This article is written by Soumya Warrier, pursuing a Certificate Course in Companies Act, from Lawsikho.com. Here she discusses “Can the Company revise its Financial Statements? How?”.

Introduction

Financial statements are an important document of the company. It describes the past, present and future financial condition of the company. If the company is not listed financial statements is important as on the basis of this clients will be attracted means this will decide whether to invest in the company or not that whether their investment is in the profit-making company or loss-making.

Financial statements include a Balance sheet, profit and loss statement, notes to account, explanatory statement etc. which together derives the actual financial status of the company. And if the company is listed then shareholders take various decisions regarding buying and selling of shares of the company on the basis of financial statements of the company. As the company will make a profit or it may make a loss or the situation will be stable etc. all this can be decided on the basis of these financial statements. So the financial statements should provide accurate figures, as any type of errors can sink the future of the company as well as the shareholders. And to avoid such situations Section 130 and Section 131 is being inserted under the companies act, 2013 which reduces such type of errors which include duplication of entries, non-compliance of provisions, accounting errors etc.

Meaning

“Financial statement” means the records maintained by the company of its financial status and current financial condition of the company. This statements should be kept with the company in electronic form and should be maintained properly so that it can be used for further reference. This statements and books should be kept properly at the registered office of the company. It should not be kept in such a way that it’s prone to any loss or theft or damage. 

Clauses:- Section-129

Financial statements should as per section-129 of companies act, 2013 should show a true and fair view of the state of affairs of the company, this statements should be prepared according to the accounting standards notified under section 133 and it should also comply with the provisions mentioned in schedule III of Companies Act, 2013. 

Provided that nothing mentioned above shall apply to any insurance or banking company or any company engaged in the generation or supply of electricity, or to any other class of company for which a form of financial statement has been specified in or under the Act governing such class of company: 

The financial statements shall not be treated as not disclosing a true and fair view of the state of affairs of the company, merely by reason of the fact that they do not disclose any information that is not required to be disclosed by them to any law that is governing them. The third proviso to section 129(1) lists the class of such companies to whom this condition applies-

1. Insurance company
2. Banking Company
3. Electricity generation or Supply Company
4. Any other company governed by any other law for the time being in force

Revision of Financial Statements

At every annual general meeting of the company, Directors have to present the audited financial statement for the approval of the shareholders. This financial statement is also attached to the notice of the meeting. But If it appears to the directors of the company that the financial statement and directors report do not comply with the provisions laid down under section 129 and 134 of companies act, 2013 then the financial statements should be revised after obtaining approval of the tribunal through proper application in such format prescribed in this regard under companies act, 2013. Under this sections Tribunal plays an important role as financial statements are the important document and fraud can be done on the basis of this type of change in financial statements, so to avoid such type of situations permission of the Tribunal is required before making any change or addition or deletion in the financial statements. Tribunal will pass the order in this regard.

And a copy of this order given by the tribunal shall be filed with the registrar. Tribunal will not give orders directly but it may take into consideration opinions and concerns, if any, from central government and Income-tax Authorities before passing the order in this regard. A no objection from income tax authority will be very important for tribunal for allowing reopening and revision of the financial statements.

The provision relating to re-opening of financial statements and board’s report and their revision either voluntarily or on court’s order or tribunal’s order has been introduced first time in companies Act 2013. Similar provisions were not present in any of the earlier company laws.

The central government to do the application of a provision of section 131, may make certain rules in relation to revised financial statements and board’s report with respect to

•  How the revised financial statements or board’s report will be replaced or supplemented by a document, indicating the corrections made
• What are the functions to be carried out by auditor in relation to revised financial statements and report
• What action the director needs to take

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Procedural Aspects

1. Before making any change in the financial statement, the Board’s approval is required. So to obtain Board of Director’s approval resolution is passed in the Board Meeting to make any change in the financial statement.

2. Company has to make an application to the Tribunal in prescribed form and manner for the revision. Following should be attached with the application in original form or in duplicate form:

1. Audited Financial Statements of the financial period;
2. MOA & AOA
3. The details of Managing Director, Chief Financial Officer, Directors, Company Secretary and Officer of the Company responsible for making and maintaining such books of accounts and Financial Statements.
4. Where such accounts are audited, valid documents and proof and contact details of the auditor or any former auditor who audited such accounts
5. Board Resolution passed by the BOD.
6. Affidavit verifying the petition.
7. Documentary evidence to confirm the payment of application fee like Bank draft.
8. Memorandum of appearance with copy of the Resolution of Directors or the executed vakalatnama, as the case may be.
9. financial statement revised or Board’s Report
10. Any other relevant document.

3.  A copy of the order passed by the tribunal shall be filed with Registrar within 30 days from the date passing of the order. If not then tribunal can reject the application.

4. Such revision in financial statements or report cannot be prepared or filed more than once in a financial year. Means the financial statement cannot be revised more than once as frequent revision can reduce the reliability of the financial statement.

5. The detailed reasons for revision of such financial statements or report shall be disclosed in the Board’s report in the relevant financial year in which such revision is being made.

6. The detailed reasons for revision of such financial statements or report shall be disclosed in the Board’s report in the relevant financial year in which such revision is being made.

7. The Advertisement should contain:

1. the date on which the application, petition or reference was presented;
2. the name and address of the applicant, petitioner and his authorised representative, if any;
3. nature and substance of the application, petition or reference;
4. the date fixed for the hearing;
5. a statement to the effect that any person whose interest is likely to be affected by the proposed petition or who intends either to oppose or support the petition or reference at the hearing shall send a notice of his intention to the concerned Bench and the petitioner or his authorised representative, if any, indicating the nature of interest and grounds of opposition so as to reach him not later than two days previous to the day fixed for hearing.

8. The advertisement should be provided on the company’s website.

9. Where the requirements as regards to the advertisement and service of the petition, are not complied with, then the Tribunal may either dismiss the petition or give such further directions as it thinks fit.

10. The Tribunal may, if it thinks fit, and upon an application being made by the party, can allow the publication of advertisement with being followed above mentioned rules

11. The Tribunal shall issue notice and hear the auditor of the original financial statement.

12. Approval of the shareholders should be taken before revision in the General Meeting. The revised financial statements, statement of directors and the statement of auditors may be put up for consideration before a decision is taken on the adoption of the revised financial statements.

Conclusion

Thus financial statements should provide true and correct information of the company’s financial conditions if not then it will be considered improper. And if any business activity is carried on with this type of financial statements then it will be wrong and it can damage the company financially and it can put into risk allover reputation of the company in the commercial market. But sometimes errors can happen genuinely, means there are chances of clerical errors, errors due to ignorance of act or sections, errors can happen due to ignorance, etc. To save the company from the loss and risk due to such type of errors, Companies act, 2013 have included section 130 and 131 which contain detail provisions regarding change and revision of financial statements and board report. Under this section, the company can revise its financial statements by complying the requirements mentioned under section 130 and 131. If the company does not follow the provisions mention under section 130 and 131 then revision is not possible and it will be considered as invalid.