19 February 2009
Sl. Provisions of the Companies Act,1956 The inconsistency 1 209(4A) Preservation of Books of accounts: The books of Accounts need to be preserved for a period of eight years as per Section 209(4A) of the Companies Act, 1956 ( the Act). In the case of a Section 25 Company, Central Government has granted exemption in this regard and that such a Company ( Section 25 Company) is required to preserve Books of Accounts for a period four years instead of eight years (S.O. no. 1578).
As per the requirements Section 8(3) of RTI Act, documents pertaining to a period of 20 years back, may be asked for inspection. Companies that have already destroyed the books of accounts in terms of present provisions of the Companies Act,1956 would not be in a position to avail those records for inspection in terms of RTI Act. 2 Companies (Preservation and Disposal of Records) Rules,1966 The Rule allows for destroying records of the Company at an earlier date than twenty years. Companies that have already destroyed the records in terms of this Rule; may not be in a position to show the old records pursuant to provisions of RTI Act. Some of the instances are as under; Register / document Time Period 1. Register of Debenture Holders- 15 years after redemption of Debentures 2. Index of Debenture Holders- 15 years after redemption of Debentures 3. Copies of Annual Return filed - Eight Years from with Registrar of Companies the date of filing with the Registrar . 3 ®Section 209(4), 209(A) of the Act.
® Part IX of Memorandum of Association ® Article 72 of Articles of Association Inspection of Books of Accounts Companies Act, 1956 does not envisage inspection of books of accounts of the Company by general public, though provisions are there for inspection by Directors, Registrar of Companies and officers authorised in this respect by the Central Government.
Part IX of the Memorandum of Association also allows inspection of books of accounts by the Directors of the Company.
Hence, these provisions of the Companies Act and that of Memorandum & Articles of Association of the Company are inconsistent with the provisions of the Right to Information Act, 2005. 4 Section 196 of the Act and views of Department of Company Affairs. Inspection of Minutes of General Meetings and that of Board Meetings:
In respect of Minutes of General Meetings; the Companies Act, 1956 allows the same to be inspected by members of the Company and that extracts of such minutes may be provided. The fee provided for providing extracts of such minutes is Re 1/- for every one hundred word. However, this is subject to changes and modifications from time to time.
In respect of minutes of Board Meetings, Department of Company affairs is of the following view-
“The Companies Act,1956 contains no provision either specifically permitting or prohibiting inspection by/or supply of copies to the shareholders of a Company of the minutes of the meetings of the Board. This Department is of the view that unless the Articles of Association provide to the contrary, a shareholder has no right of inspection or obtaining copies of minutes of its Board meetings. [Letter no. 8/15(169)/63-P.R., dated 11-12-1963].”
It may be noted that in view of the above; the general public don’t have a right to inspect the minutes of General Meetings or Board Meetings of the Company. However, this would be inconsistent with the provisions contained in the Right to Information Act, 2005. 5 Statutory Registers There are various registers maintained with the Company pursuant to the requirements of Statutes and so, referred to as Statutory Registers.
Provisions have been made regarding the inspection and obtaining extracts of such registers by such persons as authorised in that regard by provisions of the Companies Act, 1956.
Some of these registers are as under; Section 163 of the Act Annual Returns filed with Registrar of Companies along with certificates enclosed thereto No fee is charged from members of the Company for inspection of these documents.
Others are charged fee as per Rule 21A of Companies (Central Government’s) General Rules and Forms,1956. Section 150, 151, 152 of the Act ®Register of Members ®Index of Members ®Register of Debenture Holders No fee is charged from members of the Company / Debenture holders for inspection of these documents.
Others are charged fee as per Rule 21A of Companies (Central Government’s) General Rules and Forms,1956. Section 301,
Section 304, and
Section 307 of the Act ®Register of Contracts in which Directors are interested ®Inspection of Register of Directors, Managing Directors, Manager and Secretary ®Register of Directors’ Shareholding ® same as the register u/s 163
® may be inspected without fee by members. Re 1/- for each inspection by others.
®Inspection by members and Debenture holders Only.
LIST OF INFORMATION WHICH ARE PROPOSED TO BE WITHHELD FROM THE PUBLIC
1. Minutes of Board meeting of the company.
2. Part of a document where law or regulation prohibits the company from providing the part or portion of a document.
3. Books of Account and vouchers
4. Noting side of the file
5. Personnel/medical details and officers or employees submitted as part of documents for medical reimbursement.
6. Annual Confidential Report (ACRs) of officers and employees.
7. Records, Correspondence, Proceeding etc during the decision making process (disclosing such information may influence or affect the decision).
8. All information related to recruitment and appointment of personnel during the process of selection and finalization of appointment.
9. Minutes of selection committee/interview committee.
10. Disciplinary proceeding and vigilance cases initiated against an officer or employee during the process of investigation and decision.
11. Personal files of officers and employees.
12. The credential verification report received from the inspecting officers in respect of Non Government Organisations during the process of finalizing the decision for sanction/release of loan.
13. Confidential reports received from other Government/Non Government Departments for processing sanction of loan of NGOs (disclosing such report to public may constitute breach of trust).
20 February 2009
What is period of preservation of Books of Accounts?
The period of preservation of books of Accounts is different in different laws as under:-
Companies Act, 1956
> Books of accounts and vouchers of a company required to maintain for a period of 8 years immediately preceding the current year.
> Books of accounts and vouchers of a section 25 company required to maintain for a period not less than 4 years.
> The Register and Index of Members must be maintained permanently.
> The Register and Index of debenture-holders must be maintained for 15 years after the redemption of debentures.
> The copies of all Annual Returns and Certificates annexed thereto must be maintained for 8 years from date of filing with the ROC.
> In case of amalgamation/merger, the books and papers of the amalgamated/transferor company can only be disposed of with prior permission of the Central Government.
> The books and papers of a company which has been liquidated/wound-up and of its liquidator, shall not be destroyed before 5 years from the date of dissolution, unless there is prior permission from the Central Government.
Income Tax Act, 1961
> All assesses are required to maintain specified books of account for a period of 6 years from the end of relevant assessment year, e.g., the books of previous year 2000-2001 is required to maintain up to 31.03.2008.
> In case of International Transactions (Transfer pricing issues), the transfer pricing documents and information specified under Rule 10D must me maintained for income-tax purposes.
> Daily Stock Account of goods produced must be preserved for a period of five years immediately after the financial year to which such record pertain.
MAINTENANCE OF ACCOUNTS BY CERTAIN PERSONS CARRYING ON PROFESSION OR BUSINESS.
(1) Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified 707 by the Board in the Official Gazette shall keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act.
(2) Every person carrying on business or profession [not being a profession referred to in sub-section (1)] shall, - (i) If his income from business or profession exceeds one lakh twenty thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession exceed or exceeds ten lakh rupees in any one of the three years immediately preceding the previous year; or
(ii) Where the business or profession is newly set up in any previous year, if his income from business or profession is likely to exceed one lakh twenty thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession are or is likely to exceed ten lakh rupees, during such previous year; or
(iii) Where the profits and gains from the business are deemed to be the profits and gains of the assessee under section 44AD or section 44AE or section 44AF, as the case may be, and the assessee has claimed his income to be lowerthan the profits or gains so deemed to be the profits and gains of his business, as the case may be, during such previous year, keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act.
(3) The Board may, having regard to the nature of the business or profession carried on by any class of persons, prescribe, 709 by rules the books of account and other documents (including inventories, wherever necessary) to be kept and maintained under sub-section (1) or sub-section (2), the particulars to be contained therein and the form the manner in which and the place at which they shall be kept and maintained.
(4) Without prejudice to the provisions of sub-section (3), the Board may prescribe, by rules, the period for which the books of account and other documents to be kept and maintained under sub-section (1) or sub-section (2) shall be retained.