Every company shall maintain and keep the books of account and papers and financial statement (FS) at its registered office for every financial year which give a true and fair view of
- The state of the affairs of the company,
- Including that of its branch office, if any, and
- Explain the transactions entered between the registered office and its branches and
Such books shall be kept according to the double-entry system of accounting and on an accrual basis:
Provided that all or any of the books of account and papers aforesaid, may be kept at such other place in India as the BODmay decide, the company shall, within 7 days thereof, file a notice in writing giving the full address of that other place with the Registrar:
Provided further that the company may maintain such books of account or other relevant papers in electronic mode (E-MODE) in such manner as may be prescribed.
Manner to kept Books of Account in Electronic Mode
(1) Shall remain accessible in India,
(2) Shall be retained/preserved completely in the format in which they were originally prepared, sent, or received,
(3) The information received from branch offices shall not be altered and shall be kept in a manner where it shall represent what was originally received from the branches.
(4) The document shall be capable of being displayed in a legible form.
(5) There shall be a proper system for retrieval, display, storage, or printout of the electronic records.
Provided that the back-up (reserve) of the books of account and papers of the company maintained in electronic mode, including at a place outside India, if any, shall be kept in servers periodically which are physically located in India.
(6) The company shall intimate at the time of filing of financial statement to the Registrar on an annual basis-
- The name of the service provider;
- The internet protocol address (IP) of the service provider;
- The location of the service provider;
- Where the books of accounts and papers are maintained on the cloud, such addresses as provided by the service provider.
Maintenance of books of accounts outside India
Where a company has a branch office outside India or in India, it shall be deemed that the company has complied with the provisions of Section 128, if proper books of account relating to the transactions entered the branch office are kept at that office and proper summarized returns periodically are sent by the branch office to the company at its registered office or the other place.
Inspection of Books of Account
The books of account and papers shall be open for inspection which is maintained by the company within India: –
- at the office registered with ROC or
- at such other place in India authorized by the director during business hours, and
In the case of financial information, if any, maintained outside the India, copies of such financial information shall be maintained and produced for inspection by any director subject to such conditions as may be prescribed:
Provided that in the case of inspection of any subsidiary company, it shall be done only by the person authorized by a resolution passed by the Board of Directors (BOD).
Where an inspection is made, the officers and other employees of the company shall give all assistance in respect with the inspection to the person making such inspection, which the company may reasonably be expected to give.
The period for maintenance of records
The books of account of every company shall be maintained/preserve for a period not less than 8 financial years, and such books of account shall be kept in good order, in respect of all the preceding years together with the vouchers relevant to any entry.
Provided that where an investigation has been ordered in respect of the company under Chapter XIV (Section 206-229), the Central Government may direct that the books of account may be kept for such a long period as it may deem fit.
Punishment
If the MD, WTD, CFO, or any other person of a company charged by the Board, fails to comply with the provisions of section128 and contravenes such provisions, then such
- managing director (MD),
- whole-time director in charge of finance (WTD),
- Chief Financial officer (CFO) or
- such other person of the company
Shall be punishable with imprisonment for a term
- This may extend to1 year or
- With fine which shall not be less than 50,000 rupees but
- Which may extend to 5 lakh rupees or with both.
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Posted by:
CS Neetu Saini
AKGVG & Associates