24 Feb The Signing of Financial Statements of Companies under the Companies Act, 2013
The Financial Statement is a crucial document for any company, necessitating preparation every financial year and subsequent auditing by the company’s appointed auditors. It served to provide a comprehensive overview of the company’s assets, liabilities, and shareholders’ equity. By presenting this information, the Financial Statement aimed to furnish shareholders with insights into the company’s financial health and operations, empowering them to make informed investment decisions.
Understanding Financial Statements:
Section 2 (40) of the Companies Act 2013 outlined the components of a financial statement, encompassing:
- Balance sheet
- Profit and loss account (or income and expenditure account for nonprofit organizations)
- Cash flow statement
- Statement of changes in equity, if applicable
- Annexure forming part of the Financial Statement
Preparation Process:
Financial statements were required to be prepared in adherence to Schedule III of section 129 of the Companies Act, 2013, and subsequently presented to shareholders at the Annual General Meeting.
Signatories as per Companies Act 2013:
As per the stipulations of Section 134 of the Companies Act, 2013, the Financial Statement was to be signed by:
- The Chairperson of the Company (if authorized by the board of directors)
- Two Directors (one of whom should be the Managing Director)
- Chief Executive Officer/Company Secretary/Chief Financial Officer of the Company (based on their appointment within the Company)
It was noteworthy that the Chairperson could sign the financial statements upon authorization by the Board of Directors, irrespective of whether they chaired the meeting or not.
Auditor’s Involvement:
Once signed by the designated officials, the financial statement was submitted to the auditor, who then prepared an Auditor’s report, to be attached alongside the financial statement.
Number of Directors Required to Sign:
Financial statements required signatures from two directors, with one being the Managing Director, or from a single director if the company had only one director.
Mandatory Signing by Company Secretary:
Section 134(1) mandated that companies with a Whole-time Company Secretary must have the Financial Statement signed by the said Company Secretary. Additionally, if the company appointed a Chief Executive Officer or Chief Financial Officer, their signatures were also requisite.
In instances where the company lacked a CFO and CS, only the Chairman could sign the financial statement. If the company lacked a chairperson or was unauthorized by the board, two directors, one of whom was the managing director, and the CFO (if serving as a director) could sign.
Signing of Financial Statements for One Person Company (OPC):
Financial statements for a One Person Company could be signed by a single director.
Electronic Signature Option:
Financial statements could also be signed electronically, utilizing the digital signatures of Directors, Chief Executive Officer/Company Secretary/Chief Financial Officer, and the Statutory Auditors.
Date of Signing:
The date of signing the Financial Statement, including all associated documents, was set either before the signing of the Audit report or concurrently with it.
Different Signing Dates:
Directors and auditors could sign financial statements from separate locations and on different dates. Once signed by both parties, the financial statement was adopted at the Annual General Meeting.
Approval Process:
As per Section 134(1), the Financial Statement required approval by the Board of Directors during their meeting, to be signed on behalf of the board.
Adoption and Circulation:
The Financial Statement had to be adopted at the Annual General Meeting, which could convene within six months from the financial year-end. Once signed, it was circulated along with necessary documents like notes, annexures, auditor’s report, and the Board’s report.
Content of the Board’s Report:
The Board’s report included various details such as the company’s website address, Director’s Responsibility Statement, number of Board Meetings held, declaration by Independent Directors, details of contracts with related parties, loans, guarantees, or investments, among other pertinent information.
Conclusion:
In accordance with Section 134 of the Companies Act, 2013, the signing of Financial Statements was mandated by the Act’s provisions. Compliance was obligatory for every company, failure of which could result in penalties and liabilities for the company officers as prescribed by the Act.
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