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The Ministry of Corporate Affairs (MCA) has notified most of the sections and has also issued the Final Rules for the notified sections to largely operationalise the Companies Act 2013 (2013 Act). The …
The Ministry of Corporate Affairs (MCA) has notified most of the sections and has also issued the Final Rules for the notified sections to largely operationalise the Companies Act 2013 (2013 Act). The MCA has issued General Circular 08/2014 dated 4 April 2014 (see attached) to provide clarification on the applicable financial year for commencement of provisions of the 2013 Act with regard to maintenance of books of accounts and preparation, adoption and filing of financial statements, auditor’s report, Board's report and attachments to such statements and reports.
Over 180 sections of the 2013 Act have a commencement date of 1 April 2014 including sections related to maintenance of books of accounts, preparation of Board Report, financial statement preparation, audit among others. However, there was no clarity as to whether or not this should be interpreted as financial years commencing from 1 April 2014.
This led to a dilemma for companies as they prepared to close the financial year ended 31 March 2014 and start their planning for preparation of their annual report, whether they should continue to follow the requirements of Companies Act 1956 (1956 Act) or adopt the now effective sections of the 2013 Act.
The MCA has issued a timely clarification stating that financial statements (and documents required to be attached thereto), auditors’ report and Board's report in respect of financial years that commenced earlier than 1 April 2014 shall be governed by the relevant provisions, schedules, rules of the 1956 Act.
The MCA’s clarification in respect of applicable financial year for commencement of certain provisions of the 2013 Act is a welcome move and will provide more clarity to companies in compliance with the applicable provisions of the 2013 Act. It will also provide time to companies in gearing up to adopt the requirements of the 2013 Act relating to these sections.