NCLT approves company to align financial year with overseas entity The National Company Law Tribunal (NCLT) granted approval to a company, a subsidiary of a foreign entity, to retain its financial year starting January ...
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NCLT approves company to align financial year with overseas entity
The National Company Law Tribunal (NCLT) granted approval to a company, a subsidiary of a foreign entity, to retain its financial year starting January 1st and ending December 31st for consolidation with its overseas holding company. Despite not aligning financials by the specified date, the Tribunal allowed the company to maintain the cycle for 2016 due to timely application. The Registrar of Companies was directed to accept the Balance Sheet filing for 2016 based on the approved structure. The NCLT disposed of the application, providing the requested relief to the company.
Issues: Application under Section 2(41) of the Companies Act, 2013 for retention of financial year starting January 1st ending December 31st every year for consolidation of accounts with holding company registered outside India.
Analysis: The application before the National Company Law Tribunal (NCLT) involved a request by a company, incorporated under the Companies Act, 1956, to retain its financial year starting January 1st and ending December 31st for consolidation purposes with its holding company situated outside India. The company, a subsidiary of a foreign entity, sought permission to align its financial reporting with the global practices of its holding group. The NCLT considered the company's documents, including the Resolution adopted by its Board of Directors and the current Balance Sheet, which demonstrated its adherence to the desired financial year cycle. The Tribunal, in exercising its powers under the First Proviso to Section 2(41) of the Companies Act, 2013, granted approval for the company to maintain the requested financial year structure to facilitate consolidation with its overseas holding company.
Furthermore, the Tribunal noted that while the company had been following the January 1st to December 31st financial year cycle, it had not aligned its financials as per the Second Proviso to Section 2(41) of the Companies Act, 2013 by March 31, 2016. However, considering that the company had filed the application in February 2016, well within the stipulated time frame, the Tribunal allowed the company to retain the financial year cycle for 2016. The Tribunal directed the Registrar of Companies to permit the filing of the Balance Sheet for 2016 based on the approved financial year structure. The company was instructed to inform the concerned Registrar of Companies about the Tribunal's decision for their records and compliance. Consequently, the application was disposed of by the NCLT, granting the requested relief to the applicant company.
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