SHORT SUMMARY
After the introduction of the CCFS Scheme, many professionals are facing a practical issue regarding generation of UDIN for old financial statements.
Where financial statements of previous financial years were never prepared or signed, the auditor cannot generate UDIN now for past dates because UDIN can only be generated within 60 days from the date of signing of the certificate or document.
Therefore, the practical and legally sustainable solution is to prepare the financial statements now, get them signed by the auditor on the current date, generate UDIN for the current signing date, hold AGM now and file the pending AOC-4 and MGT-7/MGT-7A under the CCFS Scheme.
However, in such cases the Company will technically be in default of Section 96 (delay in AGM) and may need compounding under Section 99.
1. BACKGROUND OF THE ISSUE
With the announcement of the CCFS Scheme, many Companies that have not complied with filing requirements for several years are attempting to regularize their compliances.
A key issue has arisen regarding UDIN generation for old financial statements. Professionals are asking how UDIN can be generated when financial statements for earlier years were never signed and UDIN cannot be generated with backdated dates.
2. UNDERSTANDING UDIN REQUIREMENT
UDIN stands for Unique Document Identification Number issued by the Institute of Chartered Accountants of India (ICAI).
It is mandatory for documents certified or signed by Chartered Accountants to ensure authenticity of documents, prevention of misuse of CA signatures and verification by regulators and stakeholders.
3. ICAI GUIDELINES FOR UDIN GENERATION
As per ICAI guidelines, UDIN must be generated at the time of signing or within 60 days from the date of signing. UDIN cannot be generated beyond 60 days from the signing date and backdating is not permitted.
4. PRACTICAL PROBLEM FACED BY PROFESSIONALS
Many Companies have not prepared financial statements for several years. If the auditor signs the report with backdated date, UDIN cannot be generated. Without UDIN, filing of AOC-4 may lead to compliance issues. Therefore, backdating financial statements is not a valid option.
5. LEGALLY SUSTAINABLE SOLUTION
The Company should prepare financial statements for all pending financial years now. The financial statements will relate to the respective financial year but the date of signing will be the current date.
The statutory auditor should sign the financial statements on the present date and generate UDIN immediately or within 60 days.
6. HOLDING AGM
Once financial statements are ready, the Company should convene a board meeting, issue notice of AGM and hold AGM now. In the AGM, shareholders will adopt the financial statements for the respective financial years.
7. FILING OF FORMS
After adoption of financial statements, the Company may file Form AOC-4 for financial statements and Form MGT-7 or MGT-7A for annual return. The Company can avail the benefit of reduced additional filing fees under the CCFS Scheme.
8. LEGAL IMPLICATION - SECTION 96
Section 96 of the Companies Act, 2013 requires every company to hold AGM within six months from the end of the financial year and the gap between two AGMs should not exceed fifteen months.
Since AGM for earlier years was not held within the prescribed timeline, the company has already committed a default.
9. PENALTY - SECTION 99
In case of failure to hold AGM as required under Section 96, the company and every officer in default may be liable for penalty which may extend up to ₹1,00,000 and in case of continuing default an additional penalty of ₹5,000 per day may apply.
10. BENEFIT OF THE SCHEME
The company may still take benefit of the CCFS Scheme for filing pending forms such as AOC-4 and MGT-7/MGT-7A with substantial reduction in additional filing fees which may go up to 90%.
RECOMMENDED COMPLIANCE STRATEGY
- Prepare pending financial statements.
- Get audit reports signed with current date.
- Generate UDIN immediately.
- Hold AGM for adoption of financial statements.
- File AOC-4 and MGT-7 under the Scheme.
- Apply for compounding for delay in AGM under Section 96 read with Section 99.
CONCLUSION
Due to the UDIN restriction of 60 days, auditors cannot generate UDIN for backdated financial statements. Therefore, the correct compliance approach is to prepare financial statements now, sign them with the current date, generate UDIN accordingly, hold AGM now and file the pending forms under the Scheme. However, a delay in holding AGM will still require compounding under the Companies Act, 2013.
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