Chapter 6 A4

ACCOUNTS OF COMPANIES
CA DEEPIKA RATHI
CA DEEPIKA RATHI : CORPORATE LAW 1
Types of accounts to be maintained (section
Chapter Overview 128 & 129) Books of Accounts
Reopening and recasting of accounts on Relevant books &

court’s or Tribunal’s order (Section 130) Papers
Voluntary revision of accounts (Section 131) Financial Statement

Constitution of NFRA & Power of CG to
Prescribe accounting standards
Accounts of (Section 132-133)
Companies
(Section 128-138) Financial Statement Board Reports, etc.
(Section 134)
CSR (Section 135)
Right of Members & Filing of Financial

Statements with registrar (Section 136-137)
Internal Audit (Section 138)

BOOKS OF ACCOUNT ETC. TO BE KEPT BY COMPANY (Section 128)
Every company shall

o prepare→ books of accounts and other relevant books & records and financial
statement for every financial year.
o Which should give→ true and fair view of the state of the affairs of the
General requirement company including its branch office(s) and explain the transactions effected
both at the registered office and its branches.
o Must be kept on
 Accrual basis and
 On Double entry system of accounting
Includes records maintained in respect of –

o all sums of money received and expended by a company and matters inrelation
Books of Accounts to which the receipts and expenditure take place
[Section 2(13)] o all sales and purchases of goods and services by the company
o the assets and liabilities of the company and
o the items of cost as may be prescribed under section 148 (Cost Audit)

‘’Books and Paper’’ Includes
and ‘’Book or Paper o books of account deeds vouchers writing documents minutes and registers
[Section 2(12)] o Maintained on paper or in electronic form.
o Shall be kept at registered office of the company.
Place of Keeping o However the Board may decide another place in India to keep them.
books of account  Notice of such place must be given to Registrar within 7 days of such decision
[Section 128(1)]  In Form AOC-5
 Giving full address of that other place
Companies have the option to maintain its Books of accounts & other papers in
electronic form provided following conditions are satisfied –
Maintenance of
1. Books of account shall remain accessible in India at all the times.
books of account in
Provided that for F.Y. commencing on or after the 1st day of April 2023, every
electronic form
company which uses accounting software for maintaining its books of
[Rule 3 of
account shall use only such accounting software which has a feature of –
Companies
 Recording audit trail of each and every transaction
(Accounts) Rules
 Creating an edit log of each change made in books of accounts along with
2014]
the date when such changes were made and
 Ensuring that the audit trail cannot be disabled.

2. The books of accounts
- shall be retained completely in the format in which they were originally
generated, sent or received or
- In the format which shall present accurately the information generated sent
or received and
- The information contained in the electronic records shall remain complete
and unaltered
3. The information received from branch offices shall not be altered and shallbe
kept in a manner where it shall depict what was originally received from the
branches.
4. The information in the electronic record of the document shall be capable of
being displayed in a legible form.
5. There shall be a proper system for
o Storage, retrieval, display or printout of the electronic records.
o Such records shall not be disposed off or rendered unusable unless
permitted by law.
o Back-up of the books of account maintained in electronic mode, including at
a place outside India if any
o Shall be kept in servers physically located in India on a daily basis.

6. The company shall intimate to the Registrar on an annual basis at the time of
filing of financial statement following relevant information related to service
provider-
a. the name of the service provider
b. the internet protocol (IP) address of service provider
c. the location of the service provider (wherever applicable)
d. where the books of account and other books and papers are maintainedon
cloud, such address as provided by the service provider.
e. Where the service provider is located outside India, The Name and
Address of the person in control of the books of account and other books
and papers in India.
Where a company has a branch office in or outside India, it shall be deemed to have
complied with the provisions of sub-section (1),
o if proper books of account relatingto the transactions effected at the branch
Books of account office are kept at that office and
Branch Office o The summarized returns of the books of accounts of the company kept and
maintained outside India shall be sent to the registered office at quarterly
intervals,
o which shall be kept and maintained at the registered office of the company
and kept open to directors for inspection.
 Any director can inspect the books of account and other books and papers of the
Inspection by company during business hours.
Directors  Such inspection may be done by any type of director - nominee, independent,
[Section 128 (3)] promoter or whole time
 A person can inspect the books of account of the subsidiary, only on
authorization by way of the resolution of Boardof Directors.
Assistance by
 Where an inspection is made under sub-section (3)
officers and
 The officers and other employees of the company shall give to the person making
Employees
such inspection all assistance in connection with the inspection which the
[Section 128 (4)]
company may reasonably be expected to give.
 Where any other financial information maintained outside the country is required
Other Financial by a director.
Information  the director shall furnish a request to the company setting out the full details of
[Rule 4(4) of the financial information sought, the period for which such information is sought.
Companies  The company shall produce such financial information to the director within
(Accounts) Rule fifteen days of the date of receipt of the written request.
2014]  The Director can seek the information only individually and not by or through his
attorney holder or agent or representative with respect to financial information
maintained outside the country.
 The books of accounts, together with vouchers relevant to any entry in such
books, are required to be preserved in good order by the company for a period of
not less than eight years immediately preceding the relevant financial year.
 In case of a company incorporated less than eight years before the financial
Period for
year,the books of accounts for the entire period preceding the financial year
Preservation of
together with the vouchers shall be so preserved.
Books
 As per proviso to sub-section 5, where an investigation has been ordered in
[Section 128(5)]
respect of a company under Chapter XIV of the Act related to inspection, inquiry
or investigation, the Central Government may direct that the books of account
maybe kept for such period longer than 8 years, as it may deem fit and give
directionsto that effect.
 The person responsible for the maintenance of books of account etc. shall be:
i. Managing Director
Person Responsible ii. Whole-Time Director, in charge of finance
and Penalty iii. Chief Financial Officer
[Section 128(6)] iv. Any other person of a company charged by the Board with duty of complying
with provisions of section 128.
 Penalty : Fine Not less than Rs. 50000/- which may extend to Rs. 5 lakhs.
Summary of Section 128
Every company (including its branch/s) shall

o Prepare → Books of accounts and other relevant books & records and Financial Statement for
every financial year
o On Accrual basis and on Double entry system
o Provide→ True and Fair view
Books of Accounts [Section 2(13)]

o All sum of money received and expended
o All sales and purchase of goods and services
o Assets and liabilities
o Items of cost u/s 148
‘’Books and Paper’’ and ‘’Book or Paper [Section 2(12)]

Includes
o books of account deeds vouchers writing documents minutes and registers
o Maintained on paper or in electronic form.

Place of Keeping the Books of Accounts :
o Registered office of the Company
o Board of Directors may decide another place in India
- Notice should be filled to RoC within 7 days
- In Form AOC-5 giving full address
Maintaining Books of Accounts in Electronic Form [ Rule 3 of Companies (Accounts) Rules 2014 :
Companies have the option to maintain its Books of Accounts & Other papers in electronic form
provided following conditions are satisfied :
1. Books of accounts accessible in India at all the times
Accounting software of the company should have following features –
o Recording audit trail of each and every transaction
o Creating an edit log of each change made in books of accounts along with the date when
such changes were made
o Ensuring that the audit trail cannot be disabled
2. Information contained in the records shall be retained in the original format.
3. Branch offices information shall not be altered and depict originally received from the branches.
4. Information should displayed in legible form.

5. Electronic Records
o Proper system of storage, retrieval, display or printout.
o Shall not be disposed off or rendered unusable unless permitted by law
o Backup of books of accounts shall be kept in servers physically located in India on the daily
basis (including for records outside India)
6. On annual basis company shall intimate to Registrar about service provider
a. Name
b. IP address
c. Location
d. Where the books of account are maintained on cloud such address as provided by service
provider.
e. where the service provider is located outside India, the name and address of the person in
control of the books of account and other books and papers in India
Branch office outside India :
Deemed to have complied if
o books of accounts kept at that office
o Quarterly summarized return is sent to the registered office
o Kept open to directors for inspection

Inspection by Directors :
o Directors can inspect Books of Accounts during business hours only after authorization by
Board by way of the resolution.
o Officer and employees shall assist the person making inspection.
o Financial Information maintained outside the country
 Director required to furnish a request to → company + along with full details of
information sought
 Company shall produce such financial information within 15 days.
o Director can seek the information only individually not by attorney/representative/ agent.
Preservation of Books of Accounts :

o 8 years
o In case company incorporated less than 8 years : For the entire period preceding the F.Y.
o Where Investigation has been ordered : CG may direct longer period

Person Responsible for maintenance of Books of accounts :
o Managing Director
o Whole-Time Director in charge of finance
o Chief Financial Officer
o Any other person charged by the Board
Penalty for contravention:

Officer in default : Fine not less than Rs. 50000/- which may extend to Rs.5 Lakhs

FINANCIAL STATEMENT (Section 129)
Financial Statement is defined U/s 2(40) include
Profit and loss account or

Statement of Any explanatory notes
Income Expenditure Cash Flow
Balance sheet change in annexed to or forming part
account (in case of statement
equity of financial statement
section 8 Co.)
Exemption :
Financial statement with respect to
o One Person Company
o Small Company
o Dormant Company
o Private Company (If Startup company)
May not include the cash flow statement.
The exception modification and adaptation shall be applicable to a private company
o Who has not committed a default in filing its
- Financial statement in section 137 or
- Annual Return in section 92
o With the Registrar
Non applicability of section 129

o Section 129 shall not apply to the Government Companies
o Engaged in defence production
o To the extent of application of relevant Accounting Standard on segment reporting
Financial Statement
o should be prepared for Financial Year and
o as per the requirements of schedule III

Financial Statement [Section 2(41)]
 in relation to any company or body corporate, means the period ending on the 31st day of March every
year, and where it hasbeen incorporated on or after the 1st day of January of a year, the period
endingon the 31st day of March of the following year, in respect whereof financial statement of the
company or body corporate is made up.
 Provided that where a company or body corporate, which is a holding company ora subsidiary or
associate company of a company incorporated outside India and is required to follow a different financial
year for consolidation of its accounts outside India, the Central Government may, on an application made
by that company or body corporate in such form and manner as may be prescribed, allow any periodas
its financial year, whether or not that period is a year.
 Provided further that any application pending before the Tribunal as on the dateof commencement of
the Companies (Amendment) Ordinance, 2018, shall be disposed of by the Tribunal in accordance with
the provisions applicable to it before such commencement.
 Provided further that a company or body corporate, existing on the commencement of this Act, shall,
within a period of two years from such commencement, align its financial year as per the provisions of
this clause.

Crux of Section 2 (41)
 Financial Year means

o Period ending 31st March every year.
o Company Incorporated on or after the 1st day of January of a Year :→ The period ending on
the 31st day of March of the Following Year
 Exception:
o A company which is the holding/subsidiary company of a company incorporated outside
India and is required to follow a different financial year for consolidation account
- It may do so with Central Government permission
- CG allow : → any period as its Financial Year whether or not that period is a year.
o Prior to commencement of the Companies (Amendment) Ordinance 2018 this power was
with NCLT. (NCLT shall dispose of before such commencement)
o Company shall align its FS as per the provisions of this section within 2 years of
commencement.

Schedule III has been divided into two divisions
Division I Division II
Deals with Financial statement for a company Deals with Financial statement for a company
whose financial statement are required to whose financial statement are required to
comply with the Companies (Accounting comply with the Companies (Accounting
Standards) Rules 2006 Standards) Rules 2015

True And Faire View Section 129 (1)
The Financial Statement shall

o Give→ True and Faire View of the state of affairs of the Company or Companies
o Comply with accounting standards : → Notified U/s 133
o Be in Form or Forms as provided in : → Schedule III
o Items contained in FS shall be in : → Accordance with Accounting Standards
Non-Applicability (Exception)
Shall not apply to any
a. Insurance Company
b. Banking company
c. Company engaged in the generation or supply of electricity or
d. To any other class of company which a form of F.S. has been specified under Act governing
such class of company.

The F.S. Shall not treated as not disclosing a true and fair view of the state of affairs of the company
merely by reason of the fact that they do not disclose-
Matters which are not required to be disclosed by the

Insurance Company Insurance Act, 1938, or the InsuranceRegulatory and
Development Authority Act, 1999

Banking Company
Banking Regulation Act, 1949
Company engaged in
the generation or Electricity Act, 2003
supply of electricity
Company governed Matters which are not required to be disclosed by that

by any other law law

Laying of Financial Statement & Consolidated Financial Statement
Laying of Financial
At every annual general meeting of a company, the Board of Directors of thecompany
Statement[Section
shall lay before such meeting financial statements for the financial year.
129(2)
• Where a company has one or more subsidiaries or associate companies, itshall,

in addition to financial statements provided under sub-section (2), prepare a
consolidated financial statement (CFS) of the company and of allthe subsidiaries
and associate companies in the same form and manner asthat of its own and in
Consolidation of accordance with applicable accounting standards, which shall also be laid before
financial statement the annual general meeting of the company along with the laying of its financial
[Section 129(3)] statement under sub-section (2).
• The company shall also attach along with its financial statement, a separate
statement containing the salient features of the financial statement of its
subsidiary or subsidiaries and associate company or companies in Form AOC-1 as
per Rule 5 of the Companies (Accounts) Rules, 2014.

• Provided further that the Central Government may provide for the consolidation of accounts of
companies in such manner as may be prescribed under Rule 6 of the Companies (Accounts)
Rules, 2014.
• Explanation - For the purposes of this sub-section, the word “subsidiary” shall include
associate company and joint venture.
• Rule 6 of the Companies (Accounts) Rules, 2014 provides for the consolidation of accounts of
companies in the following manner
o Manner of consolidation of Accounts :The consolidation of financial statements of the
company shall be made in accordance with the provisionsof Schedule III of the Act and
the applicable accounting standards.
o In case where company is not required to prepare CFS: A company covered under sub-
section (3) of section 129 which is not required to prepare consolidated financial
statements under the Accounting Standards, it shall be sufficient if the company complies
with provisions of consolidated financial statements provided in Schedule III of the Act.
o Exemptions from preparation of CFS: As per Companies (Accounts) Amendment Rules,
2016, preparation of consolidated financial statements bya company is not required if it
meets the following conditions
i. it is a wholly-owned subsidiary, or is a partially-owned subsidiary of another
company and all its other members, including those not otherwise entitled to vote,
having been intimated in writing and forwhich the proof of delivery of such
intimation is available with the company, do not object to the company not
presenting consolidated financial statements
ii. it is a company whose securities are not listed or are not in the process of
listing on any stock exchange, whether in or outside India and
iii. its ultimate or any intermediate holding company files consolidated
financial statements with the Registrar which are in compliance with the
applicable Accounting Standards.
• Provided also that nothing contained in this rule shall subject to any other law or
regulation, apply for the financial year commencing from the 1st dayof April, 2014
and ending on the 31st March, 2015, in case of a company which does not have a
subsidiary or subsidiaries but has one or more associate companies or Joint ventures
or both, for the consolidation of financial statement in respect of associate companies
or joint ventures orboth, as the case may be.
Explanation: The above proviso states that for a company which does not have a
subsidiary or subsidiaries but has one or more associate companies or Joint Ventures
or both will not be required to comply with this rule of consolidation of financial
statements in respect of associate companies orjoint ventures or both, as the case
may be, only for the financial year commencing from the 1st day of April, 2014 and
ending on the 31st day of March, 2015.
• Provided also that nothing in this rule shall apply in respect of consolidation of
financial statement by a company having subsidiary or subsidiaries incorporated outside
India commencing on or after 1st April 2014.

• The provisions applicable to the preparation, adoption and audit of the financial
[Section 129(4)] statements of a holding company shall, mutatis mutandis, also applyto the
consolidated financial statements.
• where the financial statements of a company do not comply with the accounting
standards referred to in sub- section (1), the company shall disclose in its financial
[Section 129(5)]
statements, the deviation from the accounting standards, the reasons for such
deviation andthe financial effects, if any, arising out of such deviation
• The Central Government may, on its own or on an application by a class or classes

of companies, by notification, exempt any class or classes of companies from
complying with any of the requirements of this section orthe rules made
[Section 129(6)]
thereunder, if it is considered necessary to grant such exemption in the public
interest and any such exemption may be granted either unconditionally or subject
to such conditions as may be specified inthe notification.

• If a company contravenes the provisions of this section, the managing director, the
whole-time director in charge of finance, the Chief Financial Officer or any other
person charged by the Board with the duty of complying with the requirements of
Penal Provisions
this section and in the absence of any of the officers mentioned above, all the
[Section 129(7)]
directors shall be punishable with imprisonment for a term which may extend
toone year or with fine which shall not be less than fifty thousand rupees but
which may extend to five lakh rupees, or with both.

Crux of Section 129 (2) to (7)
Section 129(2) & (3): Board of Directors must lay at every Annual General Meeting (AGM)
o Financial Statement of the Company
o Consolidated Financial Statement of the Company including financial details of all its
subsidiaries and associate companies.
o Also attach salient features of subsidiaries of the company and associate companies in FORM
AOC-1 [Rule 5 of Companies (Accounts) Rules 2014]
Manner of consolidation of Accounts [Rule 6 of Companies (Accounts) Rules 2014]

o Consolidation of financial statement shall be made in accordance with
- The provisions of schedule III and
- Applicable accounting standards
o Where company is not required to prepare CFS under the Accounting Standard its shall be
sufficient compliance if company prepares CFS as per schedule III.

Exemption from preparation of CFS [Companies (Accounts) Amendment Rules 2016]
Company is not required to prepare CFS if it meets the following conditions
i. - It is a wholly or partially owned subsidiary of another company and
- all its members (whether having right to vote or not)
• In writing consented to not presenting CFS and
• Company has proof of the same.
ii. Unlisted Company (not in process of being listed in or outside of India)
iii. Whose ultimate/immediate holding company has filed a CFS in compliance with accounting
standards.
Section 129 (4)
Provisions applicable to the preparation, adoption and audit of the FS of holding company shall
mutatis mutandis apply to the CFS.
Section 129 (5)

Where F.S. of the company do not comply with the Accounting standard the company shall
o Disclose in its F.S. the deviation from accounting standards
o The reasons of such deviation
o Financial effects if any

Section 129 (6)
o CG may by its own or on application may exempt any class or classes of company from
complying the provisions of this section.
o CG has granted exemption to Government companies engaged in production of Defence
Equipment.
Section 129 (7) : Penal Provisions

If a company Contravenes the provision of this section
Whether the following officers are present ?
o Managing director Yes
o Whole Time Director in charge of Finance
o Another person appointed by board in this behalf Mentioned officers
shall be liable to
No
Imprisonment: Up to 1 Year
All the directors Fine : Rs. 50000 to Rs. 5 lakhs or
shall be liable to both
PERIODICAL FINANCIAL RESULTS (Section 129A)
The Central Government may, require such class or classes of unlisted companies, as
may be prescribed,—
(a) to prepare the financial results of the company on such periodical basis and in such form as
may be prescribed
(b) to obtain approval of the Board of Directors and complete audit or limited review of such
periodical financial results in such manner as may be prescribed and
(c) file a copy with the Registrar within a period of 30 days of completion of the relevant period
with such fees as may be prescribed.
CRUX
Central Government may prescribe for unlisted companies
o The period and form to prepare financial results
o To obtain approval of BoD and complete audit or limit review of such periodical results
o Filing with Registrar within 30 days of completion of relevant period with fees.

RE OPENING OF ACCOUNTS ON COURT’S OR TRIBUNAL ORDERS (Section 130)
 A company shall not re-open its books of accounts and not recast its financial
statements unless an application in this regard is made by –
a. Central Government
b. Income tax authorities
c. Securities and exchange board of India (SEBI)
d. Any other statutory regulatory body or authority or any person concerned
 An order is made by a court of competent jurisdiction or the Tribunal to effect
(1)
that-
Apply to court for re-
i. The relevant earlier accounts were prepared in a fraudulent manner or
opening of accounts
ii. The affairs of the company were mismanaged during the relevant period
casting a doubt on the reliability of financial statements
 Serving of Notice : Provided that the Court or Tribunal as the case may be
o Shall give notice to the CG, Income Tax Authorities, SEBI or any other
regulatory authority concerned or any other person concerned
o And shall take into consideration the representations if any made by them
before passing any order under this section.

(2)
Revised accounts shall The accounts so revised or re-casted shall be final.
be final
o No order shallbe made under sub-section (1) in respect of re-opening of books

of account relating to a period earlier than eight financial years immediately
(3)
preceding the current financial year
Time Limit in respect
o Provided that where a direction has been issued by the Central Government
of re-opening of books
under the proviso to sub-section (5) of section 128 for keeping of books of
of account
account for a period longer than eight years, the books of account may be
ordered to be re- opened within such longer period.

Summary of Section 130 Application to be made by
Central Income tax Statutory

SEBI Any other person
Government authorities Regulatory Body
To Court/ Tribunal to effect that

1. The earlier accounts were prepared in a
fraudulent manner
2. Affairs of the company are mismanaged
Time limit for re-opining
Maximum period of 8 F.Y. immediately
The Court /Tribunal shall on application preceding the current F.Y. except where
made by applicants direction by Central Government to
maintain books of accounts is beyond 8
Serve a Notice to applicants to take
representation if any
Pass order to revise/recast the accounts

The revised accounts shall be final
VOLUNTARY REVISION OF FINANCIAL STATEMENTS OR BOAR’S REPORT (Section 131)
 If it appears to the directors of a company that –

a. The financial statement of the company or
b. The report of the Board
Do not comply with the provisions of section 129 or section 134
They may prepare revised financial statement or a revised report in respect of
(1) any 3 preceding financial years after obtaining approval of the Tribunal on an
Preparation of revised application made by company in such form and manner as may be prescribed
financial statement or and a copy of the order passed by the Tribunal shall be filed with the Registrar.
revised report on the  Tribunal to serve the notice:
approval of Tribunal o The tribunal shall give notice to the CG an Income Tax authorities
o And shall take into consideration the representations if any before passing
any order under this section.
 Number of times of revision and recast:
Such revised financial statement or report shall not be prepared or filed more
than once in a financial year

 Reason for revision to be disclosed:
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.
 Where copies of the previous financial statement or report have been sent out to
members or delivered to the Registrar or laid before the company in general
(2)
meeting, the revisions must be confined to-
Limits of revisions
a. the correction in respect of which the previous financial statement or
reportdo not comply with the provisions of section 129 or section 134 and
b. the making of any necessary consequential alternation.

 The Central Government may make rules as to the application of the provisions of
(3)
this Act in relation to revised financial statement or a revised director’s report
Framing of rules by
and such rules may, in particular-
the Central
a. make different provisions according to which the previous financial
Government in
statement or report are replaced or are supplemented by a document
relation to revised
indicating the corrections to be made
financial statement or
b. make provisions with respect to the functions of the company’s auditor in
director’s report
relation to the revised financial statement or report
c. require the directors to take such steps as may be prescribed.

Summary of Section 131
o Application may be filed
If it appears to the Directors seeking approval to make
of the Company that the suitable changes in
• Financial statement • FS and
or • Board Report To the
• Board Report of Preceding 3 Financial
are not in compliance with Year
section 129 o Detailed reasons must be Tribunal shall
specified to Tribunal
o Notify the CG & Income tax Authority

and
o Consider there representation before
Note passing the order.
Maximum revisions allowed in
one financial year is one
o Pass the order to revise the
- Board Report or
- Financial statement

Copy of the Order
To Registrar of
Company shall file along with revised FS
Companies
and Board Report

 With the effect from 1st October 2018 under this section Central Government has
1. constituted the National Financial reporting Authority to provide for matters relating to
Section 132(1) & accounting and auditing standard.
(1A)  The National Financial Reporting Authority shall perform its functions through such
divisions as may be prescribed.
 Notwithstanding anything contained in any other law for the time being in force, the
NFRA shall-
a. make recommendations to the Central Government on the formulation and laying
down of accounting and auditing policies and standards for adoptionby
companies or class of companies or their auditors, as the case may be.
2. b. monitor and enforce the compliance with accounting standards and auditing
Section 132(2) standards in such manner as may be prescribed.
c. oversee the quality of service of the professions associated with ensuring
compliance with such standards, and suggest measures required for improvement
in quality of service and such other related matters as may be prescribed and
d. perform such other functions relating to clauses (a), (b) and (c) as may be
prescribed.
 The NFRA shall consist of a chairperson, who shall be a person of eminence andhaving
expertise in accountancy, auditing, finance or law to be appointed by the Central
Government and such other members not exceeding fifteen consisting of part-time and
full-time members as may be prescribed.
 Each division of the National Financial Reporting Authority shall be presided over by
the Chairperson or a full-time Member authorized by the Chairperson.
 There shall be an executive body of the National Financial Reporting Authority
consisting of the Chairperson and full-time Members of such Authority for efficient
3. discharge of its functions under sub-section (2) [other than clause (a)] and sub- section
Section 132(3) & (4)
(3A) (3B)  Provided that the terms and conditions and the manner of appointment of the
chairperson and members shall be such as may be prescribed.
 Provided further that the chairperson and members shall make a declaration to the
Central Government in the prescribed form regarding no conflict of interest or lackof
independence in respect of his or their appointment.
 Provided also that the chairperson and members, who are in full-time employment
with NFRA shall not be associated with any audit firm (including related consultancy
firms) during the course of their appointment and two years after ceasing to hold such
appointment.
 Notwithstanding anything contained in any other law for the time being in force, the
NFRA shall
a. Have the power to investigate, either suo moto or on a reference made to itby
the Central Government, for such class of bodies corporate or persons, in such
manner as may be prescribed into the matters of professional or other
misconduct committed by any member or firm of chartered accountants,
registered under the Chartered Accountants Act, 1949.
Provided that no other institute or body shall initiate or continue any proceedings
in such matters of misconduct where the NFRA has initiated an investigation
4.
under this section.
Section 132(4)
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 the following matters, namely
i. discovery and production of books of account and other documents, at such
place and at such time as may be specified by the NFRA.
ii. summoning and enforcing the attendance of persons and examiningthem
on oath.
iii. inspection of any books, registers and other documents of any person
referred to in clause (b) at any place.
iv. issuing commissions for examination of witnesses or documents.
c. where professional or other misconduct is proved, the NFRA shall have the power
to make order for
A. Imposing penalty of
I. Not less than one lakh rupees, but which may extend to five timesof the
fees received, in case of individuals.
II. Not less than five lakh rupees, but which may extend to ten timesof the
fees received, in case of firms.
B. Debarring the member or the firm from
I. Being appointed as an auditor or internal auditor or undertaking any
audit in respect of financial statements or internal audit of the functions
and activities of any company or body corporate or
II. Performing any valuation as provided under section 247
for a minimum period of six months or such higher period not exceeding ten
years as may be determined by the National Financial Reporting Authority
Explanation :-"professionalor other misconduct" shall have the same meaning
assigned to it as given under section 22 of the Chartered Accountants Act, 1949

5.
 Any person aggrieved by any order of the National Financial Reporting Authority issued
Appeal against
under clause (c) of sub-section (4), may prefer an appeal before the Appellate Tribunal
orders of NFRA
in such manner and on payment of such fee as may be prescribed.
6.  The National Financial Reporting Authority shall meet at such times and places and
Meetings of shall observe such rules of procedure in regard to the transaction of business at its
NFRA meetings in such manner as may be prescribed.
 The Central Government may appoint a secretary and such other employees as it may
7.
consider necessary for the efficient performance of functions by the National Financial
Secretary and
Reporting Authority under this Act and the terms and conditions of service of the
other employees
secretary and employees shall be such as may be prescribed.
8.  The head office of the National Financial Reporting Authority shall be at New Delhi and
Head office of the National Financial Reporting Authority may, meet at such other places in India as it
NFRA deems fit.

9.  The National Financial Reporting Authority shall cause to be maintained such books of
Maintenance of account and other books in relation to its accounts in such form and in such manner as
Books by the the Central Government may, in consultation with the Comptroller and Auditor-General
NFRA of India prescribe.
 The accounts of the National Financial Reporting Authority shall be audited by the
10. Comptroller and Auditor-General of India at such intervals as may be specified by him
Audit of Account and such accounts as certified by the Comptroller and Auditor-General of India together
of NFRA with the audit report thereon shall be forwarded annually to the Central Government
by the National Financial Reporting Authority.
 The National Financial Reporting Authority shall prepare in such form and at such time
for each financial year as may be prescribed its annual report giving a full account of its
activities during the financial year and forward a copy thereof to the Central
11.
Government and the Central Government shall cause the annual report and the audit
Annual Report
report given by the Comptroller and Auditor-General of India to be laid before each
on working of
House of Parliament
NFRA
 In exercise of the powers conferred under sub-sections (2) and (4) of section 132,the
Central Government made the National Financial Reporting Authority Rules,2018
(NFRA Rules).
 As per NFRA rules, NFRA shall have power to monitor and enforce compliance with
accounting standards and auditing standards, oversee the quality of service under sub-
section (2) of section 132 or undertake investigation under sub-section (4) of such
section of the auditors. Rule 3 provides for the classes of companies and bodies
corporate governed by the NFRA.
 These include:-
a. companies whose securities are listed on any stock exchange in India or outside
India.
b. unlisted public companies having paid-up capital of not less than rupees five
hundred crores or having annual turnover of not less than rupees one thousand
crores or having, in aggregate, outstanding loans, debentures and deposits of not
less than rupees five hundred crores as on the 31st March of immediately
preceding financial year.
c. insurance companies, banking companies, companies engaged in the generation
or supply of electricity, companies governed by any special Actfor the time
being in force or bodies corporate incorporated by an Act in accordance with
clauses (b), (c), (d), (e) and (f) of section 1 (4) of the Companies Act, 2013

Explanation.- For the purpose of this clause, “banking company” includes
‘corresponding new bank’ as defined in section 2 (d) of the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1970 and section 2(b) of the
Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 and
‘subsidiary bank’ as defined in section 2(k) of the State Bankof India (Subsidiary
Bank) Act, 1959.
d. Any body corporate or company or person, or any class of bodies corporate or

companies or persons, on a reference made to the NFRA by the Central
Government in public interest.
e. A body corporate incorporated or registered outside India, which is a subsidiary

or associate company of any company or body corporateincorporated or
registered in India as referred to in clauses (a) to (d) above,if the income or net
worth of such subsidiary or associate company exceeds20% of the consolidated
income or consolidated net worth of such companyor the body corporate, as the
case may be, referred to in clauses (a) to (d) above.

 Companies to File Auditor’s particular to NFRA
 Every existing body corporate other than a company governed by these rules, shall
inform the NFRA within 30 days of the commencement of NFRA rules, in Form
NFRA-1, the particulars of the auditor as on the date of commencement of these
rules
 A company or a body corporate other than a company governed under NFRA Rules shall
continue to be governed by the NFRA for a period of 3 years after it ceases tobe listed
or its paid-up capital or turnover or aggregate of loans, debentures and deposits falls
below the limit stated therein [i.e. mentioned in points (a) to (e)above]
12.  If a company or any officer of a company or an auditor or any other person contravenes
Punishment in any of the provisions of NFRA Rules, the company and every officer of the company
case of non- who is in default or the auditor or such other person shall be punishable as per the
compliance provisions of section 450 of theAct.

National Financial Reporting Authority (Section 132)
 Under section 132 the Central Government has constituted National Financial Reporting Authority to
assist in the framing and enforcement of legislation relating to accounting and auditing standards
(w.e.f. 1st October 2018)
 Role
a. To make recommendation to Central Government regarding Accounting and Auditing Standards and
procedures to be followed by the companies or their auditors.
b. Monitors their compliances.
c. Oversee the quality of service provided by associated professionals and suggest measures required for
improvement in quality of service and such other related matters.
d. Perform such other prescribed functions.
 Composition
Appointed by Central Government
o A chairperson
o Other members :→ Maximum 15 members (Consisting of part time or full time)

 Divisions of NFRA
o NFRA shall perform its functions through such divisions as may be prescribed.
o Each divisions of the NFRA shall be prescribed over by the Chairperson or a full time Member authorized by
the Chairperson.
o There shall be an executive body of the National Financial Reporting Authority consisting of the Chairperson
and full-time Members of such Authority for efficient discharge of its functions.
 Qualification of Chairperson / Members
o Expertise in accountancy, auditing, finance or law.
o Make a declaration to the Central Government that there is no conflict of interest or lack of independence in
their appointment.
o If chairperson and any member is in a full time employment with NFRA then they should not be associated
with any audit firm during their term of office and 2 years after their term.
 Power of NFRA
a. To investigate the matters of professional or other misconduct committed by member or firm of chartered
accountants either Suo Moto or On A Reference Made To It By The Central Government.
b. Powers as a CIVIL COURT under the Code of Criminal Procedures, 1908
i. Discovery and production of books of accounts and other documents.
ii. Summoning attendance and examining on oath.
iii. Inspection of any books, registers and other documents of any person at any place
iv. Issuing commissions for examination of witnesses or documents.
c. Where professional or other misconduct is proved it shall have power to impose the
following punishment
 Penalty:
i. Individual → Rs. 1 Lakhs which may extend to 5 times of the fees received.
ii. Firms → Rs. 5 Lakhs which may extend to 10 times of the fees received.
 Debarring the member or the firm as a member of ICAI for minimum period of 6 months but not
exceeding 10 years from -
i. For being appointed as an auditor or internal auditor or undertaking any audit in respect of financial
statements or internal audit of the functions and activities of any company or body corporate or
ii. Performing any valuation as provided under section 247.
 Appeal against orders of NFRA

Any person aggrieved by any order of the National Financial Reporting Authority may file appeal to Appellate
Tribunal in prescribed manner and prescribed fees.
 Meeting of NFRA
NFRA shall meet at such times and places and shall observe such rules of procedure in regard to the transaction
of business at its meeting in such manner as may be prescribed.

 Secretary and other employees :
Employees and secretaries of NFRA may be appointed by CG as required.
 Head Office of NFRA : New Delhi
 Maintenance of books by NFRA

NFRA shall maintain such books of account and other books in relation to its accounts as the Central Government
may in consultation with Comptroller and Auditor General of India prescribe.
 Audit of account of NFRA

o Audit of accounts of NFRA shall be done by Comptroller and Auditor General of India.
o Reports should be forwarded to Central Government annually.
 Annual Report on working of NFRA

o Annual Report shall be prepared by NFRA in such form and at such time for each Financial Year
 Giving full account of its activities during the FY and
 Forwarded a copy thereof to Central Government
o Central Government shall cause the annual report and the audit report given by C&AG of India to be laid
before each House of Parliament.

National Financial Reporting Authority Rules 2018
 As per NFRA rules, NFRA shall have power to monitor and enforce compliance with accounting standards and
auditing standards,
o oversee the quality of service under section 132 (2) or
o Undertake investigation under section 132 (4)
Rule 3 provides for the auditors of the following class of companies and bodies corporate:
a. Companies whose securities are listed on any stock exchange in India or outside India.
b. Unlisted Public Companies having
o Paid up capital not less than Rs. 500 Crore or
o Annual return not less than Rs. 1000 Crore or
o In aggregate Outstanding loan, Debentures and deposits not less than Rs. 500 Crore
As on the 31st March of immediately preceding financial year.
c. - Insurance company
- Banking Company
- Companies engaged in the generation or supply of electricity
- Companies governed by any special act or
- Bodies Corporate Incorporated by an Act in accordance with clause (b),(c), (d), (e) and (f) of section 1(4) of the
Companies Act 2013
d. Any body corporate or company or person or any class of bodies corporate or companies or persons on a
reference made to the NFRA by the Central Government in public interest and
e. - A body corporate incorporated or registered outside India which is a subsidiary or associate company of any
company or
- Body corporate incorporated or registered in India as referred to in clause (a) to (d) above
- if the Income or net worth of such subsidiary or associate company exceeds 20% of the consolidated income or
consolidated net worth of such company or the body corporate as the case may be referred to in clauses (a) to
(d) above
 Every existing body corporate other than a company governed by these rules
o shall inform the NFRA within 30 days of commencement of this rule
o In Form NFRA -1
o Particulars of the auditor
 A company or a body corporate other than a company governed under NFRA Rules
o Shall continue to be governed by the NFRA for period of 3 years
o After it ceases to be listed or its paid-up capital or turnover or aggregate of loans, debentures and deposits
fall below the limit stated therein.
 Punishment in case of Non compliance

o Company or
o Officer in default or
o An auditor or Punishable as per the provisions of section 450
o Any other person
Before constitution After constitution
of NFRA of NFRA
• The Central Government may

prescribe the standards of • The Central Government may
accounting orany addendum thereto, prescribe the standards of
• as recommended by the ICAI in accounting or any addendum
consultation with and after thereto
examination of the • as recommended by the ICAI in
recommendations made by the consultation with and after
National Advisory Committeeon examination of the
Accounting Standards (NACAS) recommendations made by the
constituted under the previous NFRA.
company law.

a. 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 at least by the chairperson of the company where he is authorized by the
Board OR by two directors out of which one shall be managing director, if any, and the
Chief Executive Officer, the Chief Financial Officer and the company secretary of the
1.
company, wherever they are appointed, or in the case of One person company, only
Authentication
by one director, for submission to the auditor for his report thereon.
of Financial
Statements
b. The auditors’ report shall be attached to every financial statement [Sub- section (2)].
[Section
134(1),(2) &(7)](i)
c. A signed copy of every financial statement, including consolidated financial statement,
if any, shall be issued, circulated or published along with a copyof [Section 134(7)]
1. Any notes annexed to or forming part of such financial statement
2. The auditor’s report; and
3. The Board’s report referred to in sub section 3.

1. According to Rule 8 of the Companies (Accounts) Rules, 2014
o The Board’s Report shall be prepared based on the standalone financial statement
of the company and
o Shall report on the highlights of performance of subsidiaries, associates and joint
venture companies and their contribution to the overall performance of the
2.
company during the period under report.
Board’s Report
2. Contents of the board’s report [Section 134 (3) read with rule 8]
[Section 134(3)
a. The web address if any where annual return referred to in sub section (3) of
&(4) read with
section 92 (Annual Return) has been placed
Rule 8 of the
b. Number of meetings of the Board
Companies
c. Director’s responsibility statement
(Accounts) Rules,
ca. Details in respect of frauds reported by auditors under sub-section (12)of
2014]
section 143 (Powers and duties of auditors and auditingstandards) other than
those which are reportable to the CentralGovernment.
d. A statement on declaration given by independent directors under sub-section (6)
of section 149 (Company to have board of board of Directors in relation to
independent director)

e. In case of a company covered under sub-section (1) of section 178 (Nomination
and Remuneration Committee and Stakeholders Relationship Committee),
company’s policy on directors’ appointment and remuneration including criteria
for determining qualifications, positive attributes, independence of a director and
other matters provided under sub-section (3) of section 178.
Note: This clause shall not apply to Government Company.
f. Explanation or comments by the Board on every qualification reservation or
adverse remark or disclaimer made-
i. By the auditor in his report
ii. By the company secretary in practice in his secretarial audit report
g. Particulars of loans, guarantees or investments under section 186
h. particulars of contracts or arrangements with related parties referred toin sub-
section (1) of section 188 in the form AOC-2
i. the state of the company’s affairs
j. the amounts, if any, which it proposes to carry to any reserves
k. the amount, if any, which it recommends should be paid by way of dividend
l. material changes and commitments, if any, affecting the financial position of the
company which have occurred between the end of the financial year of the
company to which the financial statements relate and the date of the report

m. The conservation of energy, technology absorption, foreign exchangeearnings
and outgo, in such manner as may be prescribed.
However,the Govt. companies engaged in producing defense equipment is
exempted from disclosure under this clause.
n. A statement indicating development and implementation of a risk management
policy for the company including identification therein of elements of risk, if
any, which in the opinion of the Board may threaten the existence of the
company.
o. The details about the policy developed and implemented by the company on
corporate social responsibility initiatives taken during the year.
p. In case of a listed company and every other public company having such paid-up
share capital as may be prescribed a statement indicating the manner in which
formal annual evaluation of the performance of the Board, its Committees and
of individual directors has been made.
As per Rule 8 (4) Prescribed Paid-up Share Capital : Every listed company and
every other public company having a paid up share capital of 25 crore
rupees or more calculated at the end of the preceding financial year shall
include, in the report by its Board of directors, a statement indicating the
manner in which formal annual evaluation has been made by the Board of its
own performance and that of its committees and individual directors.
Exemption to Government company : The above clause (p) of Sub section (3) of
Section 134 shall not apply in case the directors are evaluated by the Ministry or
Department of the Central Government which is administratively in charge of the
company or as the case may be the State Government as per its own evaluation
methodology.
q. Such other matters as may be prescribed

According to Rule 8 of the Companies (Accounts) Rules, 2014 the report of the
Board shall also contain-
i. The financial summary or highlights
ii. The change in the nature of business if any
iii. The details of directors or key managerial personnel who were appointed or
have resigned during the year
iiia. A statement regarding opinion of the Board with regard to integrity,
expertise and experience (Including the proficiency) of the independent
directors appointed during the year.
iv. The names of companies which have become or ceased to be its subsidiaries,
joint ventures or associate companies during the year.

v. The details relating to deposits like
a. Accepted during the year
b. Remained unpaid or unclaimed as at the end of the year
c. Whether there has been any default in repayment of deposits or
payment of interest thereon during the year and if so number of
such cases and the total amount involved -
1. At the beginning of the year
2. Maximum during the year
3. At the end of the year
vi. The details of deposits which are not in compliance with the
requirements of Chapter V (Acceptance of Deposits by Companies) of
the Act
vii. The details of significant and material orders passed by the regulators
or courts or tribunals impacting the going concern status and company’s
operations in future.
viii. the details in respect of adequacy of internal financial controls with
reference to the Financial Statements.

ix. A disclosure, as to whether maintenance of cost records as specified by
the Central Government under sub-section (1) of section 148 of the
Companies Act, 2013, is required by the Company and accordingly such
accounts and records are made and maintained.
x. A statement that the company has complied with provisions relating to
the constitution of Internal Complaints Committee under the Sexual
Harassment of Women at Workplace (Prevention, Prohibition and
Redressal) Act, 2013.
xi. the details of application made or any proceeding pending underthe
Insolvency and Bankruptcy Code, 2016 during the year along with their
status as at the end of the financial year.
xii. the details of difference between amount of the valuation done atthe
time of one time settlement and the valuation done while taking loan
from the Banks or Financial Institutions along with the reasons thereof.
It is provided that where disclosures referred to in this sub section have been
included in the financial statements, such disclosures shall be referred to instead
of being repeated in the Board’s report.

Provided further that where the policy referred to in clause (e) or clause (o) is
made available on company’s website, if any it shall be sufficient compliance of
the requirements under such clauses if the salient features of the policy and any
change therein are specified in brief in the Board’s report and the web-address is
indicated therein at which the complete policy is available.
Note: Non applicability of Rule 8 of Companies (Accounts) Rules 2014: → shall not
apply to One Person Company or Small Company.
3. Abridged Board’s report [Section 134 (3A)] : The Central Government may prescribe
an abridged Board’s report for the purpose of compliance with this section by One
Person Company or Small Company.
4. Board's Report in case of OPC [Section 134 (4)] : In case of a One Person Company the
report of the Board of Directors to be attached to the financial statement under this
section shall, mean a report containing explanations or comments by the Board on
every qualification reservation or adverse remark or disclaimer made by the auditor in
this report.

The Directors’ Responsibility Statement referred to in 134(3)(c) shall state that-
1. in the preparation of the annual accounts, the applicable accounting standards had
been followed along with proper explanation relating to material departures
2. the directors had selected such accounting policies and applied them consistently and
made judgments and estimates that are reasonable and prudent so as to give a true
and fair view of the state of affairs of the company at the end of the financial year and
3. of the profit and loss of the company for that period
Directors’ 3. the directors had taken proper and sufficient care for the maintenance of adequate
Responsibility accounting records in accordance with the provisions of this Act for safeguarding the
Statement assets of the company and for preventing and detectingfraud and other irregularities
[Section 134(5)] 4. the directors had prepared the annual accounts on a going concern basis;and
5. the directors, in the case of a listed company, had laid down internal financial controls
to be followed by the company and that such internal financial controls are adequate
and were operating effectively.
“internal financial controls” means the policies and procedures adopted by the
company for ensuring the orderly and efficient conduct of its business, including
adherence to company’s policies, the safeguarding of its assets, the prevention and
detection of frauds and errors, the accuracy and completeness of the accounting
records, and the timely preparation of reliable financial information.
6. The directors had devised proper systems to ensure compliance with the provisions of
all applicable laws and that such systems were adequate and operating effectively.
4. The Board’s report and any annexures thereto under sub-section (3) shall be signed by its
Signing of chairperson of the company if he is authorized by the Board and where he is not so
Board’s Report authorized, shall be signed by at least two directors, oneof whom shall be a managing
[Section 134(5)] director, or by the director where there is one director.
Persons liable Punishment for contravention of any

5. provision of this section
Contravention Company Rs. 3 lakh
[Section 134(8)] Every officer of the company who is in Rs. 50000
default

Financial Statement Board’s Report Etc. (Section 134)
 Section 134 (1) & (6) : Financial Statement (including Consolidated Financial Statement)
• Must be approved by the Board of Director and signed by
o Chairperson of the company (where he is authorized by the board)
or
any 2 directors out of which one shall be the managing director
and
o Chief Executive Officer
o Company Secretary
o In case of One Person Company (OPC)
• For submission to the auditor for his report thereon.
 Section 134 (2):FS must be attached with Auditor’s Report

 Section 134 (7): FS Must be issued, circulated or published along with
o Any notes annexed to or forming part of such FS
o The auditor’s report
o The board report
Board Report [Section 134(3) & (4) & Rule 8 of the Companies (Accounts) Rules 2014]
1. Board Report
 Prepared based on the standalone financial statement and
 Report on highlights of performance of subsidiaries associates and joint venture
companies and other contributions to the overall performance.
2. Content
a. Web address where annual return is placed
b. No. of Board meetings
c. Director’s responsibility statement
ca. Detail of fraud reported by the auditor u/s 143 (12) of this act
d. Statement on declaration given by independent directors u/s 149 (6)
e. Company’s policy on directors’ appointment and remuneration [1. Applicable only to
companies covered u/s 178 (1) ] [2. not applicable to government companies ]
f. Board comment or explanation on qualification, reservation/adverse remark/
disclaimer made by –
i. Auditor
ii. Company secretary
g. Particulars of loans , investments & Guarantees u/s 186

h. Particulars of contracts and agreement u/s 188 in AOC-2 .
i. State of affairs of the company
j. Amounts proposes to carry to any reserves.
k. Amounts paid or to be paid as dividend.
l. Subsequent events(material changes and commitments) affecting the financial
positions of the company.
m. Conservation of energy, technology absorption, foreign exchange earnings and outgo.
n. Risk management policy : → a statement indicating development and
implementation
o. Policy on Corporate Social Responsibility :→ initiatives taken during the year
p. Listed/ other public company having paid-up share capital Rs. 25 Crore or more shall
include statement of annual evaluation of the performance of the Board, its
Committees and of individual directors has been made.
q. Other details → As per Rule 8 of the Companies (Accounts) Rules, 2014 Board report
shall also contain-
i. Financial summary or highlights
ii. Change in nature of business
iii. Details of directors or KMP appointed or resigned during the
iiia. A opinion statement by the Board with regard to integrity, expertise and
experience of Independent directors appointed during the year.
iv. Name of companies joined or ceased to be its subsidiaries, joint ventures or
associate companies during the year.
v. Details of deposits :
a. Accepted during the year
b. Unpaid or unclaimed as at the end of the year
c. Default in repayment of deposits & interest thereon during the year if so
- Number of such cases
- Total amount involved at
- At beginning of the year
- Maximum during the year
- At the end of the year
vi. Details of deposits which are not in compliance with the requirements of chapter
V (Acceptance of Deposits by the Companies) of the Act.
vii. Details of significant and material orders :→ impacting Going Concern status
and operations in future.
viii. Details of adequacy of internal financial controls with reference to the Financial
Statement.
ix. Maintenance of Cost records U/s 148 of this act.

x. A statement : → Company has complied with provisions relating to the
constitution of Internal Complaints Committee under the Sexual Harassment of
Women at Workplace (Prevention, Prohibition and Redressal) Act 2013.
xi. the details of application made or any proceeding pending underthe
Insolvency and Bankruptcy Code, 2016 during the year along with their status
as at the end of the financial year.
XII. the details of difference between amount of the valuation done atthe time of
one time settlement and the valuation done while taking loan from the Banks
or Financial Institutions along with the reasons thereof.
Note :
 It is provided that where disclosures referred to above have been included in the financial
statement, such disclosures shall be referred to instead of being repeated in the Board’s report.
 Provided further that company’s policy
- On director’s appointment and remuneration and
- Corporate Social Responsibility made available on company’s website, if any
- it shall be sufficient compliance of the requirements under such clauses if the salient
features of the policy and any change therein are specified in brief in the Board’s report and
web address is indicated therein at which the complete policy is available.

Note: Rule 8 of Companies (Accounts) Rules, 2014 shall not apply to One Person
Company and Small Company.
Abridged Board’s report [Section 134 (3A)]
Central Government may prescribe an abridged Board’s report for

 Small company and
 One person company
Board’s Report in case of OPC [Section 134 (4)]
In case of OPC the report of the Board of Directors to be attached to the FS under this
section shall mean
- A report containing explanations or comments
- by the Board on every qualification, reservation or adverse remark or disclaimer
- Made by the auditor in his report.

Directors’ Responsibility Statement [Section 134 (5)]
The Directors’ Responsibility Statement referred to in 134 (3) (c) shall state that-
1. Accounting Standards have been followed → in preparation of the annual accounts
2. Director had
• Selected accounting policies and applied them consistently and
• Made judgements and estimates that are reasonable and prudent.
• So as to give a true and faire view of the state of affairs of the company and Profit
and loss of the company.
3. Directors had
• Taken proper and sufficient care for maintenance of accounting records
• Safeguarding the assets and
• Preventing and detecting fraud and other irregularities
4. Going concern has been followed in preparation of annual accounts.
5. Internal financial controls are adequate and operating effectively.
6. Director had
• Devised proper systems to ensure compliance with the provisions of all applicable
laws and
• That such systems were adequate and operating effectively.

Contravention [Section 134 (8)]
 Company : Rs. 3 lakhs

 Officer in default : Rs. 50,000

Corporate Social Responsibility [Section 135]
 The Companies Act, 2013 lays down the provisions requiring corporates to mandatorily spend a
prescribed percentage of their profits on certain specified areas of social upliftment in discharge of
their social responsibilities.
 Broadly, Corporate Social Responsibility (CSR) implies a concept, whereby companies decide to
contribute to a better society and a cleaner environment – a concept, whereby the companies
integrate social and other useful concerns in their business operations for the betterment of its
stakeholders and society in general.
 The provisions related with Corporate Social Responsibility has been enshrined under section 135
and Companies (Social Responsibility Policy) Rules, 2014.
 Note: On IFSC Public and Private Company section 135 shall not apply for the period of 5 years from
the commencement of business.

 Meaning of Corporate Social Responsibility (CSR) :
• Means the activities undertaken by company in pursuance of its statutory obligation laid down
in section 135 of the Act accordance with the previous contained in these rules but shall not
include following-
i. Activities undertaken in pursuance of normal course of business of the company.
• Provided that any company engaged in research and development activity of new
vaccine, drugs and medical devices in their normal course of business may undertake
research and development activity of newvaccine, drugs and medical devices related
to COVID-19 for financial years 2020-21, 2021-22, 2022-23 subject to the conditions
that
a. such research and development activities shall be carried out in collaboration
with any of the institutes or organizations mentioned in item (ix) of Schedule
VII to the Act
b. details of such activity shall be disclosed separately in the Annual report on CSR
included in the Board’s Report
ii. Any activity undertaken by company outside India.
• Except for training of Indian sports personnel representing any State or Union
Territory at national level or India at international level

iii. Contribution of any amount directly or indirectly to any political party under section 182
of the Act.
iv. Activities benefitting employees of the company as defined in clause (k) of section 2 of
the Code on Wages 2019.
v. Activities supported by companies on sponsorship basis for deriving marketing benefits
for its products or services.
vi. Activities carried out for fulfillment of any other statutory obligations under any law in
force in India.

Meaning of Corporate Social Responsibility
‘’Activities undertaken by company in pursuance of its statutory obligation laid down in section 135’’.
CSR shall not include following
Activities undertaken in normal course of business of the company
Activity undertaken by company outside India

Except: Training of Indian sports personnel representing any state/UT at national level or India at
International level
Contribution of any amount to any political party
Activities benefitting employees of company
Activities supported by companies on sponsorship basis for deriving marketing benefits
Activities carried out for fulfilment of any other statutory obligations under any law in force in
India
 Constitution of CSR Committee [Section 135 (1)] :
• Meaning [Rule 2(e)]: → The Corporate Social Responsibility Committee of the Board referred to in
section 135 of the Act .
• Companies Required to Constitute CSR Companies:

Every company having –
A. Net worth of Rs. 500 crore or more or
B. Turnover of Rs. 1000 crore or more or
C. A net profit of Rs. 5 crore or more
During the immediately preceding F.Y. shall constitute a CSR Committee of the Board.
• Rule 3(1) : →Every company including its holding or subsidiary and a foreign company having its
branch office or project office in India, which fulfils the above criteria shall comply with the
provisions of section 135 of the Act.
• (Newly Inserted Rule) Provided further that a company having any amount in its Unspent Corporate Social
Responsibility Account as per sub-section (6) of section 135 shall constitute a CSR Committee and comply with
the provisions contained in sub-sections (2) to (6) of the said section.
 Net worth, turnover or net profit of a foreign company shall be computed in accordance with the
balance sheet and profit and loss account prepared I accordance with the provisions section 381(1)
(a) and section 198 of Act.

• Meaning of Net worth for the purpose of • Meaning of Net Profit for the purpose of section
section 135 [Section 2(57)] → 135 [Explanation in section 135(5)] →
(+) Aggregate value of the
 paid-up share capital • Means the net profit of the company as per its
 All reserve created out of profit financial statement prepared in accordance with
 Securities premium account the applicable provisions of the act and calculated
 Debit or credit balance of profit and in accordance with the provisions of section 198
loss account but shall not include the following namely:-
(-) After deducting the aggregate value of
 Accumulated losses i. Any profit arising from any overseas branch(es)
 Deferred expenditure and of the company whether operated as separated
 Miscellaneous expenditure not company or otherwise and
written off
But does not include ii. Any dividend received from other companies in
 Reserve created out of revaluation of India which are covered under and complying
assets with the provisions of section 135 of Act.
 Writeback of depreciation and
amalgamation.
 Exclusion of Companies [ Rule 3 (2) of Companies (CSR) Rules ,2014] {Now this rule
is omitted as per Notification of MCA dated 20th September 2022}
• Every company which ceases to be a company u/s 135 (1) for 3 consecutive financial year shall
not required to –an
a. Constitute a CSR committee and
b. Comply with the provisions contained in sub section (2) to (6) till the time it meets the
criteria specified in section 135(1)
 Composition of CSR Committee
• CSR Committee of the board shall consist of three or more directors out of which at least one
director shall be an independent director.
• Where a company is not required to appoint an independent director, it shall have in its CSR
Committee two or more directors.
• Rule 5 (1) of the Companies (CSR) Rule 2014
The companies mentioned in the rule 3 shall constitute CSR Committee as under
i. Companies which are not required to appoint an independent director shall have its CSR
Committee without such director.
ii. A private company having only two directors on its Board shall constitute its CSR
Committee with two such directors.

iii. With respect to the Foreign company the CSR Committee shall comprise of at least two
persons of which one person shall be as specified under section 380 (1) (d) of the Act and
another person shall be nominated by the foreign company.
Composition of CSR Committee
Company required to Company not required Private Company

appoint Independent to appoint having only two Foreign Company
director Independent director directors
• CSR Committee shall

CSR Committee shall
consist at least 2 persons.
consist 3 or more
CSR Committee shall CSR Committee shall • Out of which one person
director out of which
consist 2 or more be constituted with shall be specified u/s 380
at least one director
directors two such directors (1) (b) and another person
shall be independent
shall be nominated by the
director
foreign company

 Disclosure of Composition of CSR Committee [Section 135 (2)] :
Board Report u/s 134 (3) shall disclose the composition of the Corporate Social Responsibility
Committee.
 Duties of CSR Committee [Section 135 (3)] :
The CSR Committee shall
a. Formulate and recommend to the Board a Corporate Social Responsibility Policy which shall
indicate the activities to be undertaken by the company.
b. Recommend the amount of expenditure to be incurred on the activities and
c. Monitor the CSR Policy of the company from time to time.
According to Rule 5 (2) of Companies (CSR) Rule 2014
The CSR Committee shall formulate and recommend to the Board an annual action plan in
pursuance of its CSR Policy, which shall include the following namely :-
a. List of CSR projects or programmes that are approved to be undertaken in areas or subjects
specified in Schedule VII of the Act.
b. The manner of execution of such projects or programmes.
c. The modalities of utilization of funds and implementation schedules for the projects or
programmes.
d. Monitoring and reporting mechanism for the projects or programmes and
e. Details of need and impact assessment if any for the projects undertaken by the company.
 Duties of the Board in Relation to CSR [Section 135 (4)] :
The board of company shall
a. After taking into account the recommendations made by CSR Committee
- approve the CSR Policy for the company
- Disclose contents of such policy in Board Report and
- Also place such it on the company ‘s website if any
In such manner as may be prescribe
b. Ensure that the activities as are included in CSR Policy of the company are undertaken by the
company.
Display of CSR activities on its website

Board of shall mandatorily disclose
- The composition of CSR Committee and
- CSR policy and Projects
Approved by the Board on their website if any for public access.

 Amount of Contribution toward CSR [Section 135 (5)] :
The Board shall ensure that-
• The company spends in every financial year at least 2% of average net profits of the
company made during the three immediately preceding financial year
or
• Where company has not completed the period of three financial year since its
incorporation then -
Net profits during such immediately preceding financial years shall be considered.
• The company shall give preference to the local areas around it where it operates for
spending the amount earmarked for Corporate Social Responsibility activities.
• If the company fails to spend such amount the Board shall in its report u/s 134 (3) (o)
- Specify the reasons for not spending the amount and
- Transfer unspent amount to Fund specified in Schedule VII within a period of six
months of the expiry of the financial year.
• If the company spends an amount in excess of the requirements provided under this sub-
section,
- Such company may set off such excess amount against the requirement to spend
under this sub section for such number of succeeding financial years and in such
manner as may be prescribed.
Summary of Section 135 (5)
Amount of Contribution Where to employee fund? Amount not spent Excess amount spent
• In every financial year at
least Preference should be give • Board shall give reason Set off for such number of
2% of average net to local area and areas to in Board Report U/s succeeding Financial Year
profit of immediately around it where company 134 (3) (o) and and in such manner as may
preceding 3 Financial operate. • Transfer unspent be prescribed
Year. amount to Fund
specified in Schedule VII
Or Within period of 6
months of the Expiry of
• Where company has not Financial Year.
completed 3 financial
year
Net profits during such
immediately preceding
financial years shall be
considered.

 Unspent amount relates to any ongoing projects [Section 135 (6)] :
If unspent amount relates to any ongoing projects –
• Shall be transferred by the company within a period of 30 days from the end of the financial
year
• in any schedule bank to be called Unspent Corporate Social Responsibility Account and
• Such amount shall be spent by the company in pursuance of its obligation towards the
Corporate Social Responsibility Policy
• In case of failure to spend company shall transfer same to a FUND specified in schedule VII
within period of 30 days form date of completion of 3rd Financial Year.
 Meaning of Ongoing Projects:

Means
A multi- year project undertaken by company in fulfilment of its CSR obligation having timelines
not exceeding 3 years excluding financial year in which it was commenced and shall include such
project was initially not approved as a multi- year project but whose duration has been extended
beyond 1 year by board based on reasonable justification.

Summary of Section 135 (6)
Unspent Unspent
amount of Transfer within 30 days Corporate Social
Ongoing from end of F.Y. Responsibility
project Account
In case of failure to spend

Spent such amount
Transfer same to a Fund
within a period of 3 F.Y.
specified in schedule VII
from date of such
within 30 days form the date
transfer
of completion of 3rd F.Y.

 CSR Expenditure [Rule 7 of Companies (CSR) Rules 2014] :
1. The board shall ensure that

o the administrative overheads shall not exceed five percent of total CSR expenditure of the
company for the financial year.
2. Any surplus arising out of the CSR activities
1. shall not form part of the business profit of a company and
2. shall be ploughed back into the same project or shall be transferred to the Unspent CSR
Account and spent in pursuance of CSR policy and annual action plan of the company or
transfer such surplus amount to a Fund specified in Schedule VII, within a period of six
months ofthe expiry of the financial year
3. Where a company spends an amount in excess of requirement provided under sub-section (5)
of section 135, such excess amount may be set off against the requirement to spend under
sub-section (5) of section 135 up to immediate succeeding three financial years subject to the
conditions that –
i. The excess amount available for set off shall not include the surplus arising out of the CSR
activities if any in pursuance of sub-rule (2) of this rule.
ii. The board shall pass a resolution to that effect.
 CSR Expenditure [Rule 7 of Companies (CSR) Rules 2014] :
4. The CSR amount may be spent by a company for creation or acquisitionof a capital asset,
which shall be held by –
a. a company established under section 8 of the Act, or a Registered Public Trust or
Registered Society, having charitable objects and CSR Registration Number under sub-rule
(2) of rule 4 or
b. beneficiaries of the said CSR project, in the form of self-help groups,collectives, entities or
c. a public authority
Provided that any capital asset created by a company prior to the commencement of the
Companies (Corporate Social Responsibility Policy) Amendment rules 2021 shall
- Within 180 days from such commencement comply with the requirements of this rule
- Which may be extended by a further period of 90 days with the approval of the Board based on
reasonable justification.

Summary of Rule 7
Administrative
Shall not exceed 5% of total CSR expenditure for the Financial Year
Overheads
• Shall not form part of business profit of company

• Shall be
Surplus arising out of
 Ploughed back into same project or
CSR activities
 Transferred to unspent CSR Account
 Transferred to Fund specified in schedule VII within 6 months of expiry of F.Y.
• The excess amount available for setoff shall not include the surplus arising out of the
Amount spent in excess
CSR activities
of requirements
• The board shall pass a resolution to that effect.
• CSR amount may be spent for creation/ acquisition of a capital asset

• Capital asset to be held by –
Amount spent on capital
a. Section 8 company or registered trust or society or
asset
b. Beneficiaries in form of self-help groups collectives, entities or
c. Public authority.

 Default in compliance of section 135(5) & 135 (6) :
 Company
o Twice the amount required to be transferred to Fund specified in Schedule VII/Unspent
Corporate Social Responsibility Account or
o Rs. 1 Crore
Which ever is less
 Officer in default
o 1/10th of the amount required to be transferred to Fund specified in Schedule VII/Unspent
Corporate Social Responsibility Account or
o Rs. 2 lakhs
Which ever is less
 Special Instructions of the Central Government[Section 135(8)]:
• The CG may give such general or special directions to a company or class of companies as it
considers necessary to ensure compliance of provisions of this section and such company or
class of companies shall comply with such directions.

 When it is not necessary to constitute a CSR Committee[Section 135(9)]:
o Where the amount to be spent by a company under section 135(5) shall not exceed Rs. 15 lakhs
o The requirement u/s 135(1) for constitution of CSR Committee shall not be applicable and
o The functions of such Committee shall be discharged by the Board of Directors of such company.
 CSR Implementation [Rule 4]:
1. The Board shall ensure that the CSR activities are undertaken by the company itself or through
a. a company established under section 8 of the Act, or a registered public trust or a
registered society, exempted under sub-clause (iv) (v) (vi) or (via) of clause (23C) of section
10 or registered under section 12A and approved under 80 G of the Income Tax Act, 1961,
established by the company, either singly or along with any other company or
b. a company established under section 8 of the Act or a registered trust ora registered
society, established by the Central Government or State Government or
c. any entity established under an Act of Parliament or a State legislature or
d. a company established under section 8 of the Act, or a registered public trust or a
registered society, exempted under sub-clause (iv) (v) (vi) or (via) of clause (23C) of section
10 or registered under section 12A and approved under 80 G of the Income Tax Act, 1961,
and having an established track record of at least three years in undertaking similar
activities
 For the purpose of clause (c) Entity means
- Statutory body constituted under an Act of Parliament or State Legislature to undertake
activities covered in schedule Vii of the Act.

2. (a) Every entity who intends to undertake any CSR activity shall register itself with Central
Government by Form CSR-1 with Registrar with the effect from 1st April 2021.
( This provision shall not affect any CSR projects or programmes approved prior to the 1st
April 2021).
(b) Form CSR-1 shall be signed and submitted electronically and shall be verified digitally by a
CA/CS/Cost accountant in Practice.
(c) Upon submission a unique CSR Registration Number shall be generated by system
automatically.
3. A company may engage international organizations for designing, monitoring and
evaluation of the CSR projects or programmes as per its CSR policy as well as for capacity
building of their own personnel for CSR.
4. A company may also collaborate with other companies for undertaking projects or
programmes or CSR activities in such a manner that the CSR committees of respective
companies are in a position to report separately on such projects or programmes in
accordance with these rules.
5. The Board of a company shall satisfy itself that the funds so disbursed have been utilized for
the purposes and in the manner as approved by it andthe Chief Financial Officer or the
person responsible for financial management shall certify to the effect.
6. In case of ongoing project, the Board of a Company shall monitor the implementation of the
project with reference to the approved timelines and year-wise allocation and shall be
competent to make modifications, if any, for smooth implementation of the project within
the overall permissible time period.
Meaning of International Organization :

Means
An organization notified by the Central Government as an international organization under section
3 of the United Nations (Privileges and Immunities) Act 1947 to which the provisions of the
Schedule to the said Act apply [Rule2(g)].

Summary of Rule 4
CSR activity can be taken by the

company itself or through
• A Section 8 company or
• Registered public trust or • A Section 8 company or
• A registered society • A Section 8 company • Registered public trust or
exempted Section 23 (c) or • exempted Section 23 (c)
Clause (iv) (v) (vi) or (via) • Any entity established Clause (iv) (v) (vi) or (via)
• registered trust or
registered under section under an Act of registered under section
• a registered society
12A and approved under Parliament or a state 12A and approved under
establish by the
80 G of the Income tax legislature 80 G of the Income tax Act
Central Government or
Act 1961, State Government 1961,
• establish by the company • And having established
either singly or along track record of at least 3
with any other company years in undertaking
similar activities.

Company
After submission of the
• Who intends
File E- Form CSR -1 E- Form CSR 1 Unique
to undertake To Registrar of
CSR Registration Number
any CSR Companies
shall be generated by the
activity
Shall be digitally system automatically
• Shall register
itself with CG. signed by A CA, CS
or Cost accountant
in practice
• A company may engage international organizations for

o designing, monitoring and evaluation
o Of the CSR Projects or Programmes
o As per its CSR policy as well as for Capacity building
• A company may collaborate with other companies for
o Undertaking projects or programmes or CSR activities
o In such manner that the CSR committees of respective companies can report separately on such
projects in accordance with these rules.

• Board of the company shall satisfy itself that
o Funds so disbursed have been utilized for the purpose and in manner as approved by it and
o The Chief Financial Officer or the person responsible for financial management shall certify to the
effect
• The Board of the company shall
o monitor the implementation of the project with reference to the approved timelines and year
wise allocation and
o Shall be competent to make modifications if any, for smooth implementation of the project
within the overall permissible time period.

 CSR Reporting [Rule 8]:
1. The Board's Report of a company covered under these rules pertaining to any financial year
shall include an annual report on CSR containing particulars specified in Annexure I or
Annexure II, as applicable.
2. In case of a foreign company, the balance sheet filed under clause (b) of sub-section (1) of
section 381 of the Act, shall contain an annual report on CSR containing particulars specified in
Annexure I or Annexure II, as applicable.
3. (a) Every company having average CSR obligation of ten crore rupeesor more in pursuance
of subsection (5) of section 135 of the Act, in the three immediately preceding financial
years, shall undertake impact assessment, through an independent agency, of their CSR
projects having outlays of one crore rupees or more, and which have been completed not
less than one year before undertaking the impact study.
(b) The impact assessment reports shall be placed before the Board and shall be annexed to
the annual report on CSR.
(c) A Company undertaking impact assessment may book the expenditure towards Corporate
Social Responsibility for that financial year, whichshall not exceed two percent of the
total CSR expenditure for that financial year or fifty lakh rupees, whichever is higher.

Summary of Rule 8
 Report on CSR
• Board’s Report pertaining to any financial year shall include annual report on CSR.
• In case of foreign company balance sheet shall contain an annual report on CSR.
 Impact Assessment- Requirement
Every company having For CSR projects having

average CSR obligation outlays of Rs.1 crore or
Shall undertake impact
of Rs. 10 Crore or More more and which have
assessment through an
in 3 immediately been completed not less
independent agency
preceding financial than 1 year before
years undertaking impact study.

 Report on Impact Assessment
• Impact assessment reports shall be placed before Board and shall be annexed to the
annual report on CSR.
 Impact Assessment Expenditure
• Impact assessment expenditure may be booked towards CSR,

• But it shall not exceed
o 2% of (Total CSR Expenditure for that F.Y.) or
o Rs. 50 lakh whichever is higher

 Activities specified under Schedule VII:
Activities which may be included by companies in their CSR Policies (i.e. Activitiesas specified under Schedule
VII) are as follows:
1. eradicating hunger, poverty and malnutrition, promoting health care including preventive health care and
sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government for the
promotion of sanitation and making available safe drinking water.
2. promoting education, including special education and employment enhancing vocation skills especially
among children, women, elderly, and the differently abled and livelihood enhancement projects.
3. promoting gender equality, empowering women, setting up homes and hostels for women and orphans;
setting up old age homes, day care centers and such other facilities for senior citizens and measures for
reducing inequalities faced by socially and economically backward groups.
4. ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare,
agroforestry, conservation of natural resources and maintaining quality of soil, air and water including
contribution to the Clean Ganga Fund set up by the Central Government for rejuvenation of river Ganga.
5. protection of national heritage, art and culture including restoration of buildings and sites of historical
importance and works of art; setting up public libraries; promotion and development of traditional arts and
handicrafts.

6. measures for the benefit of armed forces veterans, war widows and theirdependents, Central
Armed Police Forces (CAPF) and Central Para MilitaryForces (CPMF) veterans, and their dependents
including widows.
7. training to promote rural sports, nationally recognized sports, Paralympic sports and Olympic
sports.
8. contribution to the Prime Minister’s National Relief Fund or Prime Minister’s Citizen Assistance and
Relief in Emergency situations Fund (PM CARES FUND) any other fund set up by the Central
Government for socio-economic development and relief and welfare of the Scheduled Castes, Tribes,
other backward classes, minorities and women.
9. (a) Contribution to incubators or research development projects in the field of science, technology,
engineering and medicine, funded by Central Government or State Government or any agency or
Public Sector Undertaking of Central Government or State Government.
(b) contributions to public funded Universities; Indian Institute of Technology (IITs); National
Laboratories and Autonomous Bodies established under Department of Atomic Energy (DAE);
Department of Biotechnology (DBT); Department of Science and Technology (DST); Department
of Pharmaceuticals; Ministry of Ayurveda, Yoga and Naturopathy, Unani, Siddha and
Homoeopathy (AYUSH); Ministry of Electronics and Information Technology and other bodies,
namely DefenseResearch and Development Organization (DRDO);Indian Council of Agricultural
Research (ICAR); Indian Council of Medical Research (ICMR) Council of Scientific and Industrial
Research (CSIR), engaged in conductingresearch in science, technology, engineering and
medicine aimed at promoting Sustainable Development Goals (SDGs);

10. rural development projects.
11. slum area development. [For the purposes of this item, the term ‘slum area’ shall mean any area declared as
such by the Central Government or any State Government or any other competent authority under any law
for the time being in force.
12. disaster management, including relief, rehabilitation and reconstruction activities.
MCA has made a clarification via circulars that following shall be eligible CSR activity-
1. Spending of CSR funds for carrying out awareness campaigns/programmes or public

outreach campaigns on COVID -19 Vacation programme relation to promotion of health
care, including preventive health care and sanitization, promoting education and disaster
management.
2. Setting up makeshift hospitals and temporary COVID Care facilities relating to promotion of
health care, including preventive health care and disaster management.

MCA has made a clarification via circular dated 26th July 2022 that following shall be eligible
CSR activity-
1. Spending of CSR funds for activities related to ‘Har Ghar Tiranga ’ campaign under the ageis
of “Azadi ka Amrit Mahotsav” for mass scale production and Supply of the National Flag,
outreach and amplification efforts and other related activities are eligible CSR activities
under item no. (ii) of schedule VII of Companies Act, 2013 pertaining to promotion of
education relating to culture.

Copies of Audited
• Financial Statement
• Audit Report
• Other Document required by law to be annexed to F.S.
Must be sent to
Every trustee for Other Relevant

Every Member
debenture holder Persons
At least 21 days before General meeting

 Exception of the above provisions :
a. Company having share capital: If members forming majority and holding 95% or above voting
power agree for a shorter period.
b. Company not having share capital: If 95 % voting power agree for a shorter period.
* Financial statement so circulated shall be deemed to have duly sent.
 Listed Companies • if the copies of the documents are made available for inspection
• at its registered office during working hours for a period of not
less than 21 days before the date of the meeting
• Along with it a Statement containing the salient features of such

In the case of listed documents in the Form AOC-3 [AOC -3A for companies which are
company the required to comply with Companies (Indian Accounting
Standard) Rules 2015 ] or
provision 136(1) shall
be deemed to be • Copies of the documents as the company deem fir
complied with • and to every trustee for the holders of any debentures issued by
the company
Note
In case of section 8 Company • The statement is to be sent not less than 21 days before thedate
21 days shall be substituted of the meeting unless the shareholders ask for full financial
by 14 days. statements

 Manner of Circulation of financial statement in certain cases [Rule 11 of Companies (Account) Rules 2014]:
Circulation of Financial Statement by
Public Companies having

Listed Companies And
 Net worth more than 1 Crore and
 Turnover more than 10 Crore
in electronic mode in Physical mode
(1)
• to such members whose (2)
shareholding is in dematerialized • Where Shareholding is held
format otherwise than by dematerialized (3)
format,
And • In all other cases.
• Email ids are registered with • to such members who have
depository for communication positively consented in writing
purpose for receiving by electronic mode.

 Listed company shall also
• Place its financial statements including Consolidated Financial Statement if any and other
documents required to attach thereto
• On its website which is maintained by or on the behalf of company.
 Accounts of Subsidiaries of listed companies
Every listed company having a subsidiary or subsidiaries shall
(B)
• Provide a copy of separate audited or
(A) unaudited financial statements as case
Place separate audited accounts in may be
respect of each subsidiary on its • As prepared in respect of each of its
website if any subsidiary
• To any member of the company who
ask for it
Listed company having a foreign subsidiary or subsidiaries shall
• Where foreign subsidiary is not required

Where foreign subsidiary is statutorily to get its Financial Statement audited
required to prepare Consolidated Financial under any law of the country of its
Statement under any law of the country of incorporation and
its incorporation • Which does not get such financial
statement audited
• The holding Indian Listed company may

The requirement of this proviso shall be met if place such unaudited financial statement
on its website and
o consolidated financial statement of such • Where such financial statement is in
foreign subsidiary is placed on the website language other than English a translated
of the listed company copy of the financial statement in English
shall also be placed

In case of Nidhi Company Section 136(1) shall apply subject to following modifications
 Members who hold share (Individually or Jointly)

o More than Rs. 1000 /- of face value or
o More than 1% of total paid up share capital
Which ever is less
 It shall be sufficient compliance with the provision of this section if-

o Intimation is sent by public notice in Newspaper of that area where company has registered office
Stating- Date & Time venue of AGM and
o The financial statement with its enclosure
 can be inspected at registered office of the company and
 Are affixed in the notice board of the company
o A member is entitled to vote either in person or through proxy
 The company shall also allow every member or trustee of the debenture holder to inspect the audited
financial statement at its registered office during business hours.

Contravention Section 136 (3)
Company Officer in default
Rs. 25000/- Rs.5000/-

(i) Filing of Financial Statements [Section 137(1) & Rule 12 of Companies (Accounts) Rules 2014]
1. Every company shall file -
o Financial statement with → FORM AOC-4
o Consolidated Financial Statement with → FORM AOC-4 CFS
o Along with all documents required to be attached
o Duly adopted at the→ AGM
o To Registrar → within 30 days of the date of AGM
o Along with Fees or additional Fees
1A. Every Non Banking Financial Company (NBFC) required to comply with Indian Accounting
Standard (Ind-As) shall file-
o To registrar
o Its Financial Statement with → FORM AOC-4 NBFC (Ind AS)
o Consolidated Financial Statement with → FORM AOC-4 CFS NBFC (Ind AS)

As per Rule 1 of the Companies (Filing of Documents and Forms in Extensible Business Reporting
Language) Rules, 2015 -
Companies listed with Stock Exchange in India and

1 Indian Subsidiaries
Following class of companies 2 Having Paid-up Capital of Rs. 5 crore or more

shall file their -
o Financial Statement and
Other documents Having Turnover of Rs. 100 crore or more
3
o In E-Form → AOC 4 XBRL
o As per → Annexure -I
All companies which are required to prepare their
4 financial statements in accordance with Companies
(India Accounting Standards) Rules 2015

Provided
o Companies preparing their F.S. under the Companies (Accounting Standards) Rules 2006 Shall file
Statement using : → Taxaonomy provided in Annexure II
o Companies preparing their F.S. under the Companies (Accounting Standards) Rules 2015 Shall file
Statement using : → Taxaonomy provided in Annexure II A.
Provided further
following companies are exempted from filing of financial statement under this rule
1. Non Banking Financial companies (NBFC)
2. Housing Finance Company (HFC)
3. Banking Company
4. Insurance Company
Company (Accounts) Amendment Rules, 2022

1B. Every company covered under the provisions of sub-section (1) to section 135 shall
• Furnish a report on Corporate Social Responsibility in Form CSR-2 to the Registrar for the
preceding financial year (2020-2021) and
• onwards as an addendum to Form AOC-4 or AOC-4 XBRL or AOC-4 NBFC (Ind AS), as the
case may be.

Provided that for the preceding financial year (2020-2021), Form CSR-2 shall be filed separately
on or before 31st May 2022, after filing Form AOC-4 or AOC-4 XBRL or AOC-4 NBFC (Ind AS), as
the case may be.
2. Companies which have filed their financial statements under sub rule (1) erstwhile shall-
Continue to file their F.S. and other document
o Though they may not fall under the class of companies specified therein in succeeding years.

(ii) If the financial statement are not adopted [Section 137(1)]
a. Where the Financial Statement are not adopted at AGM or Adjourned AGM such
o Unadopted F.S. + other required documents
o Filed to → Registrar
o Within→ 30 days
b. Registrar shall take them in his records as Provisional till the F.S. are filed with him after their
adoption in the adjourned AGM for that purpose.
c. If the Financial Statement are adopted in the Adjourned AGM shall be
o Filed to → Registrar
o Within →30 days of date of such adjourned meeting
o With fees or such additional fees as may be prescribed
(iii) Filing by One Person Company [Section 137(1)]
One Person Company shall file

o Copy of its Financial Statements duly adopted by its member + other required documents
o Within → 180 days from closure of Financial year
o With prescribed fees.

(iv) Companies having subsidiaries [Section 137(1)]
Section 137 (1) (4)

o A company along with its Financial Statements attach the accounts of its subsidiary/subsidiaries
which have been incorporated outside India and not established their place of business in India.
o Provided further
 In the case of a subsidiary which has been incorporated outside India
 which is not required to get its financial statement audited under any law of the country of
its incorporation and
 Which does not get such financial statement audited then
 Holding Indian company may file such unaudited financial statement along with a
declaration to this effect and
 Where such financial statement is in a language other than English along with a translated
copy of the financial statement in English.

(v) Annual General Meeting not held [Section 137(2)]
Where the AGM of a company for any year has not been held
o Financial Statements + other required documents duly signed + statement of facts and reasons
for not holding the AGM
o Shall be filed with → Registrar within 30 days of the last date before which the AGM should
have been held
o With prescribed fees or additional fees as may be prescribed.
(vi) Penalty [Section 137(3)]
Person liable Penalty Failure continues Maximum

Company Rs. 10000/- Further penalty Rs. 200000/-
Officers- of Rs. 100 for Rs. 50000/-
• MD and CFO, if any each day after
• In their absence, other director charged by BoD the first during
with responsibility which failure
• In its absence, all the directors continues.

Summary of section 137 AGM
Held [137(1)] Not Held [137(2)]
[Copy of FS+CFS+ other Prescribed documents +

documents to be presented] : Statement of Facts & Reasons
Prescribed documents for not holding AGM
Adopted Not Adopted at AGM/ Adjourned AGM

File with ROC
Filed within 30 days of AGM to ROC

Filed with registrar Registrar takes them as Provisional in
within 30 days of the their records Within 30 days of the last date
date of AGM before which the AGM should
Further adopted in Adjourned AGM – have been held
filed with Registrar within 30 days of
the said meeting
Companies Required to appoint Internal Auditor
[Section 138 (1) & Rule 13 of Companies (Accounts) rules 2014]
All Listed Companies Unlisted Public Companies Private Company
o Paid up share capital (50 Crore or More

During P.F.Y)
o Turnover Rs. 200 crore or more
o Turnover Rs. 200 crore or more during P. F. Y
during P. F. Y
o Outstanding loan/borrowing from banks or
o Outstanding loan/borrowing
PFI exceeding Rs. 100 crore or more at any
from banks or PFI exceeding
point of time during P.E.Y
Rs. 100 crore or more at any
o Outstanding deposit Rs. 25 crore or more at
point of time during P.E.Y
any point of time during P.E.Y

 The Audit Committee/ Board shall in consultation with the Internal Auditor formulate
• The scope
• Functioning
• Periodicity and
• Methodology
For conduiting the internal audit
 Who is Internal Auditor ?
a. Internal Auditor shall either be

o A Chartered Accountant or
o A Cost Accountant or
o Other professional as decided by Board to conduct internal
audit.
b. The internal auditor may or may not be an employee of the

company

 Section 138 (2)
Central Government may by rules,
o prescribe the manner and the intervals In which the
o Internal audit shall be conducted and
o Reported to Board.
 Transitional Period
An existing company covered under any of the above criteria shall comply with the requirements
of section 138 and the this rule within 6 months of the commencement of such section.

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ACCOUNTS OF COMPANIES

Reopening and recasting of accounts on Relevant books &

Voluntary revision of accounts (Section 131) Financial Statement

CSR (Section 135)

Right of Members & Filing of Financial

Internal Audit (Section 138)

Every company shall

Includes records maintained in respect of –

CA DEEPIKA RATHI : CORPORATE LAW 3

CA DEEPIKA RATHI : CORPORATE LAW 4

CA DEEPIKA RATHI : CORPORATE LAW 5

Every company (including its branch/s) shall

Books of Accounts [Section 2(13)]

‘’Books and Paper’’ and ‘’Book or Paper [Section 2(12)]

CA DEEPIKA RATHI : CORPORATE LAW 9

CA DEEPIKA RATHI : CORPORATE LAW 10

CA DEEPIKA RATHI : CORPORATE LAW 11

Preservation of Books of Accounts :

CA DEEPIKA RATHI : CORPORATE LAW 12

Penalty for contravention:

CA DEEPIKA RATHI : CORPORATE LAW 13

Financial Statement is defined U/s 2(40) include

Profit and loss account or

Non applicability of section 129

CA DEEPIKA RATHI : CORPORATE LAW 15

CA DEEPIKA RATHI : CORPORATE LAW 16

 Financial Year means

CA DEEPIKA RATHI : CORPORATE LAW 17

CA DEEPIKA RATHI : CORPORATE LAW 18

The Financial Statement shall

CA DEEPIKA RATHI : CORPORATE LAW 19

Matters which are not required to be disclosed by the

Matters which are not required to be disclosed by the

Company governed Matters which are not required to be disclosed by that

CA DEEPIKA RATHI : CORPORATE LAW 20

• Where a company has one or more subsidiaries or associate companies, itshall,

CA DEEPIKA RATHI : CORPORATE LAW 21

CA DEEPIKA RATHI : CORPORATE LAW 23

• The Central Government may, on its own or on an application by a class or classes

CA DEEPIKA RATHI : CORPORATE LAW 24

CA DEEPIKA RATHI : CORPORATE LAW 25

Manner of consolidation of Accounts [Rule 6 of Companies (Accounts) Rules 2014]

CA DEEPIKA RATHI : CORPORATE LAW 26

Section 129 (5)

CA DEEPIKA RATHI : CORPORATE LAW 27

Section 129 (7) : Penal Provisions

CA DEEPIKA RATHI : CORPORATE LAW 29

CA DEEPIKA RATHI : CORPORATE LAW 30

o No order shallbe made under sub-section (1) in respect of re-opening of books

CA DEEPIKA RATHI : CORPORATE LAW 31

Central Income tax Statutory

To Court/ Tribunal to effect that

Pass order to revise/recast the accounts

 If it appears to the directors of a company that –

CA DEEPIKA RATHI : CORPORATE LAW 33

CA DEEPIKA RATHI : CORPORATE LAW 34

CA DEEPIKA RATHI : CORPORATE LAW 35

o Notify the CG & Income tax Authority