CS Siddhartha Banik

CS Siddhartha BanikOne of the various annual compliance activities of a company is to approve the financial statements of the Company by the Board of Directors of the Company before submission to the auditors of the Company for Audit.

The Board Report of the Company should also require to be approved by the Board of Directors of the Company before signing the same by the authorized signatories of the Company.

A Board can not delegate this power of approval of financials to any committee of Directors or Managing Directors or Manager or any principal officer of the Company.

This power should be exercised by convening and conducting a valid Board Meeting only.

In practical scenario Auditors are appointed in the AGM of the Company for whole financials year(In case of newly incorporated Company by the Board of Directors of the Company and this First Auditors should hold office till the next AGM) . They should conduct audit activities through-out the financial year. The meeting of the Board for approving the draft financials for approval of the Boards should be held after completion of Audit by the Auditors. After approval of draft financials by the Board it should be forwarded to the Auditors for their approval and signing.

As the Board report should be prepared based on the audited financial statements, as it contain board’s remarks of auditors qualification, it can be approved in the same or another meeting, but after finalizations and signing of audit report of the company only.

Filing of E-Form MGT-14:

A copy of every resolution, in respect of matters specified in sub-section (3) of section 179 together shall be filed with the Registrar within thirty days of the passing or making thereof through MGT-14 and with such fees as may be prescribed within 30 days of passing of the Resolution as specified under section 403.

Exemption to Private Limited Companies:

Under section 462 of Companies Act, 2013 The Central Government vide its notification dated 04th June 2015 exempted Private Limited Companies from filing of the above stated approval resolutions with the Registrar of Companies. However it is to be noted that this exemption is not applicable to a Private Limited Company subsidiary to a Public Limited Company. Also point to be noted that exemption is only for submission of this resolution only.

Secretarial Practice pertaining to approval of Draft Financial Statements, Board’s Report:

1. Send Notice of Board Meeting along with agenda of the meeting.

2. Conduct the Board Meeting validly and approve the Financials by passing resolution;

3. File MGT-14 within 30 days(Private Limited Company , not a subsidiary of Public Company can skip the filing);

4. Send the financials to the Auditors for their approval and signing;

5. Approve the Boards report in same meeting or another duly constituted Board Meeting;

6. Prepare and maintain minutes.

Can a Board Meeting for approval of financials be held through video conferencing?

For The approval of annual financials statements, approval of boards report should not be dealt with through video conferencing.

Specimen Resolution:

APPROVAL OF ANNUAL ACCOUNTS FOR THE FINANCIAL YEAR

 “RESOLVED THAT the draft balance sheet of the Company as at March 31, ____ and the profit and loss account of the Company for the year ended  as on the said date be and are hereby received , considered and approved and that the same be signed on behalf of the Board of Directors by Mr. ______ , Director,  Mrs. ______, Director  & Ms/Mr. _____ , Company Secretary and be submitted to the Auditors of the Company for their Report thereon.”

RESOLVED FURTHER THAT pursuant to provisions stipulated under sub section 3 of Section 179 of the Companies Act,2013 read with  Companies (Meetings of Board and its Powers) Rules, 2014, all the  directors of the Company be & is hereby severally authorized to file the resolution with the Registrar of Companies, __________ along with requisite e-Form.”

APPROVAL OF DRAFT DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ________

RESOLVED THAT the draft of the Directors’ Report for the year ended 31st March, _____, as submitted before the meeting, duly initialed by the Chairman of the Meeting for the purpose of identification, be and is hereby considered and approved by the Board and that the same be signed on behalf of the Board of Directors of the Company by Mr.  _____ , Director and  Mrs. ______, Director .

RESOLVED FURTHER THAT pursuant to provisions stipulated under sub section 3 of Section 179 of the Companies Act,2013 read with  Companies (Meetings of Board and its Powers) Rules, 2014, all the  directors of the Company be & is hereby severally authorized to file the resolution with the Registrar of Companies, __________ along with requisite e-Form.”

Penalty:

If a company fails to file the resolution the company shall be punishable with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default, including liquidator of the company, if any, shall be punishable with fine which shall not be less than one lakh rupees but which may extend to Five Lacks Rupees. 

Glossary of Terms:

Act: Here, ‘Act’ means Companies Act, 2013

Rules: ‘Rule’ here means rules made under the provisions of Companies Act, 2013;

Board: ‘Board’ here means Board of Directors of a Company;

(Author is Associated with ‘RRR Compliance Services (A division of PJ LAW SOLUTION) and can be reached at pj_law_solution@yahoo.in)

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Tags : Companies Act (1525) Companies Act 2013 (1279)

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