The Financial Statement is the important document of the company which is required to be prepare in every financial year and audited by the auditors of the company. The Financial Statement provides an overview of the company’s assets, Liabilities and shareholders’ equity. The Financial Statement is required to prepare so that the shareholders can get the information about the financial position and operation of the company. This information can be used by the shareholders to know about the company’s performance and can make
decisions whether to invest in that company or not.
What is Financial Statement?
Section 2 (40) of the companies Act 2013 states that the financial statement includes the following items:
- Balance sheet;
- Profit and loss account, or in the case of a nonprofit organization, an income and expenditure account for the financial year
- Cash flow statement
- Statement of changes in equity, if any; and
- Annexure forming part of the Financial Statement
How to Prepare Financial Statement?
The financial statement of the company shall be prepared in accordance with Schedule III of section 129 of the Companies Act, 2013 and such Financial Statement laid before the shareholders at the Annual general meeting of the company.
Who can sign the financial statements as per the Companies Act 2013?
As per the provisions of Section 134 of Companies Act, 2013 Financial Statement will be signed by the following:
- Chairperson of the Company (if he is authorized by the board of directors) OR
- Two Directors (out of which one shall be Managing Director) AND
- Chief Executive Officer/ Company Secretary/ Chief Financial Officer of the Company (on the basis of their appointment in the Company)
Note: Chairperson of the company can sign the financial statements after authorized by the Board of directors no matter whether he chaired the meeting or not.
The signed financial statement submitted to the auditor then the auditor shall prepare a Auditors’ report and the same shall be attached to the financial statement.
How many directors must sign financial statements?
The Financial Statement of the company is required to sign by two directors out of which one shall be Managing Director or by one director if the company has only 1 director.
Is it mandatory to sign financial statement from the company secretary?
As per Section 134(1), the company in which the Whole-time Company Secretary is appointed, then it is mandatory that the Financial Statement is signed from the Whole-time Company Secretary. Further if the company appointed Chief Executive Officer or Chief Financial Officer then the financial statement shall also be signed from them.
Where the company does not have a CFO and CS then only chairman can sign the financial statement. Where the company does not have a chairperson or not authorised by the board, signing of financial statements by two directors one of which shall be managing director and the CFO, if he is a director.
Signing of Financial Statement of One Person Company ‘OPC’
Financial statement of One Person Company can be signed by only one director.
Whether financial statements can sign electronically?
The Financial Statement of the Companies can also be signed electronically with the Digital Signature of the Directors, Chief Executive Officer/ Company Secretary/ Chief Financial Officer and the Statutory Auditors of the Company.
Date of Signing Of Financial Statement
The date of signing of Financial Statement including Balance sheet, Profit & Loss, Cash Flow Statement and other supporting Documents shall be the date which can either before the date of signing of Audit report or the date of signing of audit report.
Can financial statements have different signing dates?
The financial statements of the company after signed by the Directors send to the Auditors for signing. The Auditors and directors can sign the financial statement from different places and on different dates i.e. the date of signing the Financial statement by the auditors can be different from the date of signing by the directors. When the Financial statement of the Company is signed by both the Directors and the Auditor, then it was adopted by the shareholders in the Annual General Meeting of the Company.
Approval of Financial Statement
As per the provisions of Section 134(1) Financial Statement of the Company shall be approved by the board of Directors in its meeting and signed on behalf of the board.
Adoption and Circulation of Signed Financial Statement
The company is required to adopt the Financial Statement in the Annual General meeting. The Annual General Meeting of the company can be held within 6 months from the end of the financial year i.e. 30th September.
After signing the financial statement, including consolidated financial statement, if any, shall be circulated along with a copy each of—
- any notes or annexure
- the auditor’s report; and
- the Board’s report
Content of Board’s Report:
- Address of Website of the company.
- Director’s Responsibility statement.
- Number of Board Meetings.
- Declaration by Independent Directors.
- Statement of the Company’s affairs.
- Details of Contracts or arrangements with Related party ( Form No. AOC-2 )
- Details of loans, guarantees, or Investments.
- Any adverse remarks received from the Secretarial Auditor in his Report (MR-3) or by Internal auditor and comment on that remarks by the Board of directors of the
- Amount carrying reserves or paid by Dividend.
- CSR Policy and initiatives
- Policy on Director’s Appointment and Remuneration.
- Conservation of energy, technology absorption and foreign exchange.
- Details of fraud Reported by auditor.
- Statement of Annual Evaluation
Conclusion
In accordance with the Section 134 of the Companies Act, 2013 Financial Statement of the company must be sign in accordance with the rules and the provisions of the Act. It is mandatory for every company to follow the provisions of the Act. If the company fails to comply with the provisions of signing of financial statements as mentioned in the Act then the company shall be liable to a penalty of three lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees and all the concerned directors / officers of the company become liable to fine / imprisonment / both.
