Section 134 of the Companies Act 2013

Section 134 of the Companies Act 2013

The Companies Act 2013 is a key law for companies in India. Section 134 is a vital part of it. It covers financial statements, board reports, and more. This section helps companies be open and responsible with their money.

The Board of Directors must approve financial statements before they are signed. In a One-Person Company, just one director signs. Every financial statement needs an auditor’s report.

The Board’s report must list the Board meetings of the year. It also needs a Directors Responsibility Statement. Section 134 clearly states what’s needed for financial reports and board statements.

Key Takeaways

  • Section 134 of the Companies Act 2013 deals with the financial statement, board’s report, and other related matters.
  • Financial statements must be approved by the Board of Directors before signature.
  • The auditor’s report is mandatory to be attached to every financial statement.
  • The Board’s report must contain the number of meetings of the Board held during the financial year.
  • Directors Responsibility Statement is required to be included in the Board’s report.
  • Section 134 of the companies act 2013 has outlined the requirements for financial statements, board reports, and other related matters.
  • Compliance with Section 134 is essential for companies to ensure transparency and accountability in their financial dealings.

Understanding Section 134 of Companies Act 2013

Section 134 of the Companies Act 2013 is key for financial statements and board reports. It makes sure companies are transparent and accountable. This helps everyone get the right financial info to make smart choices.

This rule is for all companies, except small ones and those with just one person. It follows the rules of financial reporting. This means companies must show their real financial health and success.

Scope and Applicability

Who this rule applies to depends on the company type and its financial year. Companies must make and share financial statements on time. These statements need approval from the board and a signature from at least two directors.

Legal Framework and Context

Section 134 is backed by rules like Accounting Standards and the Companies (Accounts) Rules. It also asks companies to share specific details in their board reports.

financial statements

Key Objectives of the Section

Section 134’s main goals are clear. It wants companies to give out accurate financial info and reports. It also aims to keep things transparent and protect investors’ interests.

Essential Components of Financial Statements Under Section 134

Financial statements under Section 134 of the Companies Act 2013 are key for companies. They show the company’s financial health clearly. The balance sheet, statement of profits and losses, and consolidated financial statements are the main parts. These parts help people understand the company’s finances, how it’s doing, and its cash flow.

The Companies Act 2013 says all companies, except One Person Company (OPC) and small companies, must have a directors’ report under Section 134. This report includes the financial statements, giving a full view of the company’s money activities. The financial statements need to be okayed by the board of directors and go with the auditor’s report.

financial statements

  • Balance sheet: gives a quick look at the company’s financial state at a certain time
  • Statement of profits and losses: shows the company’s income and costs over time
  • Consolidated financial statements: puts together the financial reports of the main company and its subsidiaries

These financial statements are vital for companies to follow the Companies Act 2013. They give stakeholders true and trustworthy financial info. By having these parts in their financial reports, companies show they are open and responsible. This is important for their success in the long run.

Board’s Report Requirements and Disclosures

The board’s report is key for sharing a company’s financial health and social responsibility efforts. It must follow Section 134 of the Companies Act, 2013. This includes details like the number of board meetings, director’s statements, and the financial state of subsidiaries.

The report also covers corporate social responsibility efforts, related party deals, and any big changes after the financial year end. Here are some important details it must include:

  • Financial highlights, including net profit before and after tax
  • Current financial data, like revenue and profit use
  • Big changes affecting the company’s finances after the year end
  • Who joined or left the board during the year
  • Important rulings from regulators or courts that affect the company

Companies must post their board reports and annual reports online if they can. The annual report must detail deals with related parties in a specific format. This shows the company’s dedication to openness and responsibility, which is vital for earning stakeholder trust.

DisclosureRequirement
Financial highlightsMust include net profit before tax and net profit after tax
Current financial performance dataMust include revenue from operations and appropriation of profits
Material events or changesMust disclose events or changes affecting financial positions occurring after the balance sheet date

Compliance Timeline and Submission Process

Companies must follow a strict timeline and process under the Companies Act 2013. They need to include the web address of their annual return in the Board’s Report. They also have to report on the number of meetings held.

The report must detail the company’s policy on hiring and paying directors. It must also show how much money is set aside for reserves. Plus, it should outline any dividend recommendations by the Board.

Companies must also report any big changes in their financial situation after the financial year. Not following Section 134 can lead to big fines. The company could face ₹3,00,000, and each officer could be fined ₹50,000.

Compliance RequirementDescription
Board’s ReportMust include web address of annual return, number of meetings, and policy on director’s appointment and remuneration
Financial StatementsMust be approved by the Board of Directors and signed by the Chairperson or 2 directors
Penalties for Non-Compliance₹3,00,000 for the company and ₹50,000 for every officer in default

By sticking to the compliance timeline and process, companies can meet the Companies Act 2013’s requirements. This helps them avoid fines for not following the rules.

Penalties and Consequences of Non-Compliance

Not following section 134 of the Companies Act, 2013 can lead to big penalties. Companies and their officers face fines. For example, Draeger India Private Limited was fined INR 4,00,000 for not following the rules.

Some key penalties for not following the rules include:

  • Section 134: Fine of INR 3 Lakhs for the company and INR 50 thousand for every officer for not following financial statement rules.
  • Section 137: Penalties ranging from INR 10 thousand to INR 2 Lakhs for not filing financial statements with the registrar.
  • Section 129: Penalty of INR 50 thousand to INR 5 Lakhs for not properly disclosing financial statements, with a maximum term of 1 year.

It’s very important for companies to follow section 134 to avoid these penalties. Not following the rules can lead to serious consequences, including jail time for officers. Companies must focus on following section 134 to keep their reputation and avoid financial losses.

Companies like Mazhil Nidhi Limited have been fined for not following section 134(1) of the Companies Act, 2013. They were fined INR 4,50,000. The penalties for not following the rules can be very high, so companies must make sure they follow section 134.

Conclusion

Section 134 of the Companies Act 2013 is a key part of keeping companies transparent and accountable. It requires detailed financial reports, statements from directors, and updates on social responsibility. Companies in India must follow these rules closely.

Not following Section 134 can lead to big fines. Companies could face up to ₹3,00,000, and each officer up to ₹50,000. Directors and officers might even get jail time. Following this section is not just a rule; it’s essential for keeping investors and the public trust.

Companies that stay on top of Section 134 can improve their reputation. This helps them avoid risks and show they care about doing business the right way. By focusing on this section, companies can make India’s business world stronger and more trustworthy.

FAQ

What is the importance of Section 134 of the Companies Act 2013?

Section 134 of the Companies Act 2013 is key. It sets rules for financial statements and reports for companies in the United States.

What are the key components of financial statements under Section 134?

Financial statements under Section 134 include the balance sheet and profit and loss statement. They also include consolidated financial statements. These are important for understanding a company’s financial health.

What are the board’s report requirements and disclosures under Section 134?

Section 134 requires specific details in the board’s report. This includes mandatory information and corporate social responsibility statements. It also includes a director’s responsibility statement and details on subsidiaries’ performance and financial status. These disclosures help stakeholders understand the company’s operations and financial health.

What is the compliance timeline and submission process for Section 134?

Companies must follow deadlines for submitting financial statements and reports under Section 134. Not meeting these deadlines can lead to penalties and legal issues for the company and its directors.

What are the penalties and consequences of non-compliance with Section 134?

Not following Section 134 can result in fines and legal trouble for the company and its directors. It’s important for companies to meet these requirements to avoid penalties and keep their reputation intact.

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