DIRECTORS SIGNED FINANCIALS WITHOUT BOARD’S APPROVAL- ROC BENGALURU IMPOSED A FINE ON THE COMPANY AND DIRECTORS RS 4,50,000

 DIRECTORS SIGNED FINANCIALS WITHOUT BOARD’S APPROVAL- ROC BENGALURU  IMPOSED A FINE ON THE COMPANY AND DIRECTORS RS 4,50,000

ROC,BENGALURU VS IQMETRIX SOFTWARE DEVELOPMENT INDIA PVT LTD

FACTS OF THE CASE

ROC observed that the financial statements had been signed by directors without the financials being first approved by the Board of Directors, as required under the Companies Act, 2013.

 

SECTION 134(1) & 134(2) – COMPANIES ACT, 2013

Financial statements must be approved by the Board before they are signed.

 

Signing of financial statements must be done after such approval, by:

·      Chairperson (if authorized), or

 

·      Two directors (one must be MD, if any), or

·      CEO/CS (where appointed).

SECTION 134(8)

Non-compliance with Section 134 attracts penalties on the company and every officer in default.

KEY TAKEAWAYS

·      Board approval of financial statements is non-negotiable.

·      Even if financials are correct, procedural non-compliance attracts penalties.

COMPANIES MUST:

·      Hold a valid Board meeting,

·      Record approval in minutes,

·      Then sign and file the financials.

NON COMPLIANCE

·      It was an inadvertent mistake or procedural lapse.

·      No intention to evade or suppress information.

·      Financials were accurate; only the approval process was missed.

Despite of the above facts, it is an offence to sign the financials by the directors without Board’s approval.

This case is highlighting that it is important for the companies to engage a company secretary to give them correct advice to avoid penalties.

R V SECKAR, FCS, LLB, 79047 19295