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Company Book-keeping Rule Tightened by MCA – Books of Account to be backed up on daily basis- Companies (Accounts) Fourth Amendment Rules, 2022

SHORT SUMMARY:

As per the MCA notification dated 05th August 2022 Government has notified the Companies (Accounts) Fourth Amendment Rules, 2022. As per the amended rules back-up of the books of account/other books & papers maintained in electronic mode, including at a place outside India, shall be kept in servers physically located in India on a daily basis.

Also Read: How to File Web Based form on V-3 Portal w.e.f. 31st August 2022

I. Provisions with Amendment in Rules and their impact: – (Amended part is highlighted)

Rule 3 of Companies (Accounts) Rules states about, 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 times so as to be usable for subsequent reference.

One can opine that According to the amendment books of account and books and papers if maintained in electronic mode (Like Tally, Buzy etc) should be available in India all the time.

{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 periodic basis daily basis.

One can opine that, according to this amendment Companies are required to take backup of the Books of Accounts and Book & papers on Daily basis if records are maintained in Electronic mode.

(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)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

One can opine that, according to this amendment Companies are required to give details in AOC-4 of person authorized in india for control of books of account and other books of papers maintained in electronic mode.

Corporates in India — especially multinational outfits operating here — can no longer decline real time access of their account books to government authorities because they are maintained in electronic mode under a “cloud” infrastructure with servers located outside India. The daily backups would have to be maintained in servers physically located in India.  

Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com).

Author Bio

CS Divesh Goyal is Fellow Member of the Institute of Companies Secretaries and Practicing Company Secretary in Delhi and Steering Voice in the Corporate World. He is a competent professional having enrich post qualification experience of a decade with expertise in Corporate Law, FEMA, IBC, SEBI, View Full Profile

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4 Comments

  1. Muncha says:

    There are many company in India on Cloud Finance. They are hosted outside India.. Does that mean they need to move to another ERP that needs to be hosted in India.. or daily backup of reports n the storage of invoice documents for reference can suffice..

        1. Indy says:

          You have to read the rule in totality as it is not separated into 2 requirements. “Provided that” is an exception to the first part. Therefore complete Backup on a daily basis is required only if the books of records are disposed of or rendered unusable. As long as books of records are not disposed of and are usable with access in India, the company will be compliant with the rule.

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