VOLUNTARY REVISION OF FINANCIAL STATEMENTS OR BOARD’S REPORT UNDER NEW COMPANY LAW

[Dr. Sanjiv Agarwal]

Statutory Provision (Section 131)

 If it appears to the directors of a company that -

a)    the financial statement of the company; or

b)    the report of the Board,

do not comply with the provisions of section 129 or section 134 they may prepare revised financial statement or a revised report in respect of any of the three preceding financial years after obtaining approval of the Tribunal on an application made by the company in such form and manner as may be prescribed and a copy of the order passed by the Tribunal shall be filed with the Registrar.      

However, the Tribunal shall give notice to the Central Government and the Income- tax authorities and shall take into consideration the representations, if any, made by that Government or the authorities before passing any order under this section such revised financial statement or report shall not be prepared or filed more than once in a financial year. The detailed reasons for revision of such financial statement or report shall also be disclosed in the Board's report in the relevant financial year in which such revision is being made.

Where copies of the previous financial statement or report have been sent out to members or delivered to the Registrar or laid before the company in general meeting, the revisions must be confined to -

a)    the correction in respect of which the previous financial statement or report do not comply with the provisions of section 129 or section 134; and

b)    the making of any necessary consequential alternation.

The Central Government may make rules as to the application of the provisions of this Act in relation to revised financial statement or a revised director's report and such rules may, in particular -

a)    make different provisions   according   to which   the previous financial statement or report are replaced or are supplemented by a document indicating the corrections to be made;

b)    make provisions with respect to the functions of the company's  auditor in relation to the revised financial statement or report;

(c) require the directors to take such steps as may be prescribed.

Background

There was no corresponding provision in The Companies Act, 1956 and section  131 is a new provision which allows the directors to prepare revised financial statement or a revised Board’s report if it appears to them that the company’s financial statement or the Board’s Report did not comply with the requirement of section  129 or section  134, after obtaining approval of the Tribunal. Tribunal shall take into account the representations ,if any, of the Central Government and of the Income Tax Department. Such revised financial statements or report shall not be prepared or filed more than once in financial year. Further, where copies of financial statements or report has been sent out to members or delivered to registrar or laid before general meeting, the revisions must be confined to specified limits provided in the section. Such revised financial statement or report shall be subject to rules prepared by Central Government.

Revision of Financial Statements

It provides for provisions relating to revision of financial statements or board report by the Board of Directors. Accordingly,

The Directors of a Company on their own may prepare revised financial statements or a revised Board's Report in respect of any of the three preceding financial years after obtaining approval of the Tribunal on an application made by the Company in prescribed form and manner, if it appears to them that -

a)  financial statements of the Company; or

b)  the Report of the Board, does not comply with the provisions of section  129 related to financial statements or section  134 related to financial statements /Boards Report.

However, to revise such documents, following conditions or compliances need to be observed:

i)   Company has to make an application for intended revision to the Tribunal in prescribed form and manner.

ii)  The Tribunal before allowing for such revision of financial statements shall give notice to the Central Government and the Income-tax authorities and shall take into consideration the representations, if any, made by that Government or the authorities. The section mentions only income tax authorities.

iii)   A copy of the order passed by the Tribunal shall be filed with Registrar.

iv)  Such revision in financial statements or report cannot be prepared or filed more than once in a financial year.

v)  The detailed reasons for revision of such financial statements or report shall be disclosed in the Board’s report in the relevant financial year in which such revision is being made.

Scope of Revision

The section  specifically provides that where copies of the previous financial statements or board report have been sent out to members or delivered to the Registrar or laid before the Company in general meeting, the revisions must be confined to –

a)  the correction in respect of which the previous financial statements or board report which do not comply with the provisions of section 129 or section  134, and

b)  the making of any necessary consequential alternation.

Rules to be Prescribed

Rules shall be prescribed separately in relation to the following after enactment of Companies Bill, 2012 –

a)    For application of provisions of the Act in relation to revised financial statement or revised director's report.

b)    Form and manner of application, which is to be made to the Tribunal, for voluntary revision of financial statements or Board's report.

c)    Rules according to which the previous financial statement or report are replaced or supplemented by a document reflecting the corrections made.

d)    Rules stipulating functions of company auditor in relation to revised financial statement or board report.

e)   Steps, which the directors are required to take regarding revision of financial statements or Board's report, in the Rules made by Central Government, may be prescribed.