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CMA Intermediate · Corporate Accounting and Auditing · Secretarial Audit

Zenith Textiles Ltd, a listed company, received a secretarial audit report containing an adverse remark about delayed filing of a return. Under the Companies Act, 2013, what must the Board do?

The Board must explain in full the qualification or observation in its Board's report. Section 204(3) places this duty on the directors, so the remark cannot be ignored, withdrawn by request or disclosed only to the Registrar.

  1. AExplain in full the qualification or observation in its Board's reportCorrect
  2. BIgnore the remark, as it is only advisory
  3. CSeek the secretarial auditor's withdrawal of the remark before the AGM
  4. DDisclose the remark only to the Registrar and not to members

Explanation

Section 204(3) requires the Board of Directors, in its report under section 134(3), to explain in full any qualification, observation or other remarks made by the company secretary in practice. The remark is therefore not advisory and cannot be left unexplained.

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