume an unlisted private company has ₹60 crore outstanding to banks and ₹40 crore to validly identified public financial institutions on the relevant audited date. Total qualifying borrowings are ₹100 crore, meeting clause (c) at equality.
Illustrative example 5: Exclude a stipulated non-qualifying group lender
Assume an unlisted private company has ₹80 crore of bank borrowings and ₹30 crore from a group company that is neither a bank nor a public financial institution. Total debt is ₹110 crore, but the stipulated clause (c) base is ₹80 crore, ₹20 crore below its threshold. Lender classification must be supported.
Illustrative example 6: Do not substitute an interim peak
Assume the relevant latest-audited closing qualifying borrowing is ₹99 crore, while an interim utilisation peak was ₹110 crore. The Rule 9 explanation's stated closing basis gives ₹99 crore, ₹1 crore below the threshold; the peak is ₹11 crore higher than that closing figure. Other rules using peaks need their own review.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Establish statutory company status | Document public/private and listed-status conclusions. |
| 2 | Identify the latest audited statement | Preserve the actual statement and relevant last date. |
| 3 | Extract paid-up capital | Avoid authorised-capital or net-worth substitutions. |
| 4 | Extract turnover | Use the supported audited figure and its relevant basis. |
| 5 | Build a lender classification | Identify banks, public financial institutions and other lenders. |
| 6 | Reconcile qualifying closing borrowings | Match outstanding amounts to the specified measurement date. |
| 7 | Test each route independently | Apply equality-inclusive ₹50 crore, ₹250 crore and ₹100 crore tests as applicable. |
| 8 | Verify any claimed modification | Preserve the actual legal basis and conditions. |
| 9 | Arrange report and record access | Plan the company-secretary-in-practice audit and MR.3 workflow. |
| 10 | Reconcile Board-report treatment | Annex the report and address qualifications, observations and remarks as required. |
Sixteen practitioner FAQs
1. Must all three Rule 9 thresholds be met?
No. Test the applicable routes independently.
2. What capital threshold applies to the public-company route?
Paid-up share capital of ₹50 crore or more.
3. Can authorised capital replace paid-up capital?
No.
4. What turnover threshold applies to the public-company route?
₹250 crore or more.
5. Does equality count under these routes?
Yes. The wording is or more.
6. Can the borrowing route cover a private company?
Yes. Clause (c) says every company, subject to its conditions.
7. What borrowing threshold does it use?
₹100 crore or more from banks or public financial institutions.
8. Are all group-company loans automatically included?
No. Establish whether the lender belongs to the specified category.
9. Can a qualifying facility be excluded just because it is not called a term loan?
Do not rely on the ledger caption alone; assess the actual loan or borrowing.
10. Which measurement basis does the explanation specify?
Figures existing on the last date of the latest audited financial statement.
11. Is an interim peak automatically substituted?
No. Use the rule's stated basis.
12. Is there also a listed-company route?
Yes. Section 204 separately refers to every listed company; establish actual statutory listed status.
13. Which prescribed report form is named?
Form MR.3 under Rule 9(2).
14. Who gives the section 204 report?
A company secretary in practice.
15. What must the Board address?
The qualifications, observations or other remarks in that report, as section 204(3) requires.
16. Does this working replace cost-audit or internal-audit testing?
No. They have separate applicable provisions.
Conclusion
Section 204 and Rule 9 require separate listed-status, public-company and borrowing checks. A private company can fall within the borrowing route even though the capital and turnover routes refer to public companies.