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Provisions Of The Companies Act 1956

What is a company?
The word company is derived from the Latin word com i.e. with or together and panis i.e. bread. It denotes a group of persons and the effect of registration under the companies Act is that such group becomes a corporate body having perpetual succession and common seal.


The term company is defined in Section 2 !"#. The definition only says that a company means a company as defined in Section $ of the Companies Act. Section $ further e%plains the meaning of e%pression &company'( &e%isting company'( &private company' and &public company'. Apart from these categories the different )inds of company are holding company( subsidiary company( foreign company and companies( which are limited guarantee and lastly unlimited company.

Maintenance of Books of Accounts

ection !"9 of the Companies Act states that the #ooks of accounts sha$$ #e maintaine% at the company&s re'istere% office un$ess the Boar% of (irectors %eci%e to keep them at another p$ace in )n%ia* )t is a %uty of the company to inform the +e'istrar of Companies ,ithin seven %ays of the %ecision in case of the #oar% of (irectors %eci%es to maintain #ooks at the p$ace other than the re'istere% office* -very company is re.uire% to keep proper #ooks of accounts sho,in' i* ii* iii* A$$ monies receive% an% spent an% the %etai$s thereof a$es an% purchases of 'oo%s/ an% Assets an% $ia#i$ities

A company en'a'e% in pro%uction/ processin'/ manufacturin' or minin' activities has a$so to maintain/ if re.uire% #y the Centra$ 0overnment/ cost accountin' recor%s i*e*/ particu$ars re$atin' to uti$isation of materia$/ $a#our an% other items of cost* Proper #ooks of accounts sha$$ not #e %eeme% to #e kept if there are not kept such #ooks as are necessary to 'ive a true an% fair vie, of the state of affairs of the company or #ranch office/ as the case may #e/ an% to e1p$ain its transaction*

A$so if such #ooks are not kept on accrua$ #asis an% accor%in' to the system of %ou#$e entry #ook keepin'/ proper #ooks of accounts sha$$ not #e %eeme% to have #een kept*

tatutory Books
The following statutory boo)s are re*uired to be maintained by a company under the different sections of the Companies Act+ !. 2. $. -. /. ,egister of Investments of the company not held in its own name ,egister of mortgages and charges ,egister of members and inde% ,egister of .ebenture holders and inde% 0oreign register of members and of debentures1 holders and their duplicates

3inutes 4oo)s 5. ,egister of contracts( companies and firms in which directors are interested. 6. ,egister of directors( managing director( manager and secretary. 7. ,egister of directors' share1holding !". ,egister of loans made( guarantees given or securities provided to companies under the same management. !!. ,egister of investments in share and debentures of other companies.

,egisters and documents relating to the issue of shares are also maintained vi8.( i. Share application and allotment boo) ii. Share call boo) iii. Certificate boo) In respect of shares( the company in addition to maintaining register of members( which it has to maintain statutorily( it also maintains a# share transfer boo) and b# dividend register

Annua$ +eturn
9nder Section !-7 of the Companies Act( every company having a share capital( shall within si%ty days from the day of which each of the annual general meeting is held( prepare and file with the ,egistrar the annual return containing the particulars specified li)e the income( details of income( details of the board of directors.

2ina$ Accounts
9nder section 2!" of the Companies Act( at the annual general meeting of a company( the 4oard of .irectors of the company shall lay before the company+ A balance sheet as at the end of the period A profit and loss account for that period In case of a company not carrying on business for profit( an income and e%penditure account shall be laid before the company at its annual general meeting instead of profit and loss account.

:very balance sheet of the company shall give a true and fair view of the state of affairs of the company and at the end of the financial year an shall sub;ect to the provisions of the Section be in the form of the <art I of Schedule =I i.e.( hori8ontal or vertical form( as near thereto as the circumstances admit. :very <rofit and Loss Account of a company shall comply with the re*uirements of <art II of the Schedule =I of the Companies Act again either in hori3onta$ or vertica$ form*

The #a$ance sheet can #e prepare% either in 4ori3onta$ 2orm or 5ertica$ 2orm* 4o,ever there is no specifie% form of Profit an% 6oss Account* che%u$e 5) 7 Part )) 'ives on$y the re.uirements as to the Profit an% 6oss Account* Part ))) of che%u$e 5) 'ives interpretation* The Companies Act of 1956 a$so re.uire% to attach a Cash f$o, statement in the Annua$ +eport of the companies* An annua$ report of a company is report containin' the (irector&s +eport an% the Au%itors report a#out the ,orkin' of the company* )t a$so contains the Profit an% 6oss Account an% Ba$ance heet ,ith a$$ the necessary sche%u$es an% su#8sche%u$es*

Au%it of a company
Audit means a systematic verification of the boo)s of a company to give a true and fair view about its wor)ing and also about the financial results of the company. In India only a Chartered Accountant who has passed the professional e%amination conducted by the Institute of Chartered Accountant can conduct the audit and certify under his hand about his opinion on the maintenance of the boo)s of accounts.

(irectors& report

This is essentia$$y an account of a company&s performance in the previous year an% its prospects as seen #y its #oar% of %irectors* The o#9ective is to 'ive the rea%er a sense of the state of the #usiness* )t touches upon #oth .uantitative an% .ua$itative issues* Typica$$y/ it starts ,ith a summary of the company&s performance in the previous year/ an% the %ivi%en%s an% #onuses %ec$are%* Then/ it $aunches into a %iscussion of ,hich parts of the #usiness %i% ,e$$ an% ,hich %i%n&t/ ,hat ,ere the con%itions in the in%ustry/ the ena#$in' factors an% the $imitations/ an% the out$ook for the #usiness*

Provisions of Companies Act of 1956 +e'ar%in' 2inancia$ tatements

Sec 2"7 Sec 2"7A Sec 2!" Sec 2!! 1 4oo)s of account to be )ept by company. 1 Inspection of boo)s of account( etc.( of companies. 1 Annual accounts and balance sheet. 1 0orm and contents of balance sheet and profit and loss account. 1 Authentication of balance sheet and profit and and loss account 1 ,ight of members to copies of 4alance Sheet and Auditor's ,eport . 1 Three copies of 4alance Sheet( etc.( to be

Sec 2!/ Sec 2!7 Sec 22" filed

Provision of Companies Act of 1956 +e'ar%in' the Au%itors

Sec 22Sec 222 Sec 225 Sec 227 Sec 2$" Appointment and remuneration of Auditors 1 >ualifications and dis*ualifications of Auditors. 1 <owers and duties of auditors. 1 Signature of audit report( etc. 1 ,eading and inspection of auditor?s report. 1