COMPANIES ACT, 2013
Coverage - Chapter IX
Presentation by:
K K Tulshan
Content
• Introduction
• Sections and Rules
• Detailed provisions
• Comparison
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Sections under Chapter IX
Section 128 to Section 138
128. Books of account, etc. to be kept by
company
129. Financial statement
130. Re-opening of accounts on Court’s or
Tribunal’s orders
131. Voluntary revision of financial statements
or Boards’ report
132. Constitution
of
National
Financial
Reporting Authority
133. Central
Government
to
prescribe
accounting standards
134. Financial statement, Board’s report etc.
135. Corporate Social Responsibility
136. Right of member to copies of audited
financial statement
137. Copy of financial statement to be filed with
Registrar
138. Internal audit
S.S. Kothari Mehta & Co.
Section
138
Section
128
Section
129
Section
137
Section
136
Section
130
Chapter
IX
Section
135
Section
131
Section
132
Section
134
Section
133
3
Rules under Chapter IX
A. The Companies (Accounts) Rules, 2014
Rule 1: Short tile, extent & commencement
Rule 2: Definitions
Rule 3: Manner of books of account to be kept in
electronic mode
Rule 4: Conditions regarding maintenance and
inspection of certain financial information by
directors
Rule 12: Filing of financial statements and fees to
be paid thereon
Rule 13: Companies required to appoint internal
auditor
B. The
Companies
(Corporate
Responsibility Policy) Rules, 2014
Rule 5: Form of statement containing salient
features of financial statements of subsidiaries
Rule 1: Short tile, extent & commencement
Rule 6: Manner of consolidation of accounts
Rule 3: CSR
Rule 7: Transitional provisions with respect to
Accounting Standards
Rule 4: CSR activities
Rule 8: Matters to be included in Board’s report
Rule 9: Disclosures about Corporate Social
Responsibility (“CSR”) policy
Rule 10: Statement containing salient features of
financial statements
Social
Rule 2: Definitions
Rule 5: CSR committees
Rule 6: CSR policy
Rule 7: CSR expenditure
Rule 8: CSR reporting
Rule 9: Display of CSR activities on its website
Rule 11: Manner of circulation of financial
statements in certain cases
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Detailed provisions
Detailed provisions
Section 128: Books of account, etc. to be kept by company (corresponds to S 209 of the
Companies, 1956)
-
Every company shall prepare and keep at its registered office books of account (Sec 2(13)) and
other relevant books and papers and financial statement for every financial year which give a true
and fair view of the state of the affairs of the company, including that of its branch office or offices
(Sub Section (1)).
-
such books shall be kept on accrual basis and according to the double entry system of accounting
-
Board of Directors may decide to be keep aforesaid books & papers at some other place in India
also but should be intimated in writing to the registrar within seven days giving the detail of such
address.
-
Company may keep such books of account or other relevant papers in electronic mode in the
manner as may be prescribed (New provision).
-
If a company has a branch office in India or outside India, proper summarized returns should be
sent by the branch at the registered office of the Company or at a place as decided by the BOD.
(Sub Section (2))
-
Books of account and other papers shall be open for inspection by any director subject to the
conditions as may be prescribed (Sub Section (3)).
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Detailed provisions
-
Books of account together with vouchers to be maintained for a period of not less than eight
financial years immediately preceding a financial year or for longer period as per the order of CG
under Chapter XIV (Inspection, Inquiry and Investigation). (new provision).(Sub Section (5))
-
Managing director, the whole time director in charge of finance, CFO or any other person of a
company charged by the board with the duty to comply this provision, for non compliance of this
Section, shall be punishable with imprisonment for a term which may extend to one year or with
fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees or
with both. (Sub Section (6))
Rule 3 - Manner of books of account to be kept in electronic form
•
The books of account and other relevant books and papers maintained in electronic mode shall
remain accessible in India so as to usable for subsequent reference and shall be retained in the
format in which they were originally generated (unaltered)
•
The information in electronic record of the document shall be capable of being displayed in a
legible form
•
There shall be proper system for storage, retrieval, display or printout of the electronic records as
the Audit Committee or the Board of may deem appropriate
•
Back up server in India
•
Information to RoC
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Detailed provisions
Rule 4 - Conditions regarding maintenance and inspection of certain financial information by
directors
•
The summarized return of the books of account of the company kept and maintained outside India
shall be sent to the registered office at quarterly intervals, which shall be kept and maintained at
registered office of the company and kept open to directors for inspection.
•
The company shall produce such financial information to the director within fifteen days of the date
of receipt of the written request.
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Detailed provisions
Section 129: Financial statement (corresponds to S 210, 211 & 212 of the Companies Act,
1956)
-
The financial statements shall give a true and fair view of the state of affairs of the company or
companies, comply with the accounting standards notified under section 133 and shall be in form
or forms as may be provided for different class or classes of companies in Schedule III (Forms and
General Instructions for preparation of Balance Sheet and Statement of Profit and Loss of a
company).
-
Above sub section is not applicable to any insurance or banking company or any company
engaged in the generation or supply of electricity or any other class of company for which a form
of financial statement has been prescribed in or under relevant act.
-
At every annual general meeting of a company, the board of directors of the company shall lay
before such meeting financial statements for the financial year.
-
Where a company has one or more subsidiaries, it shall also prepare a consolidated financial
statement of the company and of all subsidiaries in the same form and manner as that of its own
which shall also be laid before the annual general meeting of the company. For this sub-section,
the word subsidiary shall include associate company and joint venture (New provision).
-
In addition to CFS, the company shall also attach a separate statement in form AOC-1 containing
the salient features of the financial statement of its subsidiary/subsidiaries/associate company/joint
venture
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Detailed provisions
-
Where the financial statements of a company do not comply with the accounting standards, the
company shall disclose the deviation from accounting standards in them, along with its reason and
financial effects, if any.
-
If a company contravenes the provisions of this section, the MD, the whole-time director in charge
of finance, the CFO or any other person responsible for complying with the requirements of this
section and in the absence of all of these, all the directors shall be punishable with imprisonment
for a term which may extend to one year or with fine amounting to Rs.50,000- 5,00,000, or with
both.
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Detailed provisions
Section 130: Re-opening of accounts on court’s or Tribunal’s orders-New Provision (Section
not notified till date)
•
A company shall not re-open its books of account and not recast its financial statements, unless
an application in this regard is made by the Central Government, the Income-tax authorities, the
Securities and Exchange Board, any other statutory regulatory body or authority or any person
concerned and an order is made by a court of competent jurisdiction or the Tribunal to the effect
that:-
a) The relevant earlier accounts were prepared in a fraudulent manner
b) The affairs of the company were mismanaged during the relevant period, casting a doubt on
the reliability of financial statements
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Detailed provisions
Section 131: Voluntary revision of financial statements or Board’s report – New provision
(Section not notified till date)
•
If it is appears to the directors of the company that the financial statement or the report of the
Board do not comply with the applicable provisions of Sections 129 or 134, they may revise the
aforesaid in respect of any of three preceding financial years after obtaining the approval from
Tribunal on an application made by the company in such form and manner as may be prescribed..
These can not be revised more than once in a financial year.
•
The detailed reasons for revision of such financial statement or report shall also be disclosed in
the Board’s report in the relevant financial year in which such revision is being made.
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Detailed provisions
Section 132: Constitution of National Financial Reporting Authority – corresponds to Sec 210A
of the 1956 Act (Section not notified till date)
-
The Central Government may, by notification, constitute a National Financial Reporting Authority to
provide matters relating to (a) accounting and auditing standards (b) quality and (c) professional
conduct.
-
The NFRA shall consist of a chairperson, who shall be a person of eminence and having expertise
in accountancy, auditing, finance or law to be appointed by the CG and such other members not
exceeding fifteen consisting part time and full time members as may be prescribed.
-
Powers of the National Financing Reporting Authority:
a) to investigate, either suo motu or on a reference made to it by the CG, for such class of bodies
corporate or persons, into the matters of professional or other misconduct committed by any
member or firm of Chartered accountants. Once the investigation is initiated by NFRA, no other
institute or body shall initiate any proceeding in such matter.
b) have the same powers as are vested in a civil court under the code of civil procedure,1908, while
trying a suit in respect of discovery & production of books of account and other documents,
issuing commissions for examination of witnesses or documents.
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Detailed provisions
c) where professional or other misconduct (same meaning as given in Sec 22 of the Chartered
Accountants Act, 1949) is proved, have the power
i. To make the order for imposing penalty (for individual: Rs.1,00,000 to 5 times of the fees
received and for firms: 10,00,000 to 10 times of the fees received)
ii. Debarring the member or the firm from practice as a member of ICAI.
-
Any person aggrieved by any order of NFRA may prefer an appeal before the Appellate Authority
constituted under this section.
-
The Central Government may, by notification, constitute an Appellate Authority consisting of a
chairperson and not more than two members for hearing appeals arising out of the orders of
NFRA.
-
The accounts of NFRA shall be audited by CAG and to be forwarded along with the audit report to
the CG annually.
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Detailed provisions
Section 133: Central Government to prescribe accounting standards (corresponds to S 211 of
the Companies Act, 1956)
-
The Central Government may prescribe the standard of accounting or any addendum thereto, as
recommended by the ICAI in consultation with and after examination of the recommendation made
by the National Financial Reporting Authority (NFRA).
Rule 7 of The Companies (Accounts) Rules, 2013
-
The standards of accounting as specified under the Companies Act, 1956 shall be deemed to be
the accounting standards until specified by the CG u/s 133
-
Till the time NFRA is constituted by the CG, CG may consider recommendations of National
Advisory Committee on accounting standards constituted u/s 210A of the Companies Act, 1956
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Detailed provisions
Section 134: Financial statement, Board’s report, etc. (corresponds to S 215, 216 & 217 of the
Companies Act, 1956)
•
The financial statement, including consolidated financial statement, if any, shall be approved by
the Board of Directors before they are signed on behalf of the board and submitted to the auditors
for their report. The authentication has to be done by the chairperson of the company where he is
authorised by the Board or by two directors out of which one shall be managing director and the
Chief Executive Officer, if he is a director in the company, the CFO and the CS of the company,
wherever they are appointed.
•
Auditors’ report shall be attached to every financial statement.
Additional disclosures in Board’s report to be laid before a company in general meeting :•
Extract of the annual return as provided u/s 92 (3) – New requirement
•
Number of meetings of the Board - New requirement
•
Directors’ responsibility statement
•
Statement of declaration by independent directors u/s 149(6) -New requirement
•
Company’s policy on directors appointment/remuneration - New requirement
•
Explanations or comments by the board on every qualification, reservation or adverse remark or
disclaimer made by the auditor in his report and by the company secretary in practice in his
secretarial audit report.
•
Particulars of loans, guarantee, investment, related party contracts, implementation of risk
management policy, policy developed on Corporate Social Responsibility, statement of formal
evaluation of the performance of the Board and its committees in case of listed and public
companies (New requirements)
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Detailed provisions
Director’s Responsibility Statement shall state :
•
The applicable AS had been followed in the preparation of the annual accounts with proper
explanation relating to material departures
•
Prudent accounting policies are followed consistently so as to give true and fair view of the state of
affairs of the company
•
Director had taken proper and sufficient care for the maintenance of adequate accounting records
in accordance with the provisions of this act for safeguarding the assets of the company, and for
preventing and detecting the frauds and other irregularities.
•
Directors had prepared the annual accounts on going concern basis.
Additional disclosures in Director’s Responsibility Statement (for listed company):
• Directors had laid down internal financial controls to be followed by the company and that such
internal controls are adequate and were operating effectively
•Directors had devised proper systems to ensure compliance with the provisions of all applicable
laws.
Penalty for non Compliance
•
Fine (50,000 to 25,00,000) for the Company, and
•
Fine (50,000 to 5,00,000) or/and imprisonment upto 3 years
Company
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for all officers in default of the
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Detailed provisions
Section 135: Corporate Social Responsibility – New provision
•
Every company having:-
- Net worth of 500 crores or more, or
- Turnover of 1000 crores of more, or
- Net profit of 5 crores or more, during any financial year shall constitute a CSR Committee of the
Board having consisting of minimum 3 Directors of which at least 1 shall be Independent Director.
•
Board’s report u/s 134 (3) shall disclose the composition of the CSR Committee.
•
CSR Committee shall
•
•
Formulate & recommend to the board, CSR policy which shall indicate the activities to be
undertaken as specified in Sch VII
•
Recommend the amount of expenditure
•
Monitor the policy from time to time
The Board of every company referred to above shall after taking into account the
recommendations made by CSR Committee:
- Approve the CSR Policy for the company and disclose contents of such policy in its report
and also place it on the company’s website, and
- Ensure that the activities as are included in CSR Policy of the company are undertaken by
the company
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Detailed provisions
•
Board of every company shall ensure that the company spends, in every financial year, at least
2% of average net profit of the company made during 3 preceding financial years, in pursuance of
its CSR policy.
•
If Company fails to spend such amount, the Board shall, in its report made, specify the reasons for
not spending the amount.
•
Average net profit shall be calculated in accordance with the provisions of section 198 (Calculation
of profit for managerial remuneration)
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Detailed provisions
Rule 3: CSR
Every company including its holding or subsidiary, and a foreign company defined under clause (42)
of section 2 of the Act having its branch office or project office in India which fulfills the criteria
specified in sub-section (l) of section 135 of the Act shall comply with the provisions of section 135 of
the Act and CSR rules
Rule 4: CSR activities
The CSR activities shall be undertaken by the company, as per its stated CSR Policy, as projects or
programs or activities (either new or ongoing) which are approved by the CSR committee, through a
registered trust or a registered society or a company established by the company, its holding or
subsidiary or associate company under section 8.
Rule 5: CSR committees
a) an unlisted public company or a private company covered under sub-section ( I ) of section I35
which is not required to appoint an independent director pursuant to sub-section (4) of section 149
of the Act, shall have its CSR Committee without such director
b) a private company having only two directors on its Board shall constitute its CSR Committee with
two such directors
c) with respect to a foreign company covered under these rules, the CSR Committee shall comprise
of at least two persons of which one person shall be as specified under clause (d) of sub-section
(1) of section 380 of the Act and another person shall be nominated by the foreign company
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Detailed provisions
Rule 6: CSR policy
The CSR Policy of the company shall, inter-alia, include the following, namely a) A list of CSR projects or programs which a company plans to undertake falling within the purview
of the Schedule VII of the Act, specifying modalities of execution of such project or programs and
implementation schedules for the same; and
b) monitoring process of such projects or programs
Rule 7: CSR expenditure
CSR expenditure shall include all expenditure including contribution to corpus, for projects or
programs relating to CSR activities approved by the Board on the recommendation of its CSR
Committee, but does not include any expenditure on an item not in conformity or not in line with
activities which fall within the purview of Schedule VII of the Act.
Rule 8: CSR reporting
The Board's Report of a company covered under these rules pertaining to a financial year
commencing on or after the 1st day of April, 2014 shall include an annual report on CSR containing
particulars specified in Annexure.
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Detailed provisions
Section 136 Right of Members to copies of Audited Financial Statements
•
Copy of FS to be sent to all the members including CFS and all other documents required by the
law to be annexed or attached to the financial statement, if any, not less than 21days before the
date of meeting.
•
Also place above statements on its website (New Provision)
•
In case of all listed companies and such public companies which have a net worth of more than
Rs. 1 crore and turnover of more than Rs. 10 crore, the financial statements may be sent by
electronic mode to such members whose shareholding are in dematerialised form or who have
positively consented in writing for receiving by electronic mode; and by despatch of physical
copies by any other recognised mode of delivery as specified under section 20 of the Act, in all
other cases.
•
Company having subsidiary / subsidiaries shall –
• Place separate audited accounts for each subsidiary on its website
• Provide a copy of audited FS of subsidiary to any shareholder who asks for it
•
Penalty for Default –
Company – Rs. 25000
Officer – Rs. 5000
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Detailed provisions
Section 137 Copy of FS to be filed with registrar
•
Copy of FS including CFS and other documents shall be filed with the Registrar within 30 days of
General Meeting with fees or additional fees.
•
Un‐adopted accounts shall be considered as provisional.
•
Accounts adopted at adjourned meeting shall be filed within 30 days of adjourned meeting.
•
OPCs to file within 180 days from closure of FY.
•
If the AGM is not held, FS along with a statement of facts & reason for not holding the AGM shall
be filed with Registrar.
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Detailed provisions
Section 138 Internal Audit (New Provision)
Such class or classes of companies, as may be prescribed, shall be required to appoint an internal
auditor, who shall either be a chartered accountant or a cost accountant, or such other professional
as may be decided by the Board. CG may prescribe the manner and intervals in which internal audit
shall be conducted and reported to the Board.
Rule 13 Companies required to appoint internal auditor
The following class of companies shall be required to appoint an internal auditor or a firm of internal
auditors, namely:a) every listed company
b) every unlisted public company having
i.
paid up share capital of fifty crore rupees or more during the preceding financial year; or
ii. turnover of two hundred crore rupees or more during the preceding financial year; or
iii. outstanding loans or borrowings from banks or public financial institutions exceeding one
hundred crore rupees or more at any point of time during the preceding financial year; or
iv. outstanding deposits of twenty five crore rupees or more at any point of time during the
preceding financial year; and
c) every private company having
i.
turnover of two hundred crore rupees or more during the preceding financial year; or
ii. outstanding loans or borrowings from banks or public financial institutions exceeding one
hundred crore rupees or more at any point of time during the preceding financial year
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Comparison
Comparison of new sections with old sections
Subject matter
New provision in the
Companies Act, 2013
Corresponding old provision in
the Companies Act, 1956
Maintenance of books of Provides for maintaining the No such provision
account in electronic mode books of account in electronic (Section 209)
mode
{Section 128(1)}
Preservation
period
books of account
of Where investigation is ordered, Books to be preserved for 8 years
CG may direct books of account (Section 209)
to be preserved for a longer
period
{Section 128(5)}
Compulsory consolidation
of accounts of holding
company
and
its
subsidiaries
including
associate companies and
joint ventures
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Provides for consolidation of
financial statements of company
and all its subsidiaries
(Section 129)
Provides for attaching the books of
account of subsidiaries along with
holding company. No such provision
of consolidation.
(Section 212)
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Comparison of new sections with old sections
Subject matter
Re-opening
accounts/recasting
financial statements
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New provision in the
Companies Act, 2013
Corresponding old provision in
the Companies Act, 1956
of If there is an order in this regard No such provision
of made by the court or Tribunal to
the effect that the relevant
earlier books of account were
prepared in fraudulent manner
or the affairs were mismanaged
during the relevant period,
casting a doubt on reliability of
financial statement. Court or
Tribunal shall give notice to the
CG and the Income Tax and
shall take into consideration,
representation, if any, made by
them. The books of account so
revised or re-casted shall be
final.
(Section 130)
27
Comparison of new sections with old sections
Subject matter
New provision in the
Companies Act, 2013
Voluntary
revision
of
financial statement or board
report
with
Tribunal’s
consent
If it is appeared to Directors of No such provision
the company that the financial
statement or report do not
comply with the applicable
provisions of Sections 129 or
134, they may revise the
aforesaid in respect of any of
three preceding financial years
after obtaining the approval from
Tribunal. These can not be
revised more than once in a
financial year
(Section 131)
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Corresponding old provision in
the Companies Act, 1956
28
Comparison of new sections with old sections
Subject matter
New provision in the
Companies Act, 2013
Corresponding old provision in
the Companies Act, 1956
Disclosures in the Board Additional disclosures of:No such provision
report
Number of meetings of the (Section 217)
Board, statement of declaration
by
independent
directors,
Company’s policy on directors
appointment/remuneration,
Particulars of loans, guarantee,
investment,
related
party
contracts, implementation of risk
management
policy,
policy
developed on Corporate Social
Responsibility, statement of
formal
evaluation
of
the
performance of the Board and
its committees in case of listed
and public companies
{Section 134(1)}
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Comparison of new sections with old sections
Subject matter
Director’s
statement
New provision in the
Companies Act, 2013
Corresponding old provision in
the Companies Act, 1956
responsibility Provides
for
additional No such provision
disclosures in case of a listed {(Section 217(2AA)}
company:
• Directors have laid down
internal financial controls and
they have complied with;
• Directors
have
devised
adequate system to ensure
compliance to the provisions
of this Act, rules and that such
system was adequate and
operating effectively.
{Section 134(5)}
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Comparison of new sections with old sections
Subject matter
Corporate
Responsibilities
New provision in the
Companies Act, 2013
Corresponding old provision in
the Companies Act, 1956
Social Company having net worth of No such provision
Rs. 500 crores or turnover of Rs.
1000 crores or net profit of Rs. 5
crores or more during any
financial year shall constitute a
CSR Committee and shall
ensure at least 2% of average
net profit of the company during
3 preceding financial years is
spent in every financial year on
CSR. Company shall give
preference to local areas where
it operates, for spending amount
earmarked for CSR activities. If
Company fails to spend such
amount, the Board to report
reasons for the same in its
report {Section 134(5)}
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Comparison of new sections with old sections
Subject matter
New provision in the
Companies Act, 2013
Internal Audit
Such class or classes of No such provision
companies,
as
may
be
prescribed, shall be required to
appoint an internal auditor, who
shall either be a chartered
accountant or a cost accountant,
or such other professional as
may be decided by the Board
CG may prescribe the manner
and intervals in which internal
audit shall be conducted and
reported to the Board
(Section 138)
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Corresponding old provision in
the Companies Act, 1956
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Thank You
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