Section 128 of the Companies Act, 2013 (“the Act”) requires every company to prepare and keep at its registered office, or at such other place in India as the board of directors may decide, books of account and other relevant books and papers and financial statements for every financial year. The provision is the foundational accounting obligation, and it is enforced through inspection, penalty, and the auditor's reporting duty.
The Place of Maintenance
The books of account must be kept at the registered office. The board may decide to keep them at another place in India, but the decision must be disclosed to the Registrar within seven days. Where the books are kept at a place other than the registered office, the company must file a notice in Form AOC-5 with the ROC.
The requirement that the books be kept in India is not absolute. Section 128(1) permits the books to be kept outside India if the board decides, but the company must maintain the books relating to transactions effected in India at the registered office or the other place in India. The proviso requires the company to send the books kept outside India to the registered office for inspection.
The Period of Retention
Section 128(5) requires the books of account and other books and papers to be preserved for a period of not less than eight financial years immediately preceding the relevant financial year. Where the company has been in existence for less than eight years, the books must be preserved for the entire period of its existence.
The eight-year period is computed from the end of the financial year to which the books relate. The retention is mandatory, and the company cannot destroy the books even after the audit is complete. The Central Government may direct the company to preserve the books for a longer period where an investigation is pending.
The Inspection
The books of account are open to inspection by the directors during business hours. The members do not have a general right to inspect the books of account; their right is limited to the financial statements and the statutory registers. The Registrar and the authorised officers have the power to inspect the books under Section 206.
The Consequences of Non-Compliance
The failure to maintain the books of account, or to preserve them for the prescribed period, is an offence. The company and every officer in default are liable to a fine of not less than ₹50,000 but which may extend to ₹5 lakh. The auditor must report the non-compliance in the audit report, and the ROC may initiate prosecution.
A company that is restructuring, merging, or transferring its business must ensure that the books of account are transferred to the transferee company and preserved for the statutory period. The failure to preserve the books after a scheme can expose the transferee to penalty.
Call to Action
Anuj Desai & Associates advises companies on the Section 128 books-of-account obligations—from the board resolution for the place of maintenance and the AOC-5 filing to the eight-year retention and the response to an inspection. If your company is restructuring or transferring its business, we can help you ensure continuity of the accounting records.
📧 office@anujdesaiassociates.com
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