Tag Archives: financial statements

Key changes on Companies (Amendment) Ordinance, 2018

The Ministry of Corporate Affairs (the MCA) on 2 November 2018, has notified the Companies (Amendment) Ordinance, 2018 (Ordinance) in order to amend provisions under the Companies Act of 2013. The following are the major changes brought about by the ordinance.

  Provision Amendment
1. Section 10A

The Company incorporated after commencement of this Ordinance and having share capital shall not start business or borrow unless:

i.    The Director shall file declaration, within 180 days from date of incorporation of the Company with the Registrar that every subscriber to the company to the memorandum has paid the value of shares agreed to be taken by him.

ii.   The Company has filed verification of its registered office with the Registrar.

·   Any default with the above provisions will make the company liable for penalty to the tune of INR 50,000/- and every officer in default will be punishable for Rs. 1000/day up to maximum of INR 1,00,000/-.

·   Failure to file the declaration gives reasonable cause to the Registrar that the company is not carrying out is business and he can initiate action for removal of the name of company from register of companies.

2 Sub-section 9 to Section 12

Now empowers the Registrar to initiate action for removing the name of company from the register of companies, when it is found, on physical verification of registered office caused by the Registrar, that the company does not have a registered office capable of receiving and acknowledging all communications and notices on behalf of the Company.

3 sub-section (2) to Section 86

Penalizes anyone who wilfully supplies false or incorrect information or knowingly suppresses any material fact required to be register under Section 77 (Duty to register charges), and such person shall be liable for action under Section 447(Punishment for fraud).

Changes to provisions of Fines / Penalties / Adjudicating authority
4 Substitution of sub-section 5 of Section 92

The amended provision provides that if any company fails to file its annual return under sub-section (4), before the expiry of the period specified therein, such company and its every officer who is in default shall be liable to a penalty of INR 50,000/- and in case of continuing failure, with further penalty of one hundred rupees for each day during which such failure continues, subject to a maximum of INR 5,00,000/-

5 Substitution of Section 117(2)

In case of failure of a Company to file resolution with the time period (i.e. 300 days from the date of event), the Company shall be liable to a penalty of INR 1,00,000/- and in case of continuing failure, INR 500/- per day up to INR 25,00,000/- maximum, with the Officer in default (including the liquidator of the company) being penalized for INR 50,000/- and in case of continuing failure, INR 500/day up to INR 5,00,000/-. Subject to the maximum prescribed, the penalty for continued failure of INR 500/- per day has been introduced.

6 Substitution of sub-section 3 of Section 137

The old provision provided that if a Company fails to file financial statements with the Registrar it shall be punishable with fine from INR 1,00,000/- to INR 5,00,000/-. Such offence has firstly been made a penal provision and secondly, new penalty of INR 1,00,000/-and in case of continuing failure, with further penalty of INR 100/- for each day after the first during which such failure continues, subject to a maximum of INR 5,00,000/- has been inserted.  The provision for imprisonment has been done away with.

7 Sub-Section 2 of Section 157

If the company fails to furnish the Director identification Number, it shall be liable to penalty of INR 100/- per day for each day after the first during which such failure continues, subject to a maximum of  INR 1,00,000/-, and every officer of the company who is in default shall be liable to a penalty of not less than INR 25,000/- and in case of continuing failure, with further penalty of INR 100/- for each day after the first during which such failure continues, subject to a maximum of INR 1,00,000/-. Provisions for imposition of daily penalties of INR 100/- have been introduced.

8 sub-section (1) under Section 164

The new ground of disqualification of director: the amended provision provides that if a director does not comply with the number of directorships under Section 165(1) that is, maximum ten public companies and maximum twenty in other companies he/she shall suffer disqualification in accordance with section 164 of the Act.

9 Section 441 Compounding of Offences:

·  Firstly, the pecuniary jurisdiction of Regional Director for compounding of offence under section 441(1)(b) has been enhanced from INR 5,00,000/- to INR 25,00,000/- and

· Secondly, it has clarified that offences which are punishable with imprisonment only or with imprisonment and fine shall not be compounded.

10 Section 446B

The Amendment has provided lesser penalties for one-person companies or small companies i.e.  penalty which shall not be more than one half of the penalty specified for non-filing of annual return u/s 92(5), non-filing of resolutions u/s 117(2), and subsection 3 of Section 137 for filing of financial statements of foreign subsidiaries.


The Companies (Amendment) Ordinance, 2018


Authors: Ms. Ayushi Singh and Mr. Ashwin Bhat


Adoption of Indian Accounting Standards (Ind – AS)

The Ministry of Corporate Affairs (‘MCA’) has notified the mandatory adoption of Indian Accounting Standards (Ind-AS) by all companies other than Insurance Companies, Banking companies and Non-Banking Finance companies.

The roadmap of this pilot project is launched by the MCA is to ensure the applicability of The Companies (Indian Accounting Standards) Rules, 2015. The concept is to converge the Ind-AS with International Financial Reporting Standards (IFRS) with an aim to bring an analogical view of the financial statements aligning with global reporting standards prepared by Indian companies which do not require to comply with IFRS.

Vide press release dated 2 January, 2015, MCA notified the threshold and commencement of reporting periods which is as below :

Threshold First year of reporting
All Companies having net worth of Rs. 500 Cr Financial year beginning on or after 01 April 2016. (FY 2016-17)
Other companies whose equity and/or debt securities are listed or are in the process of being listed on any stock exchange in India or outside India* Financial year beginning on or after 01 April 2017. (FY 2017 – 18)
Unlisted companies having net worth of Rs. 250 crores or more but less than Rs. 500 crores.* Financial year beginning on or after 1 April 2017
* Including holding, subsidiary, joint venture or associate companies of such companies

The Roadmap for adopting the Ind-AS has some salient features as below :

  • Companies are also permitted to adopt Ind-AS voluntarily before the prescribed timelines;
  • The definition of “Net Worth” shall be read with as defined under the Companies Act, 2013. [i.e. aggregate of Paid up share capital (Both equity and preference) and all reserves excluding asset revaluation reserves, if any plus Balance in Profit and Loss Account and Securities premium Account less accumulated losses, deferred expenditure and Miscellaneous expenses to the expenses not written off; (Income Tax permits a company to write off 1/5th of the entire Preliminary expenses every year for the first five years)].
  • The applicable threshold of Net Worth shall be as at 31 March 2014 as per the audited Balance Sheet of the Company. However, if any company is crossing the threshold limit as on the given cut-off date then from the succeeding financial year the company has to mandatorily adopt the Ind-AS.
  • The adoption is irrevocable, ie. in any year if any company’s net-worth (both standalone or cumulative) goes below the prescribed limit, still the company has to prepare its financial statements applying with Ind-AS.
  • The adoption shall apply to both standalone and consolidation of financial statements for the companies. Companies having domestic subsidiaries, associates and JVs also need to mandatorily adopt the same irrespective of their nature and capital ownership. However subsidiaries, associates and JVs incorporated outside India are outside the ambit to adopt the Ind-AS as they have to prepare their books based on the requirements of their origin state.
  • Companies falling within the net worth thresholds as mentioned above (including their holding, subsidiary, joint venture or associate companies) shall not be required to prepare financial statements as per the Companies (Accounting Standards) Rules, 2006.
  • Companies applying Ind-AS to prepare Financial statements on 01 April, 2016 has to apply the requirements of Ind-AS for closure of Financial Year ending on 31 March 2017.
  • Indian companies having financial instruments abroad and revenue from contracts outside India has to apply the respective Ind-AS 109 & 115 ahead of the Global reporting period of those contracting states, i.e. beginning 01 January 2017 and 2018 for corresponding IFRS adoption of the respective states.
  • The adoption guidelines for Banking, Insurance and other Finance companies shall be published separately.