KEEPING BOOKS OF ACCOUNT AT A PLACE OTHER THAN THE REGISTERED OFFICE OF A COMPANY: COMPLIANCE AND PROCEDURE

In the realm of corporate governance, adherence to regulatory frameworks is paramount to ensure transparency and accountability. One such aspect governed by the Companies Act, 2013 is the maintenance of books of account at a designated place, which is typically the registered office of the company. However, there are provisions within the Act that allow for flexibility in this regard, provided certain conditions are met. This article delves into the nuances of Section 128(1) of the Companies Act, 2013, along with associated rules and procedures, outlining the process for keeping books of account at a location other than the registered office.

LEGAL FRAMEWORK AND GENERAL REQUIREMENTS:

Section 128(1) of the Companies Act, 2013 mandates that every company maintain its books of account, along with other relevant documents and financial statements, at its registered office. These records should accurately reflect the financial position of the company and must follow the principles of accrual accounting and double-entry system.

PROVISIONS FOR ALTERNATIVE LOCATIONS:

While the default requirement is to maintain records at the registered office, the Act provides flexibility through the first proviso to Section 128(1). This clause empowers the Board of Directors to decide to keep some or all of the books of account at a location other than the registered office within India.

PROCEDURE FOR COMPLIANCE:

The process for maintaining books of account at an alternate location involves several steps as outlined below:

Board Resolution:

The Board of Directors convenes a meeting or passes a resolution by circulation to authorize the selection of a location other than the registered office for maintaining the books of account. This resolution should specify the chosen address and the effective date of the decision.

Filing Notice with ROC:

Within seven days of passing the Board resolution, the company must file a notice of the selected address with the Registrar of Companies (ROC) in Form AOC-5. Along with the form, the company is required to submit certified true copies of the Board resolution and pay the requisite fees.

Post-Compliances:

Section 128(5) mandates that the books of account be preserved for a minimum period of eight financial years, or longer if directed by the Central Government in case of an investigation. Proper maintenance and preservation of records in good order is essential for regulatory compliance and audit purposes.

Documentary Requirements:

For filing the notice of the alternate address with the ROC, the company must submit Form AOC-5 along with certified true copies of the Board resolution authorizing the change.

DRAFTING BOARD RESOLUTION:

A sample resolution template is provided to guide companies in formalizing their decision to maintain books of account at an alternate location. The resolution should explicitly mention the authorization granted to specific individuals for filing necessary documents and undertaking related actions.

“RESOLVED THAT pursuant to the provisions of section 128 of the Companies Act, 2013 read with Rules made thereunder (including any statutory modification(s) or re-enactment thereof for the time being in force) consent of the Board of Directors of Company be and is hereby accorded for keeping and maintaining Books of Accounts of the Company at ___________ (address) along with registered office of the company with effect from ________ [DD/MM/YYYY];

FURTHER RESOLVED THAT Mr./Ms._________[name]__________ [director/ CFO/ CS] and Mr./Ms._________[name]__________ [director/ CFO/ CS] of the Company be and are hereby jointly/severally authorized to file the necessary documents/form(s) with the ROC and to do all such acts, deeds, matters and things as may be deemed necessary, desirable, proper or expedient for the purpose of giving effect to this resolution and for matters connected therewith or incidental thereto.”

TIMELINE FOR COMPLIANCE:

The entire process, from convening a Board meeting to filing the notice with the ROC, must be completed within the stipulated timeframe. Delays could lead to non-compliance and potential penalties.

CONCLUSION:

Compliance with the Companies Act, 2013 regarding the maintenance of books of account at an alternate location is crucial for companies seeking operational flexibility while ensuring regulatory adherence. By following the prescribed procedure and timelines, companies can navigate this aspect of corporate governance effectively. Proper documentation and record-keeping not only facilitate regulatory compliance but also enhance transparency and accountability in corporate operations.

In essence, the ability to maintain books of account at a place other than the registered office underscores the adaptability of corporate regulations to meet the evolving needs of businesses while upholding standards of financial integrity and transparency.

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Article Compiled by:-

Mayank Garg

(LegalMantra.net Team)

+91 9582627751

Disclaimer: Every effort has been made to avoid errors or omissions in this material in spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition In no event the author shall be liable for any direct indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information Many sources have been considered including Newspapers, Journals, Bare Acts, Case Materials , Charted Secretary, Research Papers etc.