The Companies Act, 2013 has defined the term Financial Year in order to ensure uniformity of financial year among all companies. Under the previous law i.e the Companies Act, 1956 (Old Act), the term Financial Year was not defined and Companies had the liberty to fix their financial year (for example-1st April to 31st March or 01st January to 31st December).
Companies Act, 2013 stipulates that every company is obliged to have the financial year starting from 1st April to 31st March.
Definition of ‘Financial Year’
Section 2(41) of Companies Act, 2013 defines Financial Year as:
“financial year", in relation to any company or body corporate, means the period ending on the 31st day of March every year, and where it has been incorporated on or after the 1st day of January of a year, the period ending on the 31st day of March of the following year, in respect whereof financial statement of the company or body corporate is made up:
Provided that where a company or body corporate, which is a holding company or a subsidiary or associate company of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, the Central Government may, on an application made by that company or body corporate in such form and manner as may be prescribed, allow any period as its financial year, whether or not that period is a year:
Provided further that any application pending before the Tribunal as on the date of commencement of the Companies (Amendment) Ordinance, 27 , shall be disposed of by the Tribunal in accordance with the provisions applicable to it before such commencement
Provided also that a company or a body corporate, existing on the commencement of this Act, shall, within a period of two years from such commencement, align its financial year as per the provisions of this clause;
- The first financial of the Company shall be from the date of incorporation till 31st March of the following calendar year.
- The subsequent financial year of companies shall be from 1st April till 31st
- Company or body corporate, which is a holding company or a subsidiary or associate company of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, can make an application to the Central Government for change in the financial year.
Approving Authority for change in Financial year
Regional Director (The Central Government has delegated its power to Regional Director in this regard).
Brief steps to be followed in the process
The term Financial Year is generally defined in the Articles of Association of a Company. Hence the Company may require to alter its articles.
Step 1: Convening of Board Meeting to approve the following resolutions: -
- Change in Financial year
- Change in Articles of association, if required
- Authorization to a practicing professional for appearance before Regional Director (Central Government)
- Calling of General Meeting.
Step 2: Issuance of General meeting notice.
Step 3: Obtaining members approval by way of special resolution for the alteration of Articles.
Step 4: Filing of e-form MGT-14 with RoC within 30 days of passing special resolution.
Step 5: Filing of application with Regional Director in Form RD-1 (Timeline: within 60 days of passing the resolution) along with the following documents
- copy of the application along with grounds and reasons for change in the financial year
- copy of the minutes of the board meeting at which the resolution for change in the financial year was passed
- copy of the minutes of the general meeting at which the resolution for the alteration of articles was passed
- copy of the altered articles of association.
- copy of memorandum of association.
- Power of Attorney or Memorandum of Appearance, as the case may be;
- details of any previous application made within last five years for change in financial year and outcome thereof along with copy of order.
Step 6: Examination of application by Regional Director: The Regional Director after examining the application may call for further information that needs to be submitted in e-form Form RD GNL-5 within the prescribed time limit. Upon receipt of all information, the Regional Director may call for the personal hearing which needs to be attended by the authorized person.
Step 7: Order by Regional Director: The Regional director shall in this step pass an order.
Step 8: Filing of Order with the ROC: Certified copy of the order shall be filed with the Registrar of Companies (ROC) in form INC-28 within thirty days of the receipt of the copy of the order. In case the Company fails to file INC-28 within 30 days then it will be required for condonation of delay.
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