CS PROFESSIONAL - SECRETARIAL AUDIT, COMPLIANCE MANAGEMENT AND DUE DILIGENCE

MODULE 1 PAPER 2

SECRETARIAL AUDIT, COMPLIANCE MANAGEMENT AND DUE DILIGENCE

This paper is one of the core paper in the life of a company secretary. It explains and trains a student on the core strength  he needed to excel in his profession. The paper explain three aspects of expertise for a Company secretary.

1. Due diligence

2. Secretarial audit

3. Compliance management.

Due diligence is an investigative process for providing the desired comfort level about the potential investment and to minimize the risks such as hidden uncovered liabilities, poor growth prospects, price claimed for proposed investment being on higher side etc., In general due diligence process is transaction based.

Secretarial Audit is a process to check compliance with the provisions of various laws and rules/ regulations/procedures, maintenance of books, records etc., by an independent professional to ensure that the company has complied with the legal and procedural requirements and also followed the due process. It is essentially a mechanism to monitor compliance with the requirements of stated laws.

Compliance management is the method by which corporate manage the entire compliance process. It includes the compliance program, compliance audit, compliance report etc. and in other words it is called compliance solution.

Secretarial Audit and Compliance management are the routine tools for effective governance. Compliance management is to be in built into the corporate system to avoid non compliances and the Secretarial audit is carried out on periodical basis by an independent professional. Due diligence is a pre-emptive tool to assess a business transaction.

Due diligence process includes examining all aspects of a company including manufacturing, financial, legal, tax, IT systems, labour issues, checking for regulatory issues as well as understanding issues related to IPR, the environment and other matters such as contractual documentation, litigation, ownership of movable, fixed and intangible assets.

Further Adoption of secretarial standards issued by the Institute of Company Secretaries of India(ICSI) help the corporates in better compliance management and is indeed an effective governance tool.

The paper on Secretarial Audit, Compliance Management and Due Diligence has been introduced to enable the students to understand the concepts and technicalities of due diligence whether transaction based or pertaining to issue of financial instruments etc. the importance of Secretarial Audit and Secretarial Standards. This study would also through light on secretarial standards, checklists under secretarial audit, compliance management systems etc.

This paper warrants continuous updation in terms of legislative changes made to laws from time to time. Students are advised to keep themselves abreast of latest developments by regularly resorting to reading of various regulatory websites/economic dailies and additional source materials concerning corporate world. Students are also advised to read regularly the ‘Student Company Secretary’/ ’Chartered Secretary’ wherein all important regulatory amendments are reported regularly.

Part A: Secretarial Audit (25 Marks)

Secretarial Standards

1. Concept, Scope and Advantages

2. Secretarial Standards issued by the ICSI

3. Compliance of Secretarial Standards for Good Governance

4. Relevance of Guidance Note(s)

Secretarial Audit

1. Need, Objective and Scope

2. Periodicity and Format for Secretarial Audit Report

3. Benefits of Secretarial Audit

4. Professional Responsibilities and Penalties

Checklist for Secretarial Audit

Part B: Due Diligence and Compliance Management (75 Marks)

Due Diligence – An Overview

1. Introduction, Nature, Need and its Significance

2. Objectives, Scope and Types of Due Diligence

3. Process of Due Diligence

4. Concept of Data Room in Due Diligence

5. Due Diligence vs. Audit

Issue of Securities

1. Introduction and Regulatory Framework

2. Pre and Post Issue Due Diligence – IPO/FPO

3. Due Diligence – Preferential Issues of Listed and Unlisted Companies

4. Employee Stock Option, Bonus Issue, Rights Issue, Debt Issues

5. Issue of Securities by SMEs

6. Role of Company Secretary in Issue of Securities

Depository Receipts Due Diligence

1. Introduction; Broad Regulatory Framework; Parties, Approvals, Documentation and Process

2. Issue of ADRs, GDRs, IDRs and FCCBs

Merger & Acquisition (M&A) Due Diligence

1. Introduction

2. Stages of M&A Due Diligence

3. Data Room Management

4. Business, Financial, Legal and Corporate Governance Due Diligence

5. HR and Cultural Due Diligence

6. Impact of Due Diligence on Valuation

7. Takeovers and Acquisitions Due Diligence

Competition Law Due Diligence

1. Introduction

2. Need for Competition Compliance Programme

3. Mergers & Acquisitions and Competition Law Aspects

4. Reasons for Due Diligence of Competition Law Aspects

5. Process of Due Diligence of Competition Law Aspects

6. Due Diligence of Various Agreements

7. Some Common Anti Competitive Practices

8. Due Diligence on Abuse of Dominance

9. Due Diligence Checklist for Compliance with Competition Act, 2002

10. Checklist for Anti Competitive Agreements/Abuse of Dominant Position/Regulation of Combinations

Legal Due Diligence

1. Introduction

2. Objectives, Scope, Need and Process

3. General Documents/Aspects to be covered

4. Possible Hurdles in Carrying out a Legal Due Diligence and Remedial Actions

Due Diligence for Banks

1. Introduction

2. Need for Due Diligence for Banks

3. Process of Due Diligence for Banks

4. Due Diligence Report to Banks

Environmental Due Diligence

1. Introduction

2. Need for Environmental Due Diligence

3. Process involved in Environmental Due Diligence

4. Regulatory Framework relating to Environment

5. Check List on Major Regulatory Compliance

6. Environmental Guidelines for Industries by Ministry of Environment

7. Environmental Impact Assessment

8. Environmental Management Plan

9. Preparation of Risk Analysis Matrix

10. Identification of Potential Issues

11. Impact Analysis

12. Suggestions and Mitigation Measures

Search and Status Reports

1. Importance and Scope

2. Verification of Documents relating to Charges

3. Requirements of Financial Institutions and Corporate Lenders

4. Preparation of Report

Compliance Management

1. Concept and Significance

2. Establishment of Compliance Management System

3. Absolute, Apparent and Adequate Compliance