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Period for first balance sheet of company

Saliq Ansari (CA_Final Student) (885 Points)

15 September 2011

Company Incorporated in Sept, 2009

when should the company make its first balance.

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AMIT MISHRA (Legal Professional) (393 Points)
Replied 15 September 2011

Hi Saliq,

Company would be required to file the Balance Sheet in Form 23AC,P&L A/c in 23ACA and Annual return in Form 20B for the year ending March 2009-10 and subsequently for 2010-11.

Thanks & regards

Amit Mishra

BSamrish & Co.

New Delhi

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CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 15 September 2011

For this section 166 read with section 210 are to be complied with. Accordingly, section 166 provideds that a company may hold its First Annual General Meeting within 18 months of its incorporation. Section 210 provides that the company must lay its balance sheet and profit and loss account for the period which shall not exceed in case of first AGM to the period from the incorporation of Company and ending with a day which shall not precede the day of the meeting which shall not precede more than nine months.

Therefore, first Balance Sheet should me made for the period ended 31st March, 2010 and AGM for the same must be held upto 30th December, 2010.

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Lucky (123) (37 Points)
Replied 15 September 2011

y provisions in section 166 and section 210 of the Companies Act, 1956 relating to Annual General Meeting

Prof. R. Balakrishnan, CS

1. Introduction

Section 166 of the Companies Act 1956 requires that every company to hold during every year a general meeting of its members irrespective of the company being a public company or a private company. Such meeting is called an annual general meeting. Holding the annual general meeting every year is mandatory by law for every company as per the section 166 of the Companies Act 1956.

2. Provisions under section 166 of the Companies Act 1956

As per section 166 of the Companies Act, 1956, the companies could hold its annual general meeting within fifteen months of the last annual general meeting. So long as the companies hold annual general meeting within the above specified time limit, no approval from any of the regulator is required for holding such meeting.

3. Extension of time for holding annual general meeting

At times, it is possible due to certain unforeseen reasons; the companies may not be able to hold the annual general meeting. In such circumstances, the Registrar of Companies – for any special reasons – could grant time extension to hold the annual general meeting of the company by a period not exceeding three months.

This provision, however does not apply for the first annual general meeting of the company which is required to be held within a period of not more than eighteen months from the date of its incorporation and if the first general meeting is held within that period, the company is not require to hold any annual general meeting in the year of its incorporation or in the following year;

4. Provisions under section 210 of the Companies Act 1956

Sub-section 3 (b) of section 210 specifies that the company is required to hold its annual general meeting within six months from the end of the financial year.

5. Contradiction between the provision of section 166 and 210

Section 166 allows holding of an annual general meeting within fifteen months of the last annual general meeting of the company. While this does not need approval of the Registrar of Companies (ROC), this may at times result in a company not being able to hold the annual general meeting within six months from the end of the financial year as envisaged in section 210(3)(b).

6. Harmonization between section 166 and section 210

At times, there is a possibility of non-compliance emerging on this subject – while compliance would be in order for section 166 for holding the annual general meeting within nine months (taking into consideration of three month’s extended period of time by ROC) , there could not non-compliance under section 210 – for not holding the annual general meeting within six months from the end of the financial year - due to different timing specified in both these sections for holding annual general meeting.

7. Practical solution to overcome this

To overcome the non-compliance situation, the department has advised that the annual general meeting of the company to be held earlier of the following dates:-

· six months from the date of the close of the financial year.

· Within 15 months from last annual general meeting

· Last date of next calendar year.

The department has issued a circular on this stating that section 166 and section 210 to be read together so as to get a harmonious construction and if a breach of the provisions of one or the other two section is to be avoided an annual general meeting to be held on the earlier of the three relevant dates as mentioned above.

As per the circular issued by the then Department of Company Affairs where a company holds its annual general meeting within the time prescribed under section 166, though such a meeting is held beyond the period of six months from the close of its financial year {as required under section 210(3)(b)}and the company files its annual return within 60 days of the holding of the said meeting, no action should be taken against the company for default of section 159 or 166 nor additional fee be levied in such a case in respect of the filing of the annual return and audited accounts..

8. The relevant details of circular

The then Department of Company Affairs (now known as the Department of Corporate Affairs) has issued its Circular No. 8/45(166)/64-PR dated 12-1-1965 on this subject.

9. The text of the circular referred above.

Given below is the full text of the circular for the ready reference of the readers.

“With reference to the correspondence resting with your letter No. Sec.166/5694 dated 20-7-1964 on the above subject, I am directed to say that the question raised by you has been carefully examined in the Department. From the strictly legal point of view, the time within which an AGM of a company is required to be held is governed solely by section 166 of the Companies Act, 1956 and the date on which an AGM is required to be held has no direct relationship with the financial year of a company.

Accordingly, the Registrar's powers to grant extension of time under the second proviso to section 166(1) does not become exercisable if the extension sought by the company is for holding the meeting falling within the time-limits mentioned in the said section 166 and is asked solely on the ground that it has not been able to prepare the accounts for the period mentioned in section 210(3). Notwithstanding the legal provision aforesaid, the board is of the view for administrative and practical consideration where a company approaches for the grant of extension of time for holding the annual general meeting in terms of the proviso to section 166(1) of the Act, the Registrar may continue to give the required extension for the holding of AGM beyond the period of six months from the close of the financial year of the company as contemplated under section 210(3) even though the time-limit for holding the meeting as per section 166 may not have reached. It is considered that apart from facilitating the smooth working of companies, such a practice would be administratively desirable as well. It was also in this context that the Department had earlier advised the field offices and companies which sought clarification on the point that sections 166 and 210 should be read together and if a breach of the provisions of one or the other of the two sections is to be avoided, an annual general meeting should be held in the earliest of the three relevant dates prescribed under these two sections (vide item No. 27 of interpretation, explained above, Circular No. 8/16(1)/61-PR dated 25-2-1961.) However, when it comes to determining for purposes of legal proceedings or levy of additional fees as to whether there has been a default in holding the AGM it would no doubt be necessary for the Registrar to continue the provisions of section 166 strictly in the manner indicated above. For this purpose the financial year of a company or the provision of section 210 is irrelevant. In other words, where a company holds its AGM within the time prescribed under section 166, though such a meeting is held after the expiry of six months from the close of its financial year and the company files its annual return within 42 days of the holding of the said meeting (now extended to 60 days), no action should be taken against the company for default of section 159 or 166 nor additional fee be levied in such a case in respect of the filing of the annual return and audited accounts.”

Circular No. 8/45(166)/64-PR dated 12-1-1965

9. Conclusion

Though there appears to be contraction between section 166 and section 210(3)(b) of the Companies Act on the timing of holding the annual general meeting, the department has clarified that the two sections should be read together so as to get a harmonious construction and if a breach of the provisions of one or the other of the two sections is to be avoided an annual general meeting should be held on the earlier of the three relevant dates prescribed under the said two sections and contained in the department’s earlier Circular No. 8/16(1)/16-PR dated 25-2-1961 which has been stated in serial number 7 above.

The companies could be assured that no action would be taken against the company so long as the company holds its annual general meeting within the time prescribed under section 166, though such a meeting is held beyond the expiry of six months from the close of its financial year and the company files its annual return within 60 days of the holding of the said meeting. The department would not be collecting any additional fees in such a case for filing of the annual return and audited accounts after the annual general meeting within the above specified time limit of 60 days.