The Companies (Accounts) Amendment Rules, 2021:

MCA has vide its notification dated 24.03.2021, notified the Companies (Accounts) Amendment Rules, 2021.

Effective from the 1st day of April, 2021.

The analysis of amendment notification dated 24.03.2021 is as follows:

Amendment to Rule 3:

Post-Amendment, in Rule 3, in sub-rule (1) the proviso shall be inserted:

(1) The books of account and other relevant books and papers maintained in electronic mode shall remain accessible in India so as to be usable for subsequent reference.

Provided that for the financial year commencing on or after the 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 [i]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.

Amendment to Rule 8[ii]:

Post-Amendment, in rule 8, in sub-rule (5), after clause (X), two new clauses shall be inserted:

As per Rule 8 (5) In addition to the information and details specified in sub-rule (4), 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, covered under Chapter V of the Act,-

(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-

(i) At the beginning of the year;

(ii) Maximum during the year;

(iii) At the end of the year;

(vi) The details of deposits which are not in compliance with the requirements of Chapter V 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 under the Insolvency and Bankruptcy Code, 2016 (31 of 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 at the time of one time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof.

Accordingly, W.e.f. 1st day of April, 2021:

  • Every Company using accounting software shall use only such accounting software which has a feature of recording audit trail with edit log, ensuring that the audit trail cannot be disabled.
  • The report of the Board of Directors shall also contain two more disclosures as specified in sub rule 5 of rule 8.

[i] An audit trail is defined as a step-by-step sequential record which provides evidence of the documented history of financial transactions to its source. An auditor can trace the financial data of a particular transaction right from the general ledger to its source document with the help of the audit trail.

[ii] Rule 8 is not applicable to to One Person Company or Small Company.

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I am a member of The Institute of Company Secretaries of India, having experience in the field of Company Law, LLP Act, Foreign Exchange Management Act and other corporate laws. View Full Profile

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April 2021