Applicability of Internal Financial Control

Meaning of Internal Financial Control (IFC) as per Section 134(5) of the Act.

“Internal financial controls” means the policies and procedures adopted by the company for ensuring:

1. the orderly and efficient conduct of its business, including adherence to company’s policies,

2. the safeguarding of its assets,

3. the prevention and detection of frauds and errors,

4. the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information;

However, MCA vide its notification dated 13th June 2017 provide exemption from Internal Financial Controls to following private companies:

1. Which is one person Company (OPC) or a Small Company; or

2. Which has turnover less than Rs. 50 Crores as per latest audited financial statement or which has aggregate borrowings from banks or financial institutions or any body corporate at any point of time during the financial year less then Rs. 25 Crore.

Further, the above exemptions available to Private Company under section 143(3)(i) would be available only if private company has not committed a default in filing its financial statements under section 137 of the said Act or annual return under section 92 of the said Act with the ROC.

From Team Legalmantra