Procedure for Approval of Financial Statements of a Listed Entity

Aakanksha Singhal

Aakanksha Singhal

Published on: Feb 18, 2022

Khushboo Sharma

Updated on: Jun 7, 2023

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Introduction

The financial statement in relation to a company comprises of the balance sheet, profit & loss statement [income and expenditure account in case of Non-Profit Organization], and cash flow statement, statement of variation in equity if any, and explanatory notes for any particular financial year exhibiting a bona fide view of company’s state of affairs. Also, such financial statements must be furnished in accordance with the provisions of Schedule III of the Companies Act, 2013.

Applicable Provisions:

1. Regulation 29, 30, 33 and 47 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
2. Section 136, 137, 143, 173 & 177 of Companies Act, 2013
3. Rule 12 of Companies (Accounts) Rules, 2014

Mandatory Requirements:

• Approval of the Board of directors is required prior to the signing of financial statements on behalf of the Board by certain Key Managerial Persons as under:
  • Company’s chairperson duly authorized by Board
  • Two directors out of which one shall be managing director
  • Chief Executive Officer
  • Chief Financial Officer
  • Company secretary in case there’s one
• A limited review report to be placed before the board, at its meeting where financial results are to be approved prior to their submission to stock exchange(s) [As per Rule 33 (2) of SEBI (LODR) Regulations]

Procedure

1. Convene Audit Committee Meeting [Section 177 of the Companies Act, 2013]:
   Refer to the Procedure for Convening the Audit Committee Meeting.
2. Intimation to the Stock Exchange [As per LODR Regulations]:
   Listed Companies shall at least 05 working days in advance, excluding the intimation date and the Board Meeting date where the proposal of financial results approval shall be noted, intimate the Stock Exchange on the same.
3. Convene a Meeting of Board of Directors [As per section 173 & SS-1]:
   Refer to the Procedure for Convening the Meeting of the Board of Directors.
4. File Form MGT-14 with ROC:
   File Form MGT-14 with the ROC within 30 days of passing Special Resolution in General Meeting along with fee as specified in the Companies (Registration offices and fees) Rules, 2014 and with the following attachments;
   • Certified True Copies of the Special Resolution passed along with Explanatory Statement
   • Copy of the Notice of meeting sent to members along with all the annexure
   • Shorter Notice Consent Letters from the members in case the General Meeting was convened at shorter notice
   • Copy of Attendance Sheet of General Meeting
   • Any other attachment as may be applicable.
5. Advertisement in Newspapers [As per LODR Regulations]:
   • Listed entity shall publish its financial results, modified opinion(s)/reservation(s) if any of the auditor, quarterly statements of deviation(s)/variation(s) ensuing audit committee’s review and its explanation in directors report and notices given to shareholders by advertisement in-
     • at least one English language national daily newspaper and
     • one regional daily newspaper
     having wide circulation in the whole of India/the region where listed entity’s registered office is located
   • Such advertisement shall be given parallelly along with its submission to the stock exchange(s) and a weblink for the website of the listed entity and stock exchange(s) where further details are available shall also be furnished in the advertisement. [Note: Financial results as per Regulation 47(1)(b) of the LODR Regulations, shall be published within 48 hours of the conclusion of the board meeting where the financial results were approved]
6. Auditor’s Report [Section 143]:
   The company’s auditor shall make a report to the members of the company related to the following:
   • Accounts examined by him
   • On every financial statement to be laid before the company in general meeting
   • after taking into account provisions of the Companies Act, accounting & auditing standards and matters vital to be included in the audit report under the provisions of this Act or rules made thereunder or any order made under section 143(11) of the Companies Act
   • to the best of his information and knowledge that said accounts, financial statements give a true and fair view of the state of company’s affairs as at the end of the financial year and profit or loss and cash flow for the year and such other matters as may be prescribed
7. Circulation of Audited Financial Statements [Section 136 and LODR Regulations]:
   • Listed company shall issue a statement inclusive of financial statements/consolidated financial statements, auditor’s report, and every other document required by law in Form AOC-3 to be sent to every member/ trustee for debenture-holder/such other persons of the company at least 21 days prior to the meeting date unless the shareholders ask for full financial statements [Companies which are required to comply with Companies (Indian Accounting Standards) Rules, 2015 shall forward their statement in Form AOC – 3A]
   • Listed entity shall send an annual report at least 21 days prior to the Annual General Meeting in the following manner to its shareholders:
     • Soft copies of the full annual report to all those shareholders (s) who have registered their email addresses for the purpose
     • Hard copy of statement comprising of all the salient features of all the documents to those shareholder(s) who have not been registered or request for the same
   • In the case of all listed companies and such public companies having a net worth of more than Rs. 100 crores and turnover of more than Rs. 10 crores, financial statements may be sent:
     • via electronic mode to such members whose shareholding is in dematerialized format and whose email Ids are registered with Depository for communication purposes
     • where Shareholding is held in any other format, to such members who have given written consent for receiving by electronic mode and
     • by the despatch of physical copies through any recognized mode of delivery, in all other cases
8. Convene General Meeting [Section 96, 100 and SS-2]:
   Refer to the Procedure for Convening the General Meeting.
9. File Form MGT-14 with ROC:
   File Form MGT-14 with the ROC within 30 days of passing Special Resolution in General Meeting along with fee as specified in the Companies (Registration offices and fees) Rules, 2014 and with the following attachments;
   • Certified True Copies of the Special Resolution passed along with Explanatory Statement
   • Copy of the Notice of meeting sent to members along with all the annexure
   • Shorter Notice Consent Letters from the members in case the General Meeting was convened at shorter notice
   • Copy of Attendance Sheet of General Meeting
   • Any other attachment as may be applicable.
10. Filing the Financial Statements with Registrar [Section 137 and Rule 12 of the Companies (Accounts) Rules, 2014]:
    Financial statements including consolidated financial statement, if any, along with the below stated documents and fees shall be filed with Registrar in Form AOC-4 or Form AOC-4 CFS or Form AOC-4 XBRL or Form AOC-4 NBFC as may be applicable:
    • E-Form AOC-4:
      • Duly authenticated Financial statements
      • Statement of subsidiaries in e-Form AOC-1
      • Statement of the fact and reasons for not adopting balance sheet in AGM and/ or not holding AGM
      • Approval letter for extension of financial year or AGM
      • Supplementary or test audit report under section 143 of the Companies Act and details of the comments of CAG of India
      • Company’s CSR policy as per section 135(4) of the Companies Act and details of remaining CSR activities
      • Details of other entity(s) [In case any CSR amount is not spent directly by the company. Details of all such implementing agencies should be attached in that case]
      • Details of salient features and justification for entering into contracts/ arrangements/transactions with related parties as per section 188(1) of the Companies Act in e-Form AOC-2
      • Secretarial Audit Report and Directors’ report as per section 134(3) of the Companies Act
      • Any other Optional attachments as may deem fit
    • Form AOC-4 CFS:
      • Duly authenticated Financial statements
      • Statement of subsidiaries in e-Form AOC-1
      • Supplementary or test audit report under section 143 of the Companies Act and details of the comments of CAG of India
      • Details of other entity(s)
      • Secretarial Audit Report and Directors’ report as per section 134(3) of the Companies Act
      • Any other Optional attachments as may deem fit
    • Form AOC-4 XBRL:
      • XBRL financial statements duly authenticated as per section 134 of the Companies Act (including Board’s report, auditors’ report, and other documents)- Mandatory
      • XBRL document in respect of Consolidated financial statement (This is mandatory if the company is having Subsidiary and Yes is selected for consolidated Financial Statements)
      • Statement of subsidiaries as per section 129 of the Companies Act in e-Form AOC-1 which shall be attached in respect of Foreign subsidiaries
      • Statement of the fact and reasons for not adopting balance sheet in the annual general meeting which shall be mandatory if nature of financial statements was selected as Provisional Un-adopted financial statements
      • Statement of the fact and reasons for not holding the AGM which shall be mandatory if the AGM was not held
      • Approval letter for the extension of the financial year or AGM which shall be mandatory if an extension was so granted for AGM or financial year
      • Supplementary or test audit report under section 143 of the Companies Act which shall be mandatory if CAG of India had conducted supplementary or test audit under section 143
      • Details of the comments of CAG of India which shall be mandatory if CAG of India had conducted supplementary or test audit under section 143
      • Any other Optional attachments as may deem fit
    • Form AOC-4 NBFC:
      • Copy of financial statements duly authenticated as per section 134 of the Companies Act (including Board’s report, auditors’ report, and other documents)- Mandatory
      • Statement of subsidiaries as per section 129 of the Companies Act in e-Form AOC-1 (This shall be a mandatory attachment in case the company has any subsidiaries)
      • Statement of the fact and reasons for not adopting Financial statements in the annual general meeting (AGM) which shall be a mandatory attachment in case provisional unadopted financial statements are being filed
      • Statement of the fact and reasons for not holding the AGM which shall be a mandatory attachment in case AGM was not held)
      • Approval letter for the extension of the financial year or AGM which shall be a mandatory attachment in case extension is granted for AGM or financial year
      • Supplementary or test audit report under section 143 of the Companies Act which shall be a mandatory attachment in case CAG has conducted supplementary or test audit under section 143
      • Company CSR policy as per section 135(4) of the Companies Act which shall be a mandatory attachment in case CSR is applicable to the company
      • Details of other entity(s) which shall be a mandatory attachment in case any amount of CSR is not spent directly by the company. Details of all such implementing agencies should be attached in that case
      • Details of salient features and justification for entering into contracts/Arrangements/ transactions with related parties as per section 188(1) in e-Form AOC-2 which shall be a mandatory attachment in case of any transactions with related parties
      • Details of comments of CAG if India which shall be a mandatory attachment in case CAG of India has commented or supplemented the audit report under section 143
      • Secretarial Audit Report which shall be mandatory if Secretarial Audit was applicable
      • Directors’ report as per section 134(3) of the Companies Act which shall be mandatory if the same was mentioned in the Segment VI of the e-form
      • Details of remaining CSR activities (Details of CSR programs/projects/activities not mentioned in e-form is mandatory to be attached in excel sheet)
      • Any other Optional attachments as may deem fit
11. Events to be intimated to Stock Exchanges w.r.t financial [As per LODR Regulations]:
    • Listed entity shall submit the financial results with the concerned stock exchange (s) in the following manner:
      • Furnish quarterly financial results to the stock exchange within 45 days of the end of each quarter, other than the last quarter
      • In case the listed entity has subsidiaries, in addition to the requirement stated above, it may also submit quarterly financial results subject to the following
        • Stock exchange to be intimated whether or not it has opted to additionally submit quarterly consolidated financial results in the first quarter of financial year and option so availed shall not be changed during the financial year
        • In case the listed entity changes its option in any subsequent year it shall furnish comparable figures for the previous year in accordance with the option exercised for the current financial year
      • Quarterly and year-to-date financial results may be either audited or unaudited subject to the following
        • In case the listed entity opts to submit unaudited financial results it shall be subject to limited review by its statutory auditors and shall be accompanied by the limited review report
        • In case the listed entity opts to submit audited financial results they shall be accompanied by the audit report
    • Listed entity shall also submit the audited financial results w.r.t last quarter along with the results for the entire financial year along with a note stating that the figures of last quarter are the balancing figures between audited figures in respect of the full financial year and the published year-to-date figures up to the third quarter of the current financial year
    • The applicable formats of financial results and [Statement on Impact of Audit Qualifications (for audit report with modified opinion)] shall be in the manner specified by the Board.
12. Submission of Annual Report [As Per LODR Regulations]:
    • The listed entity shall submit an annual report to the stock exchange within 21 working days of it being approved and adopted in the AGM
    • The annual report shall contain the following:
      • Audited financial statements i.e. balance sheets, profit and loss accounts, etc [and Statement on Impact of Audit Qualifications as stipulated in regulation 33(3)(d) of the LODR Regulations, if applicable]
      • Consolidated financial statements audited by its statutory auditors
      • Cash flow statement presented only under the indirect method as prescribed in Accounting Standard-3 or Indian Accounting Standard 7, as applicable, specified in Section 133 of the Companies Act, 2013 read with relevant rules framed thereunder or as specified by the Institute of Chartered Accountants of India, whichever is applicable
      • Directors report
      • Management discussion and analysis report-either as a part of directors report or addition thereto
      • For the top [five hundred] listed entities based on market capitalization (calculated as of March 31 of every financial year) business responsibility report describing the initiatives taken by them from an environmental, social and governance perspective, in the format as specified by the Board from time to time. And listed entities other than top [five hundred] based on market capitalization and those which have listed their specified securities on SME Exchange, may include these business responsibility reports on a voluntary basis in the format as specified
    • Annual report shall contain any other disclosures specified in Companies Act, 2013 along with other requirements as specified in Schedule V of these regulations
13. Submission of Annual Information Memorandum [As Per LODR Regulations]:
    Listed entity shall submit to the stock exchange(s) an Annual Information Memorandum in the manner specified by the Board from time to time.