Neetika Ahuja February 21 2022 Revising financial statements under Companies Act 2013 Clasis Law | Corporate & Commercial - India Neetika Ahuja Corporate & Commercial The Companies Act 1956 comprised no provisions with respect to revision of company's accounts. While the Department of Corporate Affairs had issued circulars regarding reopening and revising annual accounts on technical grounds to meet the requirements of other laws, provided that the revised accounts were adopted at a general meeting and filed with the registrar of companies, although there was no authority that mandated a specific revision procedure.The Companies Act 2013, however, introduced sections 130 and 131 to cover revising and reopening accounts after the Satyam Computer Service case, in which the court ordered the company to recast its accounts. The committee report on the Act provided that where accounts are revised for specific purposes, companies may revise their financial statements subject to the National Company Law Tribunal's (the Tribunal's) approval. The sections are relevant in order to deal with cases related to mismanagement or fraud, or where the financial statements do not reflect a true and fair view of a company's affairs.Section 130 provides for compulsory revision of a financial statement by order of a court or the Tribunal, which is based on an application made by a statutory or regulatory authority, such asthe Income Tax Department of the Central Board for Direct Taxes;the Securities and Exchange Board; orany other concerned person.Reopening accounts for up to eight financial years immediately preceding the relevant financial year is permitted unless the company is under investigation.Section 131 of the Act provides that a company can voluntary revise its financial statements for up to three financial years, where this immediately precedes the financial year in which the application was filed. The directors of a company can revise the financial statement if it appears that the company's financial statement or the board of directors' report does not comply with the provisions of section 129 or section 134. In order to obtain approval, a company must prepare an application for revision of its financial statement in accordance with the requirements set out by the court or the Tribunal. Such a revision can be made only once per financial year. Following the revisions, a disclosure with detailed reasons for revising the financial statement or report must also be provided in the board's report of the relevant financial year (ie, the financial year in which the revision was made).Prior to passing any order for the revision under the relevant sections, the court or the Tribunal may consider the statements made by the statutory or regulatory authority, or any other concerned person.While in the past many companies were ordered to reopen and recast their financial statements in cases of oppression, mismanagement and fraud, they may suo moto apply to revise financial statement if there are mistakes in financial statements due to clerical errors or the non-application of appropriate accounting standards.For further information on this topic please contact Neetika Ahuja or Jatin Oberoi at Clasis Law by telephone (+91 11 4213 0000) or email ([email protected] or [email protected]). The Clasis Law website can be accessed at www.clasislaw.com.