First financial year of the company

This query is : Resolved

Guest

Guest (Querist)

04 February 2012
Can the first Financial Year be for more than 12 months, if Yes where it is written. For e.g. If a Company id incorporated on 23.03.2010, can it make Annual Accounts from 23.03.2010 to 31.03.2011 (of more than 12 months)in AGM held on or before the due date 22.03.2010. If yes, Please tell where it is specified in the Companies Act, 1956?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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04 February 2012 i) Section 2(17) of the companies Act,1956 says financial year can be an year or not, meaning thereby it can be > or < 12 months.
ii) Again as per section 210(4) it can be 15 months to be extended to 18 months with the permission of Registrar of Companies.

Ravi Bagaria

Ravi Bagaria (Expert)
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06 December 2012 Dear Sir,

What if instead of mentioning 23 March 2010 to 21 March 2011 on the Profit and Loss account it was mentioned 3 March 2010 to 21 March 2011.

Although the incorporation was on 23 March 2010. Is this wrong by Law?

Ravi

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Asha Kanta Sharma online

Asha Kanta Sharma

(Expert)
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24 July 2024 Under the provisions of the Companies Act, 1956 (and similarly under the Companies Act, 2013), a company's first financial year can indeed be longer than 12 months. Here are the details:

1. **First Financial Year Duration:**
- As per Section 210(5) of the Companies Act, 1956 (and also under Section 2(41) of the Companies Act, 2013), the first financial year of a company may extend beyond 12 months but cannot exceed 18 months from the date of its incorporation.
- Therefore, if a company is incorporated on 23rd March 2010, it can prepare its first financial statements for a period that starts from 23rd March 2010 and ends on a date up to 22nd September 2011 (which is within 18 months from the date of incorporation).

2. **AGM Timing and Annual Accounts:**
- The Annual General Meeting (AGM) where the financial statements (Profit and Loss account and Balance Sheet) are presented should be held within 18 months from the date of incorporation.
- In your example, if the company's financial year end is set as 21st March (or any other date before 23rd March), the accounts for the period from 3rd March 2010 to 21st March 2011 are legally valid and compliant. This is because the financial year can start from any date within the first year of incorporation.

3. **Compliance with Law:**
- It is not wrong by law to mention the financial period as 3rd March 2010 to 21st March 2011 on the Profit and Loss account, even though the incorporation date was 23rd March 2010. The crucial point is that the financial statements cover a period within the first 18 months from the date of incorporation.

In summary, under both the Companies Act, 1956 and Companies Act, 2013, a company can have its first financial year extend beyond 12 months but not exceed 18 months from the date of incorporation. The specific dates mentioned (3rd March to 21st March) are acceptable as long as they fall within the permissible period. It's advisable to consult with a qualified professional or legal advisor for specific guidance tailored to your company's situation and compliance needs.