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The Corporate Affairs Ministry (MCA) has relaxed the norms requiring Indian companies with overseas subsidiaries to file ‘audited’ financial statements of such foreign subsidiaries with the Registrar of Companies (RoC) in India.
After consulting with the CA institute, the Ministry has now clarified that even ‘unaudited’ financial statements of foreign subsidiaries can be filed with the RoC and will be treated as due compliance of Indian company law.
This dispensation will be allowed in case of a foreign subsidiary which is not required to get its financial statements audited as per legal requirements prevalent in the country of its incorporation, and which does not get its financial statements audited.
The Ministry has also clarified that unaudited accounts will need to be translated in English, if the original accounts are not in English.
Moreover, the format of financial statements of foreign subsidiaries should be, as far as possible, in accordance with the Companies Act 2013.
In case this is not possible, a statement indicating the reasons for deviation may be placed/filed along with such financial statements, the Ministry has said.
Currently, the Indian company law stipulates that a company should, along with its financial statements to be filed with the RoC, attach the financial statements of its subsidiary or subsidiaries that have been incorporated outside India.
The Ministry has also clarified that a company holding a general meeting after giving a shorter notice (as provided under Section 101 of Companies Act 2013) may also circulate financial statements (to be laid/considered in the same general meeting) at such shorter notice.
Reacting to the clarifications, professional services firm KPMG said in a note that these indicate that the Ministry is committed to address the practical challenges faced by corporates while implementing the requirements of the Companies Act 2013.
“These clarifications are a step in the right direction and echo the Ministry’s efforts to nurture a supportive regulatory environment”, the KPMG note said.
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