Key Amendments by Ministry of Corporate Affairs


Key Amendments by Ministry of Corporate Affairs


About The Author

CA. Akhil Bajaj




  1. Mandatory use of Accounting Software having Audit Trail from April 01, 2021

Audit Trail is defined as a step-by-step sequential record that provides evidence of the documented history of financial transactions to its source

MCA vide Notification dated March 24, 2021 announced that from financial year commencing on or after April 01,2021 every  company which  uses  accounting  software  for  maintaining  its  books  of  account,  shall  use  only  such accounting  software  which  has  a  feature  of  recording  audit  trail  of  each  and  every  transaction,  creating an edit  log  of  each  change  made in  books  of  account  along  with  the  date  when  such  changes  were  made  and ensuring that the audit trail cannot be disabled.

The changes were earlier proposed to be implemented from April 1, 2021. But after receiving several  representations  from  various  stakeholders  expressing  their  inability  to  make  quick changes in accounting software, the government decided to give one more year to businesses to prepare  for  new  accounting  system  that  aims  to  check  manipulation  and  ensure  utmost transparency in recording transactions.

  1. MCA broadens the Scope of Reporting by Auditors in Audit Report

MCA vide Notification dated March 24, 2021 broadens the scope of reporting by inserting clause E in Rule 11 which defines ‘Other Matters to be included in the Audit Report’

As per the amendment following Additional Disclosures are also required:

  • Reporting regarding advances loans & Investment other than disclosed in notes to accounts.
  • Receiving of funds for further lending or investing other than disclosed in notes to accounts.
  • Comment upon above 2 points whether representation made contains any material misstatement.
  • Dividend declared or paid is in compliance of Section 123 of Companies Act, 2013.
  1. MCA amended Schedule III to the Companies Act 2013

MCA  vide  Notification  dated  March  24, 2021  amended the Schedule III to  the Companies Act,2013 to incorporate the general instructions for preparation of the balance sheet and the profit and loss account of an IND AS compliant company along with additional disclosure requirements.

As per the amendment following Additional Disclosures are also required

(a) Disclosure of Shareholding Pattern of the Promoters with their Name, No of shares held and percentage  of  total  shares  along  with  any  change  in  percentage  during  the  year needs to be disclosed.

(b) Trade Payables ageing schedule with age Less than 1 year, 1-2 years, 2-3 year & More than 3 years due for payment shall be disclosed.

(C) Trade Receivables ageing schedule with age less than 6 months,6 months – 1 year, 1-2 year, 2-3 year & More than 3 years outstanding from due date of payment. Unbilled dues shall be disclosed separately. A  reconciliation of the gross and net  carrying  amounts  of  each  class  of  assets(For Tangible  and  Intangible  Assets  Separately)  at the beginning  and  end  of  the  reporting period   showing   additions,   disposals,   acquisitions  through   business   combinations, amount of change due to revaluation (if change is 10% or more in the aggregate of the net carrying value of each class asset) and other   adjustments   and   the   related depreciation and impairment losses/reversals shall be disclosed separately.

(d) Detailed disclosure regarding title deeds of Immovable Property not held in name of the Company and  where  such  immovable  property  is  jointly  held  with  others,  details  are required to be given to the extent of the company’s share.

(e) Where the Company has revalued its Property, Plant and Equipment, the company shall disclose as to whether the revaluation is based on the valuation by a registered valuer as defined under Rule 2 of the Companies (Registered Valuers and Valuation) Rules, 2017

(f) Loans or Advances granted to promoters, directors, KMPs and the related parties either severally or jointly with any other person, that are
(a) repayable on demand or
(b) without specifying any terms or period of repayment

(g) All the Details of Benami Property held where any proceedings have been initiated or pending against the company and the companies view on the sale

(h) Where a company is a declared willful defaulter by any bank or financial Institution or other lender, following details shall be given:

  • Date of declaration as willful defaulter,
  • Details of defaults (amount and nature of defaults)

(i)Relationship with  Struck  off  Companies  –  Name  ,  nature  of  Transactions   and Balance Outstanding

(j) Where any  charges  or  satisfaction  yet  to  be  registered  with  Registrar  of  Companies beyond    the    statutory    period,    details    and    reasons    thereof    shall    be   

(k) Compliance with number of layers of companies prescribed under clause (87) of section2 of  the  Act  read  with  Companies  (Restriction  on  number  of  Layers)  Rules,  2017

(l) The company  shall  explain  the  items  included  in  numerator  and  denominator  for computing the above ratios. Further explanation shall be provided for any change in the ratio by more than 25% as compared to the preceding year.

(m) Where the Company has borrowings from banks or financial institutions on the basis of security of current assets, it shall disclose the following: –

  • i)Whether quarterly returns or statements of current assets filed by the Company with banks or financial institutions are in agreement with the books of accounts
  •  (ii) if  not,  summary  of  reconciliation  and  reasons  of  material  discrepancies,  if  any  to  be             adequately disclosed.

(n) Compliance with approved Scheme(s) of Arrangements approved by the Competent Authority in terms of Section 230 to 237 of the Companies Act, 2013.

(o) Utilization of Borrowed funds and share premium. Where the company has not used the borrowings from  banks  and  financial  institutions  for  the  specific  purpose  for  which  it was  taken  at  the  balance  sheet  date,  the   company  shall  disclose  the  details  of  where theyhave been used.

(p) Where a  company  has  received  any  fund  from  any  person(s)  or  entity(ies),  including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that  the company shall :

  • i) Directly  or  indirectly  lend  or  invest  in  other  persons  or  entities  identified  in  any  manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
  • ii) provide  any  guarantee,  security  or  the  like  on  behalf  of  the  Ultimate  Beneficiaries,  the company shall disclose the following:-a) Date and amount of fund received from Funding parties with  complete  details  of  each Funding Party;

    b) Date and amount of fund further advanced or loaned or invested other intermediaries   or Ultimate Beneficiaries along with complete details of the other intermediaries’ or ultimate beneficiaries;

    c) Date and amount of guarantee, security or the like provided to or on behalf of the Ultimate Beneficiaries ;

    d) Declaration that relevant provisions of the Foreign Exchange Management Act, 1999 (42 of 1999) and Companies Act has been complied with for such transactions and the transactions are not violation of the Prevention of Money-Laundering act, 2002(15 of 2003);

(q)The Company shall give details of any transaction not recorded in the books of accounts that has been   surrendered   or   disclosed   as   income   during   the   year   in   the   tax assessments under the   Income Tax  Act,  1961  (such  as,  search or survey or  any other relevant   provisions   of   the     Income  Tax   Act,   1961),   unless  there   is   immunity   for disclosure  under  any  scheme  and  shall   also  state  whether  the  previously  unrecorded income and related assets have been properly  recorded in the books of account during the year.

(r) Disclosure regarding Corporate Social Responsibility where the company is covered under Section 135 of the Companies Act 2013

(s) Where  the  Company  has  traded  or  invested  in  Crypto  currency  or  Virtual  Currency during  the financial year, the following shall be disclosed:-

a)Profit or loss on transactions involving Crypto currency or Virtual Currency
b)Amount of currency held as at the reporting date,
c)Deposits  or  advances  from  any  person  for  the  purpose  of  trading  or  investing in CryptoCurrency/ virtual currency

For detailed information, refer to the official notification.


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