Tightening the Book-Keeping Requirements: Amendments to the Companies (Accounts) Rules, 2014

Companies are required to maintain their books of account as prescribed in the Companies Act, 2013 (the 'Act'). MCA issued an amendment to Rule 3 of Companies (Accounts) Rules, 2014 ('Account rules') relating to the maintenance of electronic books of account and other relevant books and papers to make the existing requirements more stringent. With this amendment issued in August 2022, Indian Government authorities seek to always have access to books of accounts of Indian companies, even if such books are maintained in electronic form on servers located outside India. The amendment was issued on 5th August, 2022, with no applicability date. The amended rules are effective from the date of their publication in the Official Gazette.

While the first year of the applicability of the amended rule is over, it is important for the companies as well as the auditors to understand the implications of this amendment. Non-compliance with this requirement may constitute non-compliance with the requirement of law in terms of Section 128 and impact the auditor’s assertion in ‘Report on other legal and regulatory requirement’ in Section 143 (3)(b) on maintenance of proper books of account as required by Section 128 of the Act.

Certain multinational companies have refused to provide government authorities access to financial data of Indian entities stored i