(1) Every company2(20) Company means a company incorporated under this Act or under any previous company law shall prepare and keep at its registered office books of account2(13) Books of Account includes records maintained in respect of—
(i) all sums of money received and expended by a company and matters in relation to which the receipts and expenditure take place;
(ii) all sales and purchases of goods and services by the company;
(iii) the assets and liabilities of the company; and
(iv) the items of cost as may be prescribed under section 148 in the case of a company
which belongs to any class of companies specified under that section and other relevant books and papers2(12) Books and papers include books of account, deeds, vouchers, writings, documents, minutes and registers maintained on paper or in electronic form and financial statement2(40) Financial Statement in relation to a company, includes—
(i) a balance sheet as at the end of the financial year;
(ii) a profit and loss account, or in the case of a company carrying on any activity not for profit, an income and expenditure account for the financial year;
(iii) cash flow statement for the financial year;
(iv) a statement of changes in equity, if applicable; and
(v) any explanatory note annexed to, or forming part of, any document referred to in sub-clause (i) to sub-clause (iv):
Provided that the financial statement, with respect to one person company, small company, dormant company and private company (if such private company is a start-up)may not include the cash flow statement;
Explanation. – For the purposes of this Act, the term ‘start-up’ or “start-up company” means a private company incorporated under the Companies Act, 2013 (18 of 2013) or the Companies Act, 1956 (1 of 1956) and recognised as start-up in accordance with the notification issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry. for every financial year2(41) Financial Year, in relation to any company or body corporate, means the period ending on the 31st day of March every year, and where it has been 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, in respect whereof financial statement of the company or body corporate is made up:
Provided that on an application made by a company or body corporate, which is a holding company or a 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 Tribunal may, if it is satisfied, allow any period as its financial year, whether or not that period is a year:
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
Provided also that in case of a Specified IFSC public company, which is a subsidiary of a foreign company, the financial year of the subsidiary may be same as the financial year of its holding company and approval of the Tribunal shall not be required.
Provided also that in case of a Specified IFSC private company, which is a subsidiary of a foreign company, the financial year of the subsidiary may be same as the financial year of its holding company and approval of the Tribunal shall not be required. which give a true and fair view of the state of the affairs of the company, including that of its branch office2(14) Branch Office, in relation to a company, means any establishment described as such by the company or offices, if any, and explain the transactions effected both at the registered office and its branches and such books shall be kept on accrual basis and according to the double entry system of accounting:
Provided that all or any of the books of account aforesaid and other relevant papers may be kept at such other place in India as the Board of Directors2(10) Board of Directors, in relation to a company, means the collective body of the directors of the company may decide and where such a decision is taken, the company shall, within seven days thereof, file with the Registrar2(75) Registrar means a Registrar, an Additional Registrar, a Joint Registrar, a Deputy Registrar or an Assistant Registrar, having the duty of registering companies and discharging various functions under this Act a notice Refer rule 2A of the Companies (Accounts) Rules, 2014. To view the rule,Click Here in writing giving the full address of that other place:
Provided further that the company may keep such books of account or other relevant papers in electronic mode in such manner as may be prescribed. Refer rule 3 of the Companies (Accounts) Rules, 2014. To view the rule,Click Here
(2) Where a company has a branch office in India or outside India, it shall be deemed to have complied with the provisions of sub-section (1), if proper books of account relating to the transactions effected at the branch office are kept at that office and proper summarised returns periodically are sent by the branch office to the company at its registered office or the other place referred to in sub-section (1).
(3) The books of account and other books and papers maintained by the company within India shall be open for inspection at the registered office of the company or at such other place in India by any director during business hours, and in the case of financial information, if any, maintained outside the country, copies of such financial information shall be maintained and produced for inspection by any director subject to such conditions as may be prescribed: Refer rule 4 of the Companies (Accounts) Rules, 2014. To view the rule,Click Here
Provided that the inspection in respect of any subsidiary company2(87) Subsidiary Company or Subsidiary, in relation to any other company (that is to say the holding company), means a company in which the holding company—
(i) controls the composition of the Board of Directors; or
(ii) exercises or controls more than one-half of the total voting power either at its own or together with one or more of its subsidiary companies:
Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed.
Explanation.—For the purposes of this clause,—
(a) a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company;
(b) the composition of a company’s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors;
(c) the expression “company” includes any body corporate;
(d) “layer” in relation to a holding company means its subsidiary or subsidiaries. of the company shall be done only by the person authorised in this behalf by a resolution of the Board of Directors.
(4) Where an inspection is made under sub-section (3), the officers2(59) Officer includes any director, manager or key managerial personnel or any person in accordance with whose directions or instructions the Board of Directors or any one or more of the directors is or are accustomed to act and other employees of the company shall give to the person making such inspection all assistance in connection with the inspection which the company may reasonably be expected to give.
(5) The books of account of every company relating to a period of not less than eight financial years immediately preceding a financial year, or where the company had been in existence for a period less than eight years, in respect of all the preceding years together with the vouchers relevant to any entry in such books of account shall be kept in good order:
Provided that where an investigation has been ordered in respect of the company under Chapter XIV, the Central Government may direct that the books of account may be kept for such longer period as it may deem fit.
(6) If the managing director2(54) Managing Director means a director who, by virtue of the articles of a company or an agreement with the company or a resolution passed in its general meeting, or by its Board of Directors, is entrusted with substantial powers of management of the affairs of the company and includes a director occupying the position of managing director, by whatever name called.
Explanation.—For the purposes of this clause, the power to do administrative acts of a routine nature when so authorised by the Board such as the power to affix the common seal of the company to any document or to draw and endorse any cheque on the account of the company in any bank or to draw and endorse any negotiable instrument or to sign any certificate of share or to direct registration of transfer of any share, shall not be deemed to be included within the substantial powers of management., the whole-time director2(94) Whole-time director includes a director in the whole-time employment of the company in charge of finance, the Chief Financial Officer 2(19) Chief Financial Officer means a person appointed as the Chief Financial Officer of a company or any other person of a company charged by the Board with the duty of complying with the provisions of this section, contravenes such provisions, such managing director, whole-time director in charge of finance, Chief Financial officer or such other person of the company shall be punishable with imprisonment for a term which may extend to one year orOmitted vide Companies (Amendment) Act, 2020 dated 28.09.2020 with effect from 21.12.2020. To view the Act, Click Here. To view the commencement notification, Click Here. with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees or with both.Omitted vide Companies (Amendment) Act, 2020 dated 28.09.2020 with effect from 21.12.2020. To view the Act, Click Here. To view the commencement notification, Click Here.
9.1.3-Companies (Accounts) Rules,2014
3. Manner of books of account to be kept in electronic mode.-
(1) The books of account and other relevant books and papers maintained in electronic mode shall remain accessible in India, at all timesSubstituted vide Notification dated 05.08.2022 regarding Companies (Accounts) Fourth Amendment Rules, 2022. To view the Notification, Click here accessible in India so as to be usable for subsequent reference.
Provided thatInserted vide Companies (Audit and Auditors) Amendment Rules, 2021 dated 24.03.2021. To view the notification, Click Here for the financial year commencing on or after the 1st day of April, 2023Substituted vide Companies (Accounts) Second Amendment Rules, 2022 notification dated 31.03.2022. To view the notification, Click Here1st day of April, 2022Substituted vide Companies (Accounts) Second Amendment Rules, 2021 notification dated 01.04.2021. To view the notification, Click Here 1st day of April, 2021, every company which uses accounting software for maintaining its books of account, shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.
(2) The books of account and other relevant books and papers referred to in sub-rule (1) shall be retained completely in the format in which they were originally generated, sent or received, or in a 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 shall be 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 storage, retrieval, display or printout of the electronic records as the Audit Committee, if any, or the Board may deem appropriate and such records shall not be disposed of or rendered unusable, unless permitted by law:
Provided that the back-up of the books of account and other books and papers of the company maintained in electronic mode, including at a place outside India, if any, shall be kept in servers physically located in India on a daily basisSubstituted vide Notification dated 05.08.2022 regarding Companies (Accounts) Fourth Amendment Rules, 2022. To view the Notification, Click here periodic basis.
(6) The company shall intimate to the Registrar on an annual basis at the time of filing of financial statement-
(a) the name of the service provider;
(b) the internet protocol 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 maintained on cloud, such address as provided by the service provider.
(e)Inserted vide Notification dated 05.08.2022 regarding Companies (Accounts) Fourth Amendment Rules, 2022. To view the Notification, Click here 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.
Explanation.- For the purposes of this rule, the expression “electronic mode” includes “electronic form” as defined in clause (r) of sub-section (1) of section 2 of Information Technology Act, 2000 (21 of 2000) and also includes an electronic record as defined in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000) and “books of account ” shall have the meaning assigned to it under the Act.
9.1.4-Companies (Accounts) Rules,2014
4. Conditions regarding maintenance and inspection of certain financial information by directors.-
(1) The summarised returns of the books of account of the company kept and maintained outside India shall be sent to the registered office at quarterly intervals, which shall be kept and maintained at the registered office of the company and kept open to directors for inspection.
(2) Where any other financial information maintained outside the country is required by a director, the director shall furnish a request to the company setting out the full details of the financial information sought, the period for which such information is sought.
(3) The company shall produce such financial information to the director within fifteen days of the date of receipt of the written request.
(4) The financial information required under sub-rules (2) and (3) shall be sought for by the director himself and not by or through his power of attorney holder or agent or representative.
4A. Forms and items contained in financial statements.Inserted vide Companies (Accounts) Second Amendment Rules, 2015. To view the notification,Click Here
The financial statements shall be in the form specified in Schedule III to the Act and comply with Accounting Standards or Indian Accounting Standards as applicable:
Provided that the items contained in the financial statements shall be prepared in accordance with the definitions and other requirements specified in the Accounting Standards or the Accounting Standards or the Indian Accounting Standards, as the case may be.
Rule 2A -Companies (Accounts) Rules,2014
2A. Notice of address at which books of account are to be maintained. Inserted by the Companies (Accounts) Amendment Rules, 2015 notification No. G.S.R. 37 (E) dated 16th January, 2015. To view the notification,Click Here
For the purpose of the first proviso to sub-section (1) of section 128, the notice regarding address at which books of account may be kept shall be in Form No. AOC-5. This form has been revised vide MCA notification dated 20.01.2023. To view the Notification, Click here. To view the revised form, Click here. To view the return,Click Here
Commencement Notification under Companies (Amendment) Act, 2020 dated 21.12.2020
Companies (Accounts) Amendment Rules, 2015 [GSR 37(E)] dated 16/01/2015
Companies (Accounts) Amendment Rules, 2021 [S.O.205(E)] dated 24.03.2021
Companies (Accounts) Amendment Rules, 2024 dated 24.09.2024
Companies (Accounts) Second Amendment Rules, 2015 dated 04/09/2015
Companies (Accounts) Second Amendment Rules, 2021 [G.S.R.247(E)] dated 01.04.2021
Companies (Accounts) Second Amendment Rules, 2024 dated 31.12.2024
Companies (Amendment) Act, 2020 dated 28.09.2020
Enforcement Notification S.O. 902(E) dated 26/03/2014
MCA Notification dated 20.01.2023 regarding the Companies (Accounts) Amendment Rules, 2023.
Notification on Companies (Accounts) Amendment Rules, 2020 dated 30.01.2020
Form AOC 5 substituted vide Companies (Accounts) Amendment Rules, 2023.
Form No. AOC 5