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Compliance Management, Audit and Due Diligence · Secretarial Audit

Secretarial Standards and Penalties for Section 204 Non-compliance

Updated 11 October 2026 · Fact-checked

Secretarial Standards SS-1 (Board meetings) and SS-2 (general meetings) are issued by ICSI and approved by the Central Government. Section 205 makes the CS responsible for ensuring the company complies with them. Under section 204(4), a company, its officer in default, or the secretarial auditor who contravenes section 204 is liable to a penalty of ₹2,00,000.

Understand Secretarial Standards and Penalties for Non-compliance

A secretarial audit checks whether a company has complied with the law and its own governance processes. The auditor is a company secretary in practice. The report is annexed to the Board's report under section 134(3).

Secretarial Standards are the yardstick for how meetings and records are run. Section 205 defines them as standards issued by the Institute of Company Secretaries of India and approved by the Central Government. SS-1 covers Board meetings. SS-2 covers general meetings. Under section 205(1)(b), ensuring the company complies with them is a function of the company secretary.

In a secretarial audit, the auditor checks notices, agenda, minutes, quorum, attendance, resolutions and registers. The Standards give the benchmark for these checks. A gap against SS-1 or SS-2 can become a remark in the report.

Section 204 also sets duties and a penalty. The company must give all assistance and facilities to the auditor (204(2)). The Board must explain in full any qualification, observation or remark made by the auditor (204(3)). If the company, any officer of the company or the auditor contravenes the section, the company, every officer in default, or the auditor in default is liable to a penalty of two lakh rupees (204(4)).

Penalties are imposed by an adjudicating officer under section 454 after giving a reasonable opportunity of being heard. Appeal lies to the Regional Director. Smaller companies may get relief under section 446B.

Key rules to remember

Meaning of secretarial standards (section 205, Explanation)
Secretarial standards = standards issued by ICSI + approved by the Central Government
SS-1 deals with Board meetings and SS-2 with general meetings. Both conditions must be met.
Duty of the CS on standards (section 205(1)(b))
CS must ensure the company complies with applicable secretarial standards
Section 205(1)(a) also requires reporting to the Board on compliance with the Act, rules and other applicable laws.
Penalty for contravening section 204 (section 204(4))
Company / every officer in default / CS in practice in default: penalty of ₹2,00,000
The words are 'liable to a penalty of two lakh rupees'. It applies to the company, the officers in default and the auditor.
Company's duties under section 204(2) and (3)
Give all assistance and facilities; Board explains in full every qualification, observation or remark
The explanation goes in the Board's report under section 134(3).
Lesser penalty (section 446B)
Penalty ≤ ½ of specified penalty, subject to a maximum of ₹2,00,000 for a company and ₹1,00,000 for an officer in default or other person
Applies to One Person Company, small company, start-up company or Producer Company.
Adjudication and appeal (section 454)
Hearing before penalty → appeal to Regional Director within 60 days of receiving the order
Non-compliance with the order within 90 days attracts a fine on the company of ₹25,000 to ₹5,00,000. An officer or other person in default faces imprisonment up to 6 months or a fine of ₹25,000 to ₹1,00,000, or both.

How to solve Secretarial Standards and Penalties for Non-compliance questions

Use this order for any question on Secretarial Standards and section 204 penalties. It matches the provision, analysis, conclusion format.

  1. 1Identify who is involved: a listed or prescribed company, its officers, the CS, or the secretarial auditor.
  2. 2State the relevant provision. Use section 204 for audit duties and penalty, and section 205 for the CS's duty on secretarial standards.
  3. 3Apply the facts. Ask whether the company gave facilities, whether the Board explained the remarks, and whether SS-1 or SS-2 was followed.
  4. 4Name the person in default. The company, an officer in default, or the auditor can each be liable.
  5. 5State the consequence: a penalty of ₹2,00,000 under section 204(4), imposed by the adjudicating officer after a hearing.
  6. 6Check for relief. See whether the company is an OPC, small company, start-up or Producer Company, so that section 446B applies.
  7. 7Mention the remedy: appeal to the Regional Director within 60 days.
  8. 8Conclude with a clear answer and, where the question asks, one practical compliance step.

Quickest way: Four-line answer frame

When to use it: Use when you have a short time and the question asks who is liable and how much.

  1. Provision: section 204 (and 205 for Standards).
  2. Default: what was breached (facilities, Board explanation, or audit duty).
  3. Liable: company, officers in default, auditor in default.
  4. Penalty and process: ₹2,00,000 under 204(4); adjudication under section 454 with a hearing; appeal to Regional Director in 60 days; check section 446B.

Common mistakes in Secretarial Standards and Penalties for Non-compliance

  • Saying only the company is penalised under section 204.

    Students link the audit report only with the company.

    Fix: Quote section 204(4): the company, every officer in default and the company secretary in practice are all covered.

  • Stating the wrong penalty amount or calling it a fine or imprisonment.

    Students mix up the penalty with older provisions or with section 454(8).

    Fix: Section 204(4) provides a penalty of ₹2,00,000. Imprisonment appears only in section 454(8) for failure to comply with an adjudication order.

  • Saying the Secretarial Standards are issued by the Central Government.

    The word 'approved' is overlooked.

    Fix: They are issued by ICSI and approved by the Central Government.

  • Mixing up SS-1 and SS-2.

    Both deal with meetings and the numbers are easy to swap.

    Fix: SS-1 is Board meetings. SS-2 is general meetings.

  • Ignoring section 446B for small companies.

    Students stop at the headline penalty.

    Fix: For an OPC, small company, start-up company or Producer Company, the penalty is at most half, capped at ₹2,00,000 for the company and ₹1,00,000 for an officer.

  • Forgetting that the Board must explain auditor remarks.

    Students treat the report as the end of the process.

    Fix: Mention section 204(3): the Board's report must explain in full every qualification, observation or remark.

Worked examples

Example 1

Meridian Textiles Ltd, a listed company, did not give its practising company secretary access to the minute books and statutory registers, so the secretarial audit report could not be completed in time. Advise on the consequences.

Show the solution
  1. Provision: section 204(2) requires the company to give all assistance and facilities to the company secretary in practice for auditing the secretarial and related records.
  2. Analysis: refusing access to minute books and registers is a failure to give assistance and facilities. This is a contravention of section 204.
  3. Liability: under section 204(4), the company and every officer in default are liable to a penalty of two lakh rupees.
  4. Process: the adjudicating officer under section 454 must give them a reasonable opportunity of being heard before imposing the penalty. An appeal lies to the Regional Director within 60 days of receiving the order.
  5. Practical point: the company should give the access and also report to the Board, as the CS's role under section 205 includes reporting on compliance.

Answer: Meridian Textiles Ltd and each officer in default are liable to a penalty of ₹2,00,000 under section 204(4), after a hearing by the adjudicating officer.

Example 2

Explain the role of SS-1 and SS-2 in a secretarial audit and state who bears responsibility for compliance with them.

Show the solution
  1. Meaning: section 205 Explanation defines secretarial standards as those issued by ICSI and approved by the Central Government.
  2. Coverage: SS-1 relates to Board meetings and SS-2 to general meetings.
  3. Role in audit: the auditor tests notices, agenda, quorum, minutes and resolutions against the Standards. Deviations may appear as observations in the report.
  4. Responsibility: under section 205(1)(b), ensuring compliance with applicable secretarial standards is a function of the company secretary.
  5. Board's duty: under section 205(2) the duties of the Board, chairperson, managing director or whole-time director are not affected. Under section 204(3), the Board must explain in full any remark made by the auditor.

Answer: SS-1 and SS-2 are the benchmark for meeting-related compliance in a secretarial audit. The CS must ensure compliance, but the duties of the Board and its officers remain.

Exam tips

  • Write the section number with each point: 204(2) facilities, 204(3) Board explanation, 204(4) penalty, 205(1)(b) standards.
  • Always say the auditor can also be penalised, not just the company.
  • Mention section 446B whenever the facts show an OPC, small company, start-up or Producer Company.
  • Mention the hearing, the adjudicating officer and the appeal to the Regional Director to show the full process.
  • Keep SS-1 and SS-2 correctly paired, and state the 'issued by ICSI, approved by the Central Government' definition.

Practice questions from Secretarial Audit

Secretarial Standards and Penalties for Non-compliance in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Secretarial Standards and Penalties for Non-compliance: frequently asked questions

What is the penalty for contravening section 204?

Section 204(4) provides a penalty of ₹2,00,000. It applies to the company, every officer in default and the company secretary in practice who is in default.

What do SS-1 and SS-2 cover?

SS-1 covers Board meetings and SS-2 covers general meetings. They are secretarial standards issued by ICSI and approved by the Central Government.

Who imposes the penalty and can it be appealed?

An adjudicating officer appointed under section 454 imposes it after giving a hearing. An appeal lies to the Regional Director within 60 days of receiving the order.

Do small companies pay the same penalty?

Not always. Under section 446B, an OPC, small company, start-up company or Producer Company pays at most half the specified penalty. The cap is ₹2,00,000 for the company and ₹1,00,000 for an officer in default.