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CS Professional · Compliance Management, Audit and Due Diligence · Secretarial Audit

Kaveri Components Pvt Ltd is an unlisted company. Its management argues that secretarial audit never applies to unlisted companies since section 204 speaks only of listed companies. Which statement is correct under section 204(1)?

Section 204(1) applies to listed companies and also to companies belonging to other classes as may be prescribed. An unlisted company is therefore not automatically exempt; it must annex the report if it falls within a prescribed class.

  1. ASection 204(1) covers only listed companies, so no unlisted company can ever be covered
  2. BSection 204(1) also covers a company belonging to such other class of companies as may be prescribed, so an unlisted company may be covered if it falls in a prescribed classCorrect
  3. CSection 204(1) covers every private company with a paid-up capital above a figure stated in the section itself
  4. DSection 204(1) covers unlisted companies only when the auditor of the company requests a secretarial audit

Explanation

The section applies to every listed company and also to a company belonging to other classes of companies as may be prescribed. The classes are fixed by rules, not in the section text. So an unlisted company is covered if it falls within a prescribed class; the management's argument ignores this limb.

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