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Rules Relating to the Period of Records Preservation (Provision Under The Companies Act 1956)
Professor R Balakrishnan, FCS, Pune.

e-mail : bala.hitsafrica@gmail.com

The Companies Act as well as the various Rules and Regulations framed there under require companies to maintain various records and documents. The time period up to which the various records are to be kept is also specified in the Rules relating to record preservation. This article briefly explains the law and procedure relating to records preservation.

INTRODUCTION
Many organizations keep on accumulating their records relating to their activities storing the same for years together and there could be records of permanent nature such as incorporation certificates, various registration certificates such as excise registration, sales tax registration, factory licence, shop and establishment licence etc. and the records which are generated years to year basis on account of activities carried on by the enterprise such as books of accounts, registers, returns, supporting documents such as vouchers for receipt and expenses, production and distribution related documents etc. However, a question arises as to how long the corporate should preserve these records/documents. Since companies are registered under the Companies Act, 1956, one needs to refer the said Act which prescribes the preservation of records for a minimum period of eight years and there is also rules prescribed for the disposal of records by the Companies (Preservation and Disposal of Records) Rules 1966. The following are the relevant provisions with reference to the Companies Act and Rules applicable on this subject.

Needless to mention that in the case of a company incorporated less than eight years, before the current year, it is required to preserve the records for the entire period proceeding the current year.

Company Law Board Circular on this matter

The Ministry of Law, Justice and Company Affairs, Department of Company Affairs*, vide its circular No. 1/1/ 83-CL-V; No.59/196/CT/91-78.CAB dated 2nd March 1983 issued a circular No. 2/83 on the subject of proper maintenance of accounting records under section 209 of the Companies Act, 1956 which reads as under: (it may be noted that the circular not only specifies the period of maintenance of records but also it specifies that the records to be maintained in indelible ink.) A case has come to the notice of the Government where certain cost accounting records of a company were maintained in pencil. The question whether accounting records could be maintained by entries in pencil was examined by the Department in the light of the requirement under section 209 of the Companies Act, 1956 that proper books of account shall be kept by every company. Further subsection (4A) of section 209 provides that the books of account etc., relating to a period of not less than 8 years shall be maintained in good order. It has been decided that having regard to the provisions of section 209 of the
* Now Ministry of Corporate Affairs

PRESERVATION OF RECORDS
As per the Companies Act, 1956, vide its section 209(4A) corporates are required to preserve the books of accounts and registers along with the vouchers for a minimum period of eight years.

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Rules Relating to the Period of Records Preservation (Provision Under The Companies Act 1956)

Companies Act, 1956, should be prepared and maintained in indelible ink for giving a proper and adequate meaning to the words proper books of account in section 209 of the Act.

In such circumstances, the company is required to preserve the specified documents and records as directed by the regulator and can not destroy them till that period. Needless to mention that a contravention shall be punishable with fine which may extend to Rs. 500.

COMPANIES (PRESERVATION AND DISPOSAL OF RECORDS) RULES 1956

The Government has also come out with the above rules for preservation of documents. The above rules provide for destruction and preservation of records as under rule 3 and these rules are in force with effect from 1st February 1966.
Sl. Name of documents No. (1) 1 Register of members commencing from the date of registration of the company Index of Members Register of debenture-holders Index of debenture-holders Period (2) Permanent

RECORDS OF DESTROYED DOCUMENTS OBLIGATIONS

The regulator also wants the company to maintain a register as per form specified by the regulator - and the company is required to enter the brief details/description of the documents destroyed by the company. The above requirement is arising out of rule 4 of the Companies (Preservation and Disposal of Records) Rules, 1956. The format specified by the regulator is given below:APPENDIX (See Rule 4)
Particulars of documents destroyed 1 Date and mode of destruction with the initial of secretary or other authorized person 2

2 3 4

Permanent 15 years after the redemption 15 years after the redemption of debentures 8 years from the date of filing with the Registrar

Copies of all annual returns prepared under sections 159 and 160 and copies of all certificates and documents required to be annexed thereto under sections 160 and 161

The following may be noted in connection with the destruction of records (a) The form prescribed by the regulator says that the secretary or other authorized person shall have to authenticate the particulars of documents destroyed. (b) The above, therefore automatically means by inference that the board may have to authorize the destruction of documents and as well as the person - secretary or any other - for this purpose and the document destruction may have to done under the supervision of the board authorized person. (c) Again, this register would have to be preserved in the safe custody of the company for future reference. (d) Rules also specify that any contravention of this rule would attract penalty and is punishable with fine which may extend to Rs. 500.

The rules further prescribe that a contravention shall be punishable with fine which may extend to Rs. 500.

INCOME TAX RULES

The assessing income tax officer is empowered to reopen the assessment of any year within seven years from the end of the relevant assessment year wherever he finds/suspects that escaped income is likely to exceed Rs. 50,000 or more for that year. This empowerment comes from the Income Tax Act vide section 149(1)(a)(ii) of the Income Tax Act, 1961. Obviously, the record maintenance is required under the Income Tax Act, 1961 is also for a period of eight years.

PRESERVATION OF DOCUMENTS BEYOND THE PRESCRIBED PERIOD

A company may receive an order in writing from the Registrar of Companies directing it to preserve certain documents beyond the prescribed period prescribed by the Act and Rules.

Suggested Board Resolution

Obviously, the Board may have to authorize the destruction and supervision by way of a board resolution and the companies may pass the following board resolution - a suggested one -

Rules Relating to the Period of Records Preservation (Provision Under The Companies Act 1956)

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which could be modified as per the need and circumstances of the company. RESOLVED, that all books, documents and records of the company for the period .............to ...............are being over ....... years old be destroyed under the supervision of the secretary/authorized executive who shall prepare and maintain a Register showing books, documents and records so destroyed. FURTHER RESOLVED, that the list of documents destroyed be kept in the safe custody of the secretary/ authorized executive. Of course, a contravention on the above would also be punishable with fine which may extend to Rs. 500.

manner as the company by special resolution directs; and (c) in the case of a creditor voluntary winding up, in such manner as the committee of inspection or, if there is no such committee, as the creditors of the company may direct. After the expiry of five years from the dissolution of the company, no responsibility will rest on the company, the liquidator or any person to whom the custody of the books and papers has been committed, by reason of any books or papers not being forthcoming to any person claiming to be interested therein. The Central Government, may, by Rules:(a) prevent for such period (not exceeding five years from the dissolution of the company) as the Central Government thinks proper, the destruction of the books and papers of a company which has been wound up and of its liquidator; and (b) enable any creditor or contributory of the company to make representations to the Central Government in respect of the matters specified in clause (a) and to appeal to the Court from any direction which may be given by the Central Government in the matter. If any person acts in contravention of any such rules or of any direction of the Central Government hereunder, he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees or with both.

PROVISION RELATING TO AMALGAMATED COMPANY

Section 396A of the Companies Act is relevant on this subject which reads as under : The books and papers of a company which has been amalgamated with, or whose shares have been acquired by, another company under this Chapter shall not be disposed off without the prior permission of the Central Government and before granting such permission, that Government may appoint a person to examine the books and papers or any of them for the purpose of ascertaining whether they contain any evidence of the commission of an offence in connection with the promotion or formation, or the management of the affairs of the first mentioned company or its amalgamation or the acquisition of its shares. From the above, it is clear that documents of an amalgamated company cannot be destroyed/disposed of unless the prior permission from the Government is taken.

SECRETARIAL STANDARD REGISTERS AND RECORDS

(SS-4)

ON

PROVISION COMPANY

RELATING

TO

DISSOLVED

Similarly in the case of dissolved company, section 550 of the Companies Act, 1956 provides that when the affairs of the company have been completely wound up and it is about to be dissolved, its books and papers and those of the liquidator may be disposed of as follows, that is to say:(extracts from the section itself) (a) in the case of a winding up by or subject to the supervision of the Court, in such a manner as the Court directs; (b) in the case of a members voluntary winding up in such

The Institute of Company Secretaries of India has brought out a Secretarial Standard in October 2005 which is effective from 20th October 2005. The Secretarial Standard spells out the preservation period for different kinds of records and registers the Secretarial Standard is also specifying the record maintenance period in line with the Companies Act, 1956 read with the Companies (Preservation and Disposal of Records) Rules, 1956. The summary of the record preservation period mentioning the types of records and the corresponding preservation period is as given below, as per the Secretarial Standard (SS-4) issued by the Institute of Company Secretaries of India.

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Rules Relating to the Period of Records Preservation (Provision Under The Companies Act 1956)

Preservation of records - the time period as per SS-4

Sl. No. 1 2 3 4 5 6 7 8 9 REGISTERS/RECORDS Registers of investments in securities not held in the name of the company Register of buy-back of securities back Register of charges Register and index of members Register and index of debenture holders Foreign Register of members or debenture holder Register of renewed and duplicate certificates Register of contracts in which directors are interested Register of directors, managing director, manager and secretary PRESERVATION PERIOD Permanent 8 years from the date of completion of buyPermanent Permanent 15 years from the date of redemption of debentures To be maintained until discontinued Permanent Permanent Permanent Permanent Permanent 8 years from the date of last entry 8 years from the date of each allotment 8 years from the date of payment 8 years Until the resolution has been implemented or for a period of 10 years whichever is later 8 years from the date of meeting 8 years Permanent Permanent Permanent 8 years from the date of last entry Permanent Permanent Permanent Permanent

10 Register of directors share holding 11 Register of inter corporate loans and investments 12 Register of deposits 13 Register of allotment 14 Register of payment of dividend 15 Register of Directors attendance 16 Register of postal ballot 17 Register of proxies 18 Register of inspection 19 Register of investment (other than securities not held in the name of the company) 20 Register of documents executed under common seal 21 Register of records and documents destroyed 22 Register of investors complaints 23 Register of transfer of shares 24 Register of transmission of shares 25 Register of transfer of debentures 26 Register of transmission of debentures

Rules Relating to the Period of Records Preservation (Provision Under The Companies Act 1956)

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27 Register of employee stock options 28 Register of sweat equity shares 29 Register in respect of SEBI (substantial acquisition of shares and takeovers) Regulations, 1997 30 Register of SEBI (Prohibition of insider trading) Regulations, 1992 31 Books of Accounts 32 Annual Return 33 Miscellaneous A. Agreement under section 136 B. Disclosures received by the company under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 1997 (SAST Regulations) C. General Meeting Records D. Record of Directors particulars E. Notice of disclosure of interest by the Directors, officers and substantial shareholders under Model Code of Conduct F. Various agreements G. Certificate received from Secretarial Auditors H. Documents to be filed with Registrar of Companies I. Copy of Memorandum & Articles of Association J. Certificate issued by Registrar of Companies K. Any court order/CLB order L. Annual Reports M. Replies to show cause notices, if any etc. N. Record of employee Stock Purchase Scheme (ESPS) O. Record of issued and cancelled share/debenture certificates

15 years from the date of exercise of options 8 years from the financial year in which the latest entry is made Permanent 5 years 8 accounting years immediately proceeding the current accounting year Last 8 annual returns

The aforesaid records should be preserved in good order for as long as they remain current, or for a minimum of 8 years and may be destroyed hereafter under the authority of the Board

RECORD PRESEVATION PRESCRIBED PERIOD

BEYOND

THE

The Registrar of Companies may prescribe the period for preservation of records beyond the above period and in such circumstances the companies should preserve the same as per the direction of the Registrar of Companies.

CONCLUSION
Document preservation period for any corporate, by and large is for a minimum period of eight years (current year to be excluded) barring permanent records.

Fifteen years period of preservation has been prescribed in respect of the following: (a) Register of debenture-holders after the redemption and (b) Index of debenture-holders after the redemption of debentures. The books, registers and documents talked about is in relation to all those which are falling under the provision of the Companies Act and in respect of other documents falling under different acts - such as Central Excise, Customs, Sales Tax, Income Tax and such other Acts - the preservation of documents would be governed by the respective Acts.