1. A private limited company has six directors-two whole time directors and one Managing Director. The Managing Director is a foreign national, who visits India off and on.
2. The balance sheet and the profit and loss account of a particular year were not authenticated by the Managing Director because at the time of the relevant board meeting, he was in a foreign country. Consequently, the annual accounts were authenticated by two other directors along with the Secretary of the company as authorized by the board. A note was given on the accounts explaining the reason why the Managing Director could not sign the accounts.
3. The querist requested the Committee’s opinion on the following:
(a) Whether the statutory auditors can object to the above authentication as non-compliance of Sec. 215(1) of the act, in the absence of the Managing Director’s signature.
(b) Whether in sub-section (2) of Sec. 215, the word “Director” includes Managing Director.
(c) Whether attaching a statement with the annual accounts explaining the reason, why the Managing director could not sign the balance sheet and profit and loss account (being absent from India) is enough and the annual accounts be treated as properly authenticated under the provisions of Sec. 215.
Opinion August 13, 1982
1. Section 215 (1) of the Companies Act, 1956, provides that every balance sheet and every profit and loss account of a company other than a banking company shall be signed on behalf of the board of directors, by its Manager or Secretary, if any, and by not less than two directors of the company one of whom shall be managing director where there is one. However, it has been provided under Section 215 (2): “In the case of a company not being a banking company, where only one of its directors is for the time being in India, the balance sheet and the profit and loss account shall be signed by such director; but in such a case there shall be attached to the balance sheet and the profit and loss account a statement signed by him explaining the reason for non-compliance with the provisions of sub-section (1)”.
2. The Committee is of the opinion that in view of the above and in the circumstances of the case the authentication of the annual accounts by two other directors along with the Secretary of the company as authorized by the board with a statement attached to the accounts explaining the reason for non-compliance with the provisions of sub-section (1) is proper.
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