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CS Executive · Setting Up of Business, Industrial and Labour Laws · Setting up of Branch Office, Liaison Office and Wholly Owned Subsidiary by Foreign Company

Orion Heavy Machines Inc., a US company, has an Indian branch. Its Mumbai office has retained books of account for the last six financial years. A compliance officer says that is enough because the company is foreign. Which statement is correct under section 128 of the Companies Act, 2013 as applied by section 384?

Books of account relating to not less than eight financial years immediately preceding a financial year, with relevant vouchers, must be kept in good order, or all preceding years if the company is younger. Six years is insufficient, and the foreign status gives no exemption.

  1. AForeign companies are exempt from any retention period
  2. BRetention must be at least eight financial years immediately preceding a financial year, with vouchers relevant to entries, kept in good order, unless the company has existed for a shorter periodCorrect
  3. CRetention is required for only three years unless an investigation is ordered
  4. DRetention is required for ten years in all cases

Explanation

Section 128(5) requires books for not less than eight financial years immediately preceding a financial year, with relevant vouchers, kept in good order, or for all preceding years if the company is younger than eight years. Section 384(3) applies section 128 to the Indian business of a foreign company. Six years falls short, and the investigation proviso only permits a longer period.

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