Home / Sec 25 Company - Management & Accounts

Sec 25 Company - Management & Accounts

• Management of Company
• Accounts & Audit

Management

Management: Board of Directors/Governing Council/Governing Body In case of section 25 companies, the management is divorced of the ownership. The Company is managed by the Board of Directors/Governing Council/Governing Body, which consists of Directors/representative elected by the Shareholders. In section 25 Companies , Shareholders are generally not appointed as the Directors.

Board of Directors/Governing Council/Governing Body is responsible for managing the day to day affairs of the Company and are responsible towards the shareholders for their conduct. Directors hold fiduciary relationship with the shareholders and acts as their Trustees. Shareholders have the right to appoint and remove the Directors at any point of time. Company is binded by all the acts of the Directors done in exercise of their authority.

Board of Directors/Governing Council/Governing Body is required to meet every six months during the year to discuss the issues related to the management of the Company, the Companies Act 1956 provides specific powers, which can be exercised by the Board in their meeting only and whereas all other powers can be delegated by the Board of Directors to any other Director or can be exercised on its own. All the decisions at the meeting of the Directors are taken by way of majority voting and each Director holds one vote.

Some of the major decisions, which can only be taken by the Board of Directors/Governing Council/Governing Body in their meeting, are:

1. Power to borrow money
2. Power to call , the amount pending on shares
3. Power to authorize buy-back

Shareholders

Shareholders do not interfere in the day to day business activities of the Company. The Board of Directors is required to submit the audited Balance Sheet & Profit & Loss account statement to the Shareholders every year along with their report as to the performance of the company during the last financial year and expectations from the future. The Balance Sheet & Profit & Loss account is required to be audited by the statutory auditor, appointed by the Shareholders.

Every year, a meeting of shareholders is held i.e. Annual General Meeting, where they approve the audited Balance Sheet & Profit & Loss account and discusses the performance of the company during the last financial year. The Board of Directors is under an obligation to answer all the queries of the shareholders related to the annual financial statement and performance of the Company. The Board of Directors Board of Directors/Governing Council/Governing Body are responsible for disclosing the prescribed key information in respect of the Company, in their report to the shareholders.

Decisions like change in name, change in business, increase in authorized capital, alteration of Memorandum & Articles of Association etc requires the permission of the shareholders provided any decision as to changes in the Memorandum & Articles of Association shall be approved by the Regional Director.

All the decisions at the meeting of the shareholders are taken by way of voting and vote of each shareholder is in proportion to the share capital held by them. Some decision requires majority voting and some 3/4th voting.

In case the Shareholders want to discuss any issue related to the company or take any decision, they have the right to ask the Board of Directors, to call a meeting of the shareholders called as Extra Ordinary general meetings. For calling the extra ordinary general meeting, requisition should by the members fulfilling the following criteria:

• In the case of a company having a share capital, such number of them as hold at the date of the deposit of the requisition, not less than one tenth of such of the paid-up capital of the company as at that date carries the right of voting in regard to that matter;
• In the case of a company not having a share capital, such number of them as have at the date of deposit of the requisition not less than one/tenth of the total voting power of all the members having at the said date a right to vote in regard to that matter.

Rights of Shareholders

1. To call the general meeting of the shareholders.
2. To appoint & remove Directors
3. To inspect the statutory registers.
4. To receive the audited balance sheet & profit & loss account.
5. To vote on all the matters before the general meeting.
6. To alter the Memorandum & Articles of Association

Accounting & Audit

Books of Account

Section 25 Companies are required to maintain books of account with respect to: 1. All sums of money received and expended by the company and the matters in respect of which the receipt and expenditure take place; 2. All sales and purchases of goods by the company; 3. Assets and liabilities of the company;

The Book of accounts shall give a true and fair view of the state of affairs of the company and shall be kept at the registered office of the company unless the Board of Directors decides otherwise.

Method of Accounting

Section 25 Companies are required to maintain their books of account on accrual basis and the double entry system of accounting. The fundamental assumption of going concern shall also be followed.

Financial Statements

Section 25 Companies are required to prepare annual financial statements which would consist of the following:

1. A Balance Sheet – to give a true and fair view of the state of affairs of the company as at the end of the financial year; and
2. A Profit and Loss Account – to give a true and fair view of the profits or losses of the company for the financial year.

The Profit and Loss Account and the Balance Sheet are to be prepared in format specified under the Companies Act 1956 and in accordance with the Accounting Standards issued by the Institute of Chartered Accountants of India and the requirements of the Indian Companies Act, 1956.

Fiscal Period

The fiscal period which is generally followed both under the Companies Act, 1956 and the Income Tax Act 1961 is 1st April-31st March every year.

Companies have the option to change their fiscal period as per their need but the fiscal period cannot be more than 18 months.

Statutory Audit

Every Indian company is required to get its annual accounts audited by the statutory auditor appointed by the shareholders of the company in the Annual General meeting every year. The Statutory Auditor of the Company holds its office from the conclusion of one Annual General Meeting till the conclusion of next Annual General Meeting and therefore needs to be reappointed at each Annual General meeting. The report of the Statutory Auditor as to its audit is sent to all the shareholders. Only a Chartered Accountant in practice, who is member of the Institute of Chartered Accountants of India, can be appointed as Statutory Auditor.

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