Regulatory Alert – Amendment to the Companies (Accounts) Rules, 2014
18 August 2022
The Ministry of Corporate Affairs (“MCA”) on 5th August 2022 notified the Companies (Accounts) Fourth Amendment Rules, 2022 (“the Amended Rules”) by further amending Companies (Accounts) Rules, 2014. The amendment is made in the provisions related to the ‘manner of books of account to be kept in electronic mode’.
Key highlights of the Amended Rules are summarised below
- The Companies that maintain their books of account and other relevant books and papers in electronic mode must maintain in such a way that such records remain accessible in India for further use/reference, at all the times.
- The Companies must maintain a system for storage/retrieval/display/printout of the electronic records in the manner deemed appropriate by the companies’ Board Members and Audit Committee. Further, the backup of the books of account and other books and papers maintained in electronic mode, including at a place outside India, must be kept in servers physically located in India on a daily basis (instead of a periodical basis).
- At the time of filing annual financial statements, the companies are required to provide certain information regarding their service provider viz. name, internet protocol address, location, cloud storage address, etc. However, where the service provider is located outside India, it is now mandatory for the companies to provide the name and address of the person in control of the books of account and other books and papers, in India.
The intention here is to have data transparency by making the electronic records, including their backup, available at all the times. For this, companies must ensure to have strong technology solutions/robust mechanisms in place to comply with the above.