Copies of Financial Statements – post 9th February 2018


The Companies Amendment Act, 2017 read with notification dated 9th February 2018 amended law related to the rights of a member to copies of audited financial statements under Section 136 of the Companies Act, 2013. Section 136, in its original form, as applicable from 1st April 2014 until 8th February 2018. We shall discuss amended section 136 here.

Deletion of opening words

“Without prejudice to the provisions of section 101”, was opening words in the original section which was deleted by the Companies Amendment Act, 2017. Section 101 deals with the notice. Both sections practically need simultaneous compliance for practical reasons. Copies of financial statements along with other documents usually send with notice of Annual General Meeting, hence need to comply together. [Section 38(i) of the Companies (Amendment) Act, 2017]

Documents with Financial statements

Such financial statement shall include

  • consolidated financial statements, if any,
  • auditor’s report, and
  • every other document required by law to be annexed or attached to the financial statements. [Section 136(1)]

Entitlement to receive

A copy of financial statements to be laid before its general meeting (read annual general meeting) shall be sent:

  • to every member of the company,
  • to every trustee for the debenture-holder of any debentures issued by the company, and
  • to all persons being the person so entitled. [Section 136(1)]

The period

The copy shall be sent not less than twenty-one days before the date of the meeting. [Section 136(1)]

In case of Section 8 companies, the period of 21 days shall be read as 14 days. [Notification G.S.R. 466(E) dated 5th June 2015]

Shorter period

This is certainly new provision as there is no shorter period for copies of financial statements but for notice of general meeting.

If the copies of the documents are sent less than twenty-one days before the date of the meeting, they shall be deemed to have been duly sent if it is so agreed by members—

(a) holding, if the company has a share capital, majority in number entitled to vote and who represent not less than ninety-five percent if such part of the paid-up share capital of the company as gives a right to vote at the meeting; or

(b) having, if the company has no share capital, not less than ninety-five percent of the total voting power exercisable at the meeting. [Newly inserted First Proviso to Section 136(1)]

Relaxation for Listed Companies

A listed company has an option to made available copies of these documents for inspection at its registered office during working hours for a period of twenty-one days before the date of the meeting. While exercising this option, a statement containing the salient features of such documents in the prescribed form shall be sent to each person entitled to receive these documents. Such documents shall be sent company not less than twenty-one days before the date of the meeting. Shareholders have right to ask full financial statement, in such case. [Now, second proviso of Section 136(1)]

The statement containing features of documents referred to in the first proviso [Now Second; need amendment in rules] to sub-section (1) of section 136 shall be in Form AOC-3. [Rule 10 of the Companies (Accounts) Rules, 2014].

A company which is required to comply with Companies (Indian Accounting Standards) Rules, 2015 shall forward their statement in form AOC-3A. [First Proviso to Rule 10 of the Companies (Accounts) Rules, 2014 inserted by the Companies (Accounts) Amendment Rules, 2018 with effect from 27th February 2018]

Circulation of copies

The Central Government may prescribe the manner of circulation of financial statements of companies having such net worth and turnover as may be prescribed. [Now, the third proviso of Section 136(1)]

In case of all listed companies and such public companies which have a net worth of more than one crore rupees and turnover of more than ten crore rupees, the financial statements may be sent-

(a) by electronic mode to such members whose shareholding is in dematerialised format and whose email Ids are registered with Depository for communication purposes;

(b) where Shareholding is held otherwise than by dematerialised format, to such members who have positively consented in writing for receiving by electronic mode; and

(c) by the despatch of physical copies through any recognised mode of delivery as specified under Section 20 of the Act, in all other cases. [Rule 11 of the Companies (Accounts) Rules, 2014]

Rule 11 seems to be the matter of duplication with Section 20. However, this Rule made electronic mode compulsory for shareholders holding shares in Dematerialised Form.

Placing on Website

A listed company shall also place its financial statements including consolidated financial statements if any, and all other documents required to be attached thereto, on its website, which is maintained by or on behalf of the company. [Now, 4th Proviso to Section 136(1)]

Accounts of Subsidiaries of Listed companies

Every listed company having a subsidiary or subsidiaries shall place separate audited accounts in respect of each of subsidiary on its website if any. [Now, 5th Proviso to Section 136(1) substituted for what was 4th proviso earlier]

Accounts of Foreign Subsidiary of Listed companies

A subsidiary incorporated outside India is called “foreign subsidiary” for the purpose of this proviso. [Now 6th Proviso to Section 136(1) substituted for what was 5th proviso earlier]

Consolidated Financial Statements

Where a foreign subsidiary is statutorily required to prepare consolidated financial statement under any law of the country of its incorporation, consolidated financial statement of such foreign subsidiary shall be placed on the website of the holding Indian listed company. [Now clause (a) of 6th Proviso to Section 136(1) substituted for what was 5th proviso earlier]

Unaudited financial statements

Where a foreign subsidiary 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, the holding Indian listed company may place such unaudited financial statement on its website. Where such financial statement is in a language other than English, a translated copy of the financial statement in English shall also be placed on the website. [Now clause (b) of 6th Proviso to Section 136(1) substituted for what was 5th proviso earlier]

Inspection

A company shall allow every member or trustee of the holder of any debentures issued by the company to inspect the documents stated under sub-section (1) at its registered office during business hours. [Section 136(2)]

Copy of financial statements of subsidiaries

Every company having a subsidiary or subsidiaries shall provide a copy of separate audited or unaudited financial statements, as the case may be, as prepared in respect of each of its subsidiary to any member of the company who asks for it. [newly inserted proviso to Section 136(2)]

Penalty

If any default is made in complying with the provisions of this section, the company shall be liable to a penalty of twenty-five thousand rupees and every officer of the company who is in default shall be liable to a penalty of five thousand rupees.

Advertisements

No professional query in comments (but in mail). Only academic discussion here. Comments moderated. Sometime, reply to your mail ID. To subscribe blog, check homepage.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s