By Lucy Rana and Rupin Chopra
The Ministry of Corporate Affairs (MCA) has recently issued a notification dated January 22, 2021, enforcing certain provisions of the Companies (Amendment) Act, 2020 pertaining to submission of financial statements by companies. Under Section 129(2) of the Companies Act, 2013 (Principal Act), the Board of Directors of a company have to submit the financial statement for the financial year at every Annual General Meeting (AGM) of such company.
Section 129A- Periodical Financial Results
The Amendment of 2020 inserts a new provision, i.e. Section 129A, which provides as under:
“129A. The Central Government may, require such class or classes of unlisted companies, as may be prescribed, — (a) to prepare the financial results of the company on such periodical basis and in such form as may be prescribed;
(b) to obtain approval of the Board of Directors and complete audit or limited review of such periodical financial results in such manner as may be prescribed; and
(c) file a copy with the Registrar within a period of thirty days of completion of the relevant period with such fees as may be prescribed.”
Hence, as per the new Section, in addition to annual submission of financial reports, certain unlisted companies have to prepare financial results of their respective companies on ‘periodic’ basis as per the Rules which is to be framed by the Ministry. Reportedly, such requirements may be similar to those which are followed by listed companies to generate interim financial results.
It is estimated that at present there are over 11 lakh unlisted companies active in operation in India. In the past there have been cases wherein unlisted companies have faced financial troubles with respect to financial updates regarding certain important unlisted companies. The new provision inserted by virtue of the Amendment Act of 2020 aims to improve corporate governance of certain class or classes of unlisted companies. Only certain unlisted companies are subject to the new amendment, and the criteria for deciding which classes of unlisted companies would have to submit their period financial results, is reportedly yet to be decided by the Ministry.
Vide notification No.S.O. 325(E)., dated 22ndJanuary, 2021
Section 25 of the Companies (Amendment) Act, 2020 (29 of 2020)