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CA Intermediate · Corporate and Other Laws · Accounts of Companies

Sagar Foods Ltd was incorporated on 10 June 2022 and has a financial year ending 31 March. Its first financial year ended 31 March 2023. Later, the Board wants to change the financial year-end to 30 September for alignment with its foreign holding company, which is not an Indian company. Which statement reflects the legal position under the Companies Act, 2013?

The Companies Act requires a 31 March financial year, but a company that is a holding, subsidiary or associate of a foreign body corporate needing a different year for consolidation can follow a different year with the Tribunal's permission. It cannot change freely or merely by Registrar approval.

  1. AThe company may choose any year-end freely, and a Tribunal is never involved
  2. BEvery company must follow 31 March, and there is no exception of any kind
  3. CA company that is a subsidiary or associate of a body corporate incorporated outside India which is required to follow a different financial year for consolidation may, with permission of the Tribunal, follow a different financial yearCorrect
  4. DThe Registrar of Companies may allow the change by a simple letter, whatever the reason

Explanation

Companies must follow a financial year ending 31 March, but a company that is a holding or subsidiary or associate of a body corporate incorporated outside India required to follow a different year for consolidation may apply to the Tribunal for a different financial year. Free choice and Registrar approval are not recognised, and the rule is not absolute without any exception.

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