Consequence of non-compliance with w.r.t maintenance of Books of Accounts, Statutory Registers and Minutes Book

In recent times, ROC has been diligently suspecting the non-compliance and passing stringent orders against the Company and its Directors. Therefore it has become important for the Company and Directors to ensure Compliance in true spirit and letter. Thus, we have attempted to list the Compliance of the provisions of various sections of Companies Act, 2013 concerning the Maintenance of Books of Accounts, Statutory records, and Registers and Minutes Book at the Registered office (RO) or at any place decided by the Board.

As per Companies Act 2013, every Company must maintain books of accounts, statutory Registers and Minutes book at the registered office or any office that the board of directors may decide. If the company is maintaining books at an office other than the registered office, it must intimate the same to ROC. The company may maintain the accounts in electronic form also. Below are provisions listed for each of them separately along with consequences if not followed with it.

BOOKS OF ACCOUNTS

• Every Company including all its branches shall mandatorily prepare and keep its books of accounts, other relevant books, and papers for every financial year at the RO and such books to be kept on accrual basis and according to the double entry system of accounting.
• However, all or any of the books of account aforesaid may be kept at any other place in India as the Board of Directors may decide provided the within 7 days thereof, file with the Registrar a notice in writing giving the full address of that other place.
• The company may keep such books of account or other relevant papers in electronic mode.
• Such books be maintained by the company within India and be kept open for inspection at the RO of the company or at such other place in India by any director during business hours, and in the case of financial information, if any, maintained outside the country, copies of such financial information shall be maintained and produced for inspection by any director.
• The books of account of every company must be maintained for a period of not less than eight financial years immediately preceding a financial year, or where the company had been in existence for a period less than eight years, in respect of all the preceding years together with the vouchers relevant to any entry in such books of account shall be kept in good order.

Punishment

If the managing director, the whole-time director in charge of finance, the Chief Financial Officer or any other person of a company charged by the Board with the duty of complying with the provisions of this section, contravenes such provisions, such managing director,

whole-time director in charge of finance, Chief Financial officer or such other person of the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees.

STATUTORY REGISTERS

• Register of Members: Every Company is required to maintain Statutory Registers which must be kept at the RO of Company either in physical or electronic form.
• Register of significant beneficial owners in a company: Every company shall maintain a register of the interest declared by individuals under Section 90(1) of Companies Act, 2013 and changes therein which include the name of individual, his date of birth, address, details of ownership in the company.
• Register of Charges: Every company shall keep at its RO register of charges in such form and in such manner as may be prescribed under Section 85 of Companies Act 2013, which include therein all charges and floating charges affecting any property or assets of the company. 
• Register of Directors and KMP and their Shareholding: Every company shall keep at its RO, register containing such particulars of its Directors and KMP as may be prescribed, which include the details of securities held by each of them in the company or its holding, subsidiary, subsidiary of company’s holding company or associate companies.
• Register of Investments held by company: The company shall maintain a register of any shares or securities in which investments have been made by a company which are not held by it in its own name which contains such particulars as may be prescribed and such register shall be open to inspection by any member or debenture-holder of the company without any charge during business hours subject to such reasonable restrictions as the company may by its articles or in general meeting impose.
• Register of contracts or arrangements in which Directors are interested: The register referred to in Section 189(1) shall be kept at the RO of the company and be kept open for inspection at such office during business hours and extracts may be taken therefrom, and copies thereof as may be required by any member of the company. It shall be produced at the commencement of every AGM of the company and remain open and accessible during the continuance of the meeting to any person having the right to attend the meeting.
• Every director who fails to comply with the provisions of section 189 of Companies Act 2013 and the rules made thereunder shall be liable to a penalty of twenty-five thousand rupees.

Case Law

Adjudication order was passed by the Registrar of Companies, NCT of Delhi & Haryana bearing adjudication order no No. ROC/D/Adj/Order/Sec.189/Lava/2023/1076-1086 dated 7thFebruary 2023 Order for Penalty for Violation of Section 189(1) of the Act, 2013 in the matter of Lava International Limited.

Penalty imposed on company/ director(s) of Rs. 25,000/- against each Director.

Punishment

• If a company does not maintain a register of members or debenture-holders or other security holders or fails to maintain them in accordance with the provisions of Section 88 (1) & (2) of Companies Act 2013, the company shall be liable to a penalty of three lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.

Case Law

Adjudication order was passed by the Registrar of Companies, Bangalore on 8th Feb 2022, in the matter of M/s. SDU Holdings Private Limited - Adjudication order No. ROC B/ADJ/454/ SECTION 88/co. No. 55235 /2021 whereby during the course of the inspection officer it was noticed that the register MGT-1 maintained by the company was incomplete and many columns remained unfilled  lead to violation of provisions of section 88 of the Companies Act 2013.

Company was penalized Rs. 3,00,000 and Whole-time Director Rs. 50,000.

• If a company is in default in complying with the provisions of section 187 of Companies Act 2013, the company shall be liable to a penalty of five lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.

So, we would like to conclude that the ROC authorities are on the forefront to ensure that the Companies are following the rules and regulations w.r.t Registered office and hence we had like to take initiative to create awareness in respect of the same.

Case Law

Adjudication order for penalty under Section 454(3) of the Companies Act, 2013 read with rule 3 of Companies (Adjudication of Penalties) Rules, 2014 for Violation of Section 12(1), (2) & (4) of the Companies Act, 2013 in the matter of Avenue Asia Advisors Private Limited whereby Company and each Director was penalized for Rs. 1,00,000 each.

MINUTES BOOK

As per SS-7 of Secretarial Standard on meetings of the Board of Directors, every company shall keep Minutes of all Board and Committee Meetings in a Minutes Book. Minutes kept in accordance with the provisions of the Act evidence the proceedings recorded therein. Minutes help in understanding the deliberations and decisions taken at the Meeting. Minutes shall be recorded in books maintained for that purpose. A distinct Minutes Book shall be maintained for Meetings of the Board and each of its Committees. A company may maintain its Minutes in physical or in electronic form.

As per SS-17 of Secretarial Standard on General Meetings, every Company shall keep Minutes of all Meetings. Minutes kept in accordance with the provisions of the Act evidence the proceedings recorded therein. Minutes help in understanding the deliberations and decisions taken at the Meeting. Minutes shall be recorded in books maintained for that purpose. A distinct Minutes Book shall be maintained for Meetings of the Members of the company, creditors and others as may be required under the Act.

Disclaimer: This article has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. This article cannot be relied upon to cover the specific situation and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact Affluence Advisory Private Limited to discuss these matters in the context of your particular circumstances. Affluence Advisory Private Limited, Its Partners, Directors, Employees, and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this article or for any decision based on it.