Section 136 Right of member to copies of audited financial statement – Companies Act 2013

Amended and updated notes on section 136 of Companies Act 2013. Provisions and rules related to right of member to copies of audited financial statement.

Amended and updated notes on section 136 of Companies Act 2013. Detail discussion on provisions and rules related to right of member to copies of audited financial statement.

Chapter IX (Sections 128138) of the Companies Act, 2013 (CA 2013) deals with the provisions related to accounts of companies. Section 136 of CA 2013 provides for right of member to copies of audited financial statement.

Recently, we have discussed in detail section 135 (Corporate Social Responsibility) of CA 2013. Today, we learn the provisions of section 136 of Companies Act 2013 read with the Companies (Accounts) Rules, 2014.

Section 136 of the Companies Act, 2013 has been notified by the Ministry of Corporate Affairs (MCA) vide Notification No. S.O. 902(E) issued dated 27.03.2014. This notification shall come into force from 1st April, 2014 i.e. the commencement date of section 136 is 01-04-2014.

A new section 136 of the Companies Act, 2013 came into force from 1st April, 2014 vide Notification No. S.O. 902(E) issued dated 27.03.2014. Section 136 corresponds to Section 219 of the Companies Act, 1956 i.e. right of member to copies of balance-sheet and auditors’ report. The provisions of section 136 provides for right of members, debenture holders, to have copies of audited financial statement.

Name of ActThe Companies Act 2013
Enacted byParliament of India
Administered byMinistry of Corporate Affairs (MCA)
Number of Chapters29
Number of Sections484 (470-43+57)
Number of Schedules7
You are reading:
Chapter No.IX
Chapter NameAccounts of Companies
Section No.136
Section NameRight of member to copies of audited financial statement
Monthly Updated EditionCompany Law PDF

Who are entitled for Audited Financial Statement?

As per section 136(1) of the Companies Act, 2013, a copy of the financial statements which are to be laid before a company in its general meeting shall be sent in not less than twenty-one (21) days before the date of the meeting to the following:

  • a) Every member of the company;
  • b) Every trustee for the debenture-holder of any debentures issued by the company; and
  • c) All persons other than such member or trustee, being the person so entitled.

Note that such financial statements shall also annex/ attach the Consolidated Financial Statements (CFS), if any, Auditor’s Report and every other document required by law to be annexed or attached to the financial statements.

However, the first proviso to sub-section (1) of section 136 states that the above mentioned requirements shall be deemed to be complied with in the case of a listed company, if:

i) Available for Inspection:

The copies of the documents are made available for inspection at its Registered Office during working hours for a period of 21 days before the date of the meeting; and

ii) Send Statement with Salient Features:

A statement containing the salient features of such documents in Form AOC-3 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 21 days before the date of the meeting unless the shareholders ask for full financial statements.

According to section 136(2), a company shall also allow every member or trustee of the holder of any debentures issued by the company to inspect the documents stated u/s 136(1) at its registered office during business hours.

Manner of Circulation of Financial Statements

As per second proviso to sub-section (1) of section 136, the Central Government may prescribe the manner of circulation of financial statements of companies having such net worth and turnover as may be prescribed.

Accordingly, the Rule 11 of the Companies (Accounts) Rules, 2014 has prescribed the manner of circulation of financial statements in certain cases which has been sited hereunder.

In case of all listed companies and such public companies which have a net worth of more than ₹1 Crore and turnover of more than ₹10 Crore, the financial statements may be sent by:

a) Electronic Mode: The financial statement may be sent by electronic mode to such members whose:

  • i) Shareholding is in dematerialised format and whose email Ids are registered with Depository for communication purposes;
  • ii) Shareholding is held otherwise than by dematerialised format and who have positively consented in writing for receiving by electronic mode; and

b) Physical Copy: In all other cases, the financial statement may be sent by despatch of physical copies through any recognised mode of delivery as specified u/s 20 of the CA 2013.

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.

Additionally, every company having a subsidiary or subsidiaries shall,

a) place separate audited accounts in respect of each of its subsidiary on its website, if any;
b) provide a copy of separate audited financial statements in respect of each of its subsidiary, to any shareholder of the company who asks for it.

Punishment for Contravention of Section 136 of Companies Act, 2013

According to section 136(3), if any default is made in complying with the provisions of Section 136 of CA 2013:

  1. The company shall be liable to a penalty of ₹25,000; and
  2. Every officer of the company who is in default shall be liable to a penalty of ₹5,000.

Compare to the CA 1956, the punishment in case of contravention of the provisions related to Section 136 of the Companies Act, 2013 has been increased in case of default by company.

Section 136 of Companies Act 2013: Right of member to copies of audited financial statement

Section 136 shall come into force on 1st day of April, 2014 vide Notification No. S.O. 902(E) dated 27th March, 2014.

(1) 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:

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:

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:

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.
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.

Exception/ Modification/ Adaptation:

1) In case of Nidhis, sub-section (1) of Section 136, shall apply, subject to the modification that, in the case of members who do not individually or jointly hold shares of more than one thousand rupees in face value or more than one per cent. of the total paid-up share capital whichever is less, it shall be sufficient compliance with the provisions of the section if an intimation is sent by public notice in newspaper circulated in the district in which the Registered Office of the Nidhi is situated stating the date, time and venue of Annual General Meeting and the financial statement with its enclosures can be inspected at the registered office of the company, and the financial statement with enclosures are affixed in the Notice Board of the company and a member is entitled to vote either in person or through proxy. – Notification No. G.S.R. 465(E) dated 5th June, 2015.

2) In case of Section 8 (Non-profit) Companies, in sub-section (1), for the words “twenty one days”, the words “fourteen days” shall be substituted. – Notification No. G.S.R. 466(E) dated 5th June, 2015.

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