1.34 Query: Finalisation of previous years’ accounts and audit thereof in the current year.
1.A public sector company is engaged in the production of Methanol, Formalin, Petrolite – M, Petrolite R- 50 etc. in Assam. The company commenced commercial production in 1976. The company has cash surplus and is planning for further expansion of Formalin and Methanol projects. The expansion plan of methanol project of 300 TPD requires atleast Rs. 2000.00 crores. For which the company intends to make a public issue. However, the company has not been in a position to close the accounts from the year 1987-88 onwards due to prolonged agitations and disturbed situation prevailing in the State. As per the querist, the company can not go for the public issues as per the SEBI’s directives. Under the circumstances, the Board of Directors of the company has decided to apply to the competent authority for exemption/relaxation under section 637 A and 211 (4) of the Companies Act, 1956 for submission of accounts and audit thereof.
2. As per the querist, now the company proposes to prepare accounts for each year from 1987-88 onwards to 1993-94 separately. However, it would annex reports like directors’ report, auditors’ report etc., at the end of the year 1993-94 only. Further, all adjustments pointed out by auditors which are insignificant in nature would be adjusted in the year 1993-94. The company would conduct only one annual general meeting (AGM) which will consider accounts for all the years including current year’s. As per the querist, in past, the Department of Company Affairs, Government of India, has granted certain similar exemption/relaxation to companies, affected by militancy activities.
3. Insofar as the statutory audit and government audit of the company are concerned, as per the querist, it would require the following exemptions/relaxations, namely:-
(a) complete exemption of statutory audit from 1987-88 to 1992-93 or only some test audit may be conducted; and
(b) complete exemption under sections 619(3) and 619(4) of the Companies Act, 1956 upto 1992-93.
4.The querist has sought the opinion of the Expert Advisory Committee on the following issues:
(a) Whether the procedure suggested for finalisation of accounts of previous years, in para 2 above is correct? If not, whether the company can conduct seven annual general meetings consecutively in a year or two? If yes, the minimum gap in days required between two annual general meetings may be advised.
(b) Any other solution to the problem of the company, the Expert Advisory Committee may like to advise.
Opinion November 25, 1994
1. The Committee notes that the above query relates primarily to the issue as to whether accounts pertaining to years 1987-88 onwards, and upto 1992-93 can be adopted at the annual general meeting for the year 1993-94. Accordingly, the opinion of the Committee is restricted to the above issue only. The Committee has not considered any legal or other issue that may arise in this context.
2.The Committee notes sections 217(1) and 227(2) of the Companies Act, 1956, which inter alia read as follows:
“217(1) There shall be attached to every balance-sheet laid before a company in general meeting, a report by its Board of Directors, with respect to - ……….”
“227(2) The auditor shall make a report to the members of the company on the accounts examined by him, and on every balance-sheet and profit and loss account and on every other document declared by this Act to be part of or annexed to the balance-sheet or profit and loss account, which are laid before the company in general meeting during his tenure of office, and the report shall state whether, in his opinion and to the best of his information and according to the explanations given to him, the said accounts give the information required by this Act in the manner so required and give a true and fair view –
(i) in the case of the balance-sheet, of the state of the company’s affairs as at the end of its financial year; and
(ii) in the case of the profit and loss account, of the profit or loss for its financial year.”
3. On the basis of the above, and subject to para 1 above, the Committee is of the opinion that-
(i) In the peculiar facts and circumstances of the case, the company may adopt accounts relating to years 1987-88 onwards at the current year’s annual general meeting. However, these accounts should be prepared and audited as per the requirements of the Act separately, and a separate audit report/board report should be attached/annexed with each year’s accounts;
(ii) The Committee fees that the suggestion at (i) above would meet the requirements of the querist. ________________________
|