Page 217 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Corporate Legal Framework

Notes Section 212 provides that the Balance Sheet of a holding company should have annexed to it
certain documents relating to its subsidiary. Some of them are: (i) a copy of the Balance Sheet of
the subsidiary; (ii) a copy of its Directors’ report; (iii) a copy of its Profit and Loss Account.

Section 219 provides that not less than 21 days before the date of the meeting a copy of the Balance

Sheet together with Profit and Loss Account, Auditor’s and Board’s reports, must be sent to every
member, debentureholder, trustee for the debentureholder, legal representative of deceased

member, official Receiver or Assignee of an insolvent member, and auditor of the company.
However the Act, gives a choice to the listed companies either to send detailed accounts to its
shareholders or a statement containing the salient features only. Where a company has sent only
the salient features of accounts to its shareholders, it must send a copy of the detailed accounts
free of cost to a shareholder, who demands the same. Further, accounts and documents need
not be sent to debentureholders. However, these shall be required to be sent to the trustee of the
debentureholders.

Section 220 requires every company to file with the Registrar three copies of the Balance Sheet

and the Profit and Loss Account within thirty days from the date of the AGM, and where it is
not held, then within 30 days from the last day on or before which that should have been held.
If the accounts are not adopted in the A.G.M, or the meeting is adjourned without adopting the
accounts, it is obligatory on the part of the company to report to the Registrar the reason for the
same. The penalty for failure to fi le in time the annual accounts would be a continuing offence
within meaning of s.472 of Code of Criminal Procedure, 1973.

10.5.2 Appointment of Auditors

It is compulsory for every company to appoint qualified auditors to do the audit of the accounts

maintained by the company. The first auditors(s) can be appointed by the Board of Directors

within one month of the date of the incorporation of the company. The first auditors hold

office until the conclusion of the first AGM of the company. However, they can be removed by

members at their meeting held before the first AGM by giving a special notice of an intention to

remove them. Also, if the Board of Directors do not appoint the first auditors, then the company
in general meeting may do so.

The Board of Directors is also authorised to fill casual vacancies arising for reasons other than
by the resignation of an auditor, which can only be filled up by the company in general meeting.

The duration of the auditor, so appointed in casual vacancy shall be upto the conclusion of the
next AGM.
Every company must appoint at each AGM to hold office from the conclusion of the AGM until the

conclusion of the next AGM. The company has to inform, within seven days of the appointment,
the auditor so appointed, unless he is a retiring auditor (s.224). The company, however must
obtain a certificate from the auditor to the effect that the appointment or re-appointment is

within the limits of the number of audits which can be undertaken by an auditor. No company
or its Board of Directors shall appoint or reappoint any person who is in full time employment

elsewhere; or firm as its auditor, if such person or firm is, at the date of such appointment or

re-appointment, holding appointment as auditor of the specified number of companies or more
than the specified number of companies. However, in the case of a firm of auditors, “specifi ed

number of companies” shall be construed as the number of companies specified for every partner

of the firm who is not in full-time employment elsewhere. The specified number means (a) in the

case of a person or firm holding appointment as auditor of number of companies each of which
has a paid up share capital of less than 25 lakhs, 20 such companies; (b) in any other case, 20
companies, out of which not more than 10 shall be companies each of which has a paid-up share
capital of ` 25 lakhs or more. Where a firm is appointed as auditors, the ceiling of twenty will be

per partner. However, when any partner of a firm or auditors is also a partner in any other fi rm

or firms of auditors, the overall ceiling in relation to such partner will also be twenty.
212 LOVELY PROFESSIONAL UNIVERSITY