Companies Act Section 136 — Right of member to copies of audited financial statement
CHAPTER IX ACCOUNTS OF COMPANIES
Commercial / Corporate
Summary
Sub-section (1) requires a company to send copies of its financial statements, including consolidated financial statements if any, the auditor's report, and every other document that must by law be attached to the financial statements, to every member of the company, to every trustee for debenture-holders, and to all other persons entitled to receive them. These copies must be sent at least twenty-one days before the general meeting where the statements are to be laid.
The first proviso to sub-section (1) states that if the copies are sent less than twenty-one days before the meeting, they are still considered to have been properly sent if the members agree to this. Under clause (a), this agreement must come from members who hold a majority in number of the voting rights and who represent at least ninety-five per cent of the paid-up share capital that gives a right to vote at the meeting, if the company has share capital. Under clause (b), if the company has no share capital, the agreement must come from members holding at least ninety-five per cent of the total voting power exercisable at the meeting.
The second proviso to sub-section (1) deals with listed companies. It says that the requirement of sending copies is considered fulfilled if the documents are made available for inspection at the registered office during working hours for twenty-one days before the meeting, and a statement containing the salient features of the documents in the prescribed form, or copies of the documents as the company chooses, is sent to every member and every trustee for debenture-holders at least twenty-one days before the meeting, unless the shareholders ask for the full financial statements.
The third proviso to sub-section (1) allows the Central Government to prescribe the manner of circulation of financial statements for companies with a specified net worth and turnover.
The fourth proviso to sub-section (1) requires a listed company to also place its financial statements, including consolidated financial statements if any, and all other documents required to be attached, on its website maintained by or on behalf of the company.
The fifth proviso to sub-section (1) requires every listed company with a subsidiary or subsidiaries to place separate audited accounts for each subsidiary on its website, if it has one.
The sixth proviso to sub-section (1) addresses listed companies with a foreign subsidiary. Under clause (a), if the foreign subsidiary is required by the law of its country of incorporation to prepare consolidated financial statements, the requirement is met if the consolidated financial statement of that foreign subsidiary is placed on the listed company's website. Under clause (b), if the foreign subsidiary is not required to get its financial statements audited under the law of its country of incorporation and does not get them audited, the holding Indian listed company may place the unaudited financial statement on its website, and if that statement is in a language other than English, an English translation must also be placed on the website.
Sub-section (2) requires a company to allow every member or trustee for debenture-holders to inspect the documents mentioned in sub-section (1) at its registered office during business hours. The proviso to sub-section (2) states that every company with a subsidiary or subsidiaries must provide a copy of the separate audited or unaudited financial statements, as prepared for each subsidiary, to any member who asks for it.
Sub-section (3) states that if there is any default in complying with the provisions of this section, the company is liable to a penalty of twenty-five thousand rupees, and every officer of the company who is in default is liable to a penalty of five thousand rupees.
Official Text
(1) 7*** a copy of the financial statements, including consolidated financial statements, if any, auditor’s report and every other document required by law to be annexed or attached to the financial statements, which are to be laid before a company in its general meeting, shall be sent to every member of the company, to every trustee for the debenture-holder of any debentures issued by the company, and to all persons other than such member or trustee, being the person so entitled, not less than twenty-one days before the date of the meeting: 8[Provided that if the copies of the documents are sent less than twenty-one days before the date of the meeting, they shall, notwithstanding that fact, be deemed to have been duly sent if it is so agreed by members—
(a) holding, if the company has a share capital, majority in number entitled to vote and who represent not less than ninety-five per cent. of such part of the paid-up share capital of the company as gives a right to vote at the meeting; or
(b) having, if the company has no share capital, not less than ninety-five per cent. of the total voting power exercisable at the meeting: Provided further that] in the case of a listed company, the provisions of this sub-section shall be deemed to be complied with, if the copies of the documents are made available for inspection at its registered office during working hours for a period of twenty-one days before the date of the meeting and a statement containing the salient features of such documents in the prescribed form or copies of the documents, as the company may deem fit, is sent to every member of the company and to every trustee for the holders of any debentures issued by the company not less than twenty-one days before the date of the meeting unless the shareholders ask for full financial statements: 1[Provided also] that the Central Government may prescribe the manner of circulation of financial statements of companies having such net worth and turnover as may be prescribed:
Provided also that a listed company shall also place its financial statements including consolidated financial statements, if any, and all other documents required to be attached thereto, on its website, which is maintained by or on behalf of the company: 2[Provided also that every listed company having a subsidiary or subsidiaries shall place separate audited accounts in respect of each of subsidiary on its website, if any: Provided also that a listed company which has a subsidiary incorporated outside India (herein referred to as “foreign subsidiary”)—
(a) where such foreign subsidiary is statutorily required to prepare consolidated financial statement under any law of the country of its incorporation, the requirement of this proviso shall be met if consolidated financial statement of such foreign subsidiary is placed on the website of the listed company;
(b) where such foreign subsidiary is not required to get its financial statement audited under any law of the country of its incorporation and which does not get such financial statement audited, the holding Indian listed company may place such unaudited financial statement on its website and where such financial statement is in a language other than English, a translated copy of the financial statement in English shall also be placed on the website.]
(2) A company shall allow every member or trustee of the holder of any debentures issued by the company to inspect the documents stated under sub-section (1) at its registered office during business hours. 3[Provided that every company having a subsidiary or subsidiaries shall provide a copy of separate audited or unaudited financial statements, as the case may be, as prepared in respect of each of its subsidiary to any member of the company who asks for it.]
(3) If any default is made in complying with the provisions of this section, the company shall be liable to a penalty of twenty-five thousand rupees and every officer of the company who is in default shall be liable to a penalty of five thousand rupees.