Preservation of Records
Preservation of Records
Preservation of Records
Rules Relating to the Period of Records Preservation (Provision Under The Companies Act 1956)
Professor R Balakrishnan, FCS, Pune.
e-mail : [email protected]
The Companies Act as well as the various Rules and Regulations framed there under require companies to maintain various records and documents. The time period up to which the various records are to be kept is also specified in the Rules relating to record preservation. This article briefly explains the law and procedure relating to records preservation.
INTRODUCTION
Many organizations keep on accumulating their records relating to their activities storing the same for years together and there could be records of permanent nature such as incorporation certificates, various registration certificates such as excise registration, sales tax registration, factory licence, shop and establishment licence etc. and the records which are generated years to year basis on account of activities carried on by the enterprise such as books of accounts, registers, returns, supporting documents such as vouchers for receipt and expenses, production and distribution related documents etc. However, a question arises as to how long the corporate should preserve these records/documents. Since companies are registered under the Companies Act, 1956, one needs to refer the said Act which prescribes the preservation of records for a minimum period of eight years and there is also rules prescribed for the disposal of records by the Companies (Preservation and Disposal of Records) Rules 1966. The following are the relevant provisions with reference to the Companies Act and Rules applicable on this subject.
Needless to mention that in the case of a company incorporated less than eight years, before the current year, it is required to preserve the records for the entire period proceeding the current year.
PRESERVATION OF RECORDS
As per the Companies Act, 1956, vide its section 209(4A) corporates are required to preserve the books of accounts and registers along with the vouchers for a minimum period of eight years.
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Rules Relating to the Period of Records Preservation (Provision Under The Companies Act 1956)
Companies Act, 1956, should be prepared and maintained in indelible ink for giving a proper and adequate meaning to the words proper books of account in section 209 of the Act.
In such circumstances, the company is required to preserve the specified documents and records as directed by the regulator and can not destroy them till that period. Needless to mention that a contravention shall be punishable with fine which may extend to Rs. 500.
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Permanent 15 years after the redemption 15 years after the redemption of debentures 8 years from the date of filing with the Registrar
Copies of all annual returns prepared under sections 159 and 160 and copies of all certificates and documents required to be annexed thereto under sections 160 and 161
The following may be noted in connection with the destruction of records (a) The form prescribed by the regulator says that the secretary or other authorized person shall have to authenticate the particulars of documents destroyed. (b) The above, therefore automatically means by inference that the board may have to authorize the destruction of documents and as well as the person - secretary or any other - for this purpose and the document destruction may have to done under the supervision of the board authorized person. (c) Again, this register would have to be preserved in the safe custody of the company for future reference. (d) Rules also specify that any contravention of this rule would attract penalty and is punishable with fine which may extend to Rs. 500.
The rules further prescribe that a contravention shall be punishable with fine which may extend to Rs. 500.
Rules Relating to the Period of Records Preservation (Provision Under The Companies Act 1956)
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which could be modified as per the need and circumstances of the company. RESOLVED, that all books, documents and records of the company for the period .............to ...............are being over ....... years old be destroyed under the supervision of the secretary/authorized executive who shall prepare and maintain a Register showing books, documents and records so destroyed. FURTHER RESOLVED, that the list of documents destroyed be kept in the safe custody of the secretary/ authorized executive. Of course, a contravention on the above would also be punishable with fine which may extend to Rs. 500.
manner as the company by special resolution directs; and (c) in the case of a creditor voluntary winding up, in such manner as the committee of inspection or, if there is no such committee, as the creditors of the company may direct. After the expiry of five years from the dissolution of the company, no responsibility will rest on the company, the liquidator or any person to whom the custody of the books and papers has been committed, by reason of any books or papers not being forthcoming to any person claiming to be interested therein. The Central Government, may, by Rules:(a) prevent for such period (not exceeding five years from the dissolution of the company) as the Central Government thinks proper, the destruction of the books and papers of a company which has been wound up and of its liquidator; and (b) enable any creditor or contributory of the company to make representations to the Central Government in respect of the matters specified in clause (a) and to appeal to the Court from any direction which may be given by the Central Government in the matter. If any person acts in contravention of any such rules or of any direction of the Central Government hereunder, he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees or with both.
(SS-4)
ON
PROVISION COMPANY
RELATING
TO
DISSOLVED
Similarly in the case of dissolved company, section 550 of the Companies Act, 1956 provides that when the affairs of the company have been completely wound up and it is about to be dissolved, its books and papers and those of the liquidator may be disposed of as follows, that is to say:(extracts from the section itself) (a) in the case of a winding up by or subject to the supervision of the Court, in such a manner as the Court directs; (b) in the case of a members voluntary winding up in such
The Institute of Company Secretaries of India has brought out a Secretarial Standard in October 2005 which is effective from 20th October 2005. The Secretarial Standard spells out the preservation period for different kinds of records and registers the Secretarial Standard is also specifying the record maintenance period in line with the Companies Act, 1956 read with the Companies (Preservation and Disposal of Records) Rules, 1956. The summary of the record preservation period mentioning the types of records and the corresponding preservation period is as given below, as per the Secretarial Standard (SS-4) issued by the Institute of Company Secretaries of India.
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Rules Relating to the Period of Records Preservation (Provision Under The Companies Act 1956)
10 Register of directors share holding 11 Register of inter corporate loans and investments 12 Register of deposits 13 Register of allotment 14 Register of payment of dividend 15 Register of Directors attendance 16 Register of postal ballot 17 Register of proxies 18 Register of inspection 19 Register of investment (other than securities not held in the name of the company) 20 Register of documents executed under common seal 21 Register of records and documents destroyed 22 Register of investors complaints 23 Register of transfer of shares 24 Register of transmission of shares 25 Register of transfer of debentures 26 Register of transmission of debentures
Rules Relating to the Period of Records Preservation (Provision Under The Companies Act 1956)
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27 Register of employee stock options 28 Register of sweat equity shares 29 Register in respect of SEBI (substantial acquisition of shares and takeovers) Regulations, 1997 30 Register of SEBI (Prohibition of insider trading) Regulations, 1992 31 Books of Accounts 32 Annual Return 33 Miscellaneous A. Agreement under section 136 B. Disclosures received by the company under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 1997 (SAST Regulations) C. General Meeting Records D. Record of Directors particulars E. Notice of disclosure of interest by the Directors, officers and substantial shareholders under Model Code of Conduct F. Various agreements G. Certificate received from Secretarial Auditors H. Documents to be filed with Registrar of Companies I. Copy of Memorandum & Articles of Association J. Certificate issued by Registrar of Companies K. Any court order/CLB order L. Annual Reports M. Replies to show cause notices, if any etc. N. Record of employee Stock Purchase Scheme (ESPS) O. Record of issued and cancelled share/debenture certificates
15 years from the date of exercise of options 8 years from the financial year in which the latest entry is made Permanent 5 years 8 accounting years immediately proceeding the current accounting year Last 8 annual returns
The aforesaid records should be preserved in good order for as long as they remain current, or for a minimum of 8 years and may be destroyed hereafter under the authority of the Board
BEYOND
THE
The Registrar of Companies may prescribe the period for preservation of records beyond the above period and in such circumstances the companies should preserve the same as per the direction of the Registrar of Companies.
CONCLUSION
Document preservation period for any corporate, by and large is for a minimum period of eight years (current year to be excluded) barring permanent records.
Fifteen years period of preservation has been prescribed in respect of the following: (a) Register of debenture-holders after the redemption and (b) Index of debenture-holders after the redemption of debentures. The books, registers and documents talked about is in relation to all those which are falling under the provision of the Companies Act and in respect of other documents falling under different acts - such as Central Excise, Customs, Sales Tax, Income Tax and such other Acts - the preservation of documents would be governed by the respective Acts.