Suppose you are registered as a Producer Company as per the Companies Act of 2013. In that case, there are certain regulations issued by the Ministry of Consumer Affairs (MCA) that the Producer Company must observe. Some of these regulations are related to the maintenance of the company’s finances, accounts, and audit systems. The MCA expects a company to comply with these regulations. Therefore, in this article, we have discussed all the finance and accounts-related regulations put forth by the MCA that a Producer company must adhere to.
Books of Account
Every registered Producer Company must keep at its office proper books of account. The Book of accounts must contain and maintain the following:
- All sums of money received and expended by the Company
- All matters of the receipts and expenditures that take place within the Company
- All sales and purchases of goods by the Company
- Instruments of liability executed by or on behalf of the Company
- The assets and liabilities of the Producer Company Registration
- In the case of a Company engaged in production, processing, and manufacturing, the particulars regarding utilization of materials or labour or other items of costs
The registered Producer Company must prepare the balance sheet as well as profit and loss accounts per the Act’s provisions.
Internal Audit
Every Company must have an internal audit of its accounts. These audits must be held at such intervals as well as in such manners as specified in the articles by a chartered accountant. These regulations are defined under section 2 of the Institute of Chartered Accountants Act of 1949.
Duties of an Auditor
The auditor, appointed by the Authority, must report on the following matters relating to the Producer Company:
- Amount of debts due along with particulars of bad debts, if any
- The verification of cash balance and securities of the Company
- Details of assets and liabilities of the producer company
- All the transactions appear to be contrary to the provisions of the Act
- The loans given by the Producer Company to the directors
- The donations or subscriptions given by the Producer Company
- Any other matter as considered necessary by the auditor
Donations and Subscription
A Company can, by a special resolution, make donations or offer subscriptions to any institution or individual for the following purposes:
- To promote the social and economic welfare of company members or producers or the general public
- To promote the mutual assistance principles
But the aggregate amount of all such donations and subscriptions in any financial year must not exceed three percent of the net profit of the Producer Company in the financial year immediately preceding the financial year in which the Producer makes such donations or subscriptions.
Also, no Producer Company must make direct or indirect donations to any political party or for any political purpose. Read More: Startup Registration
General and Other Reserves
- Every Company must maintain a general reserve in every financial year, in addition to any reserve maintained by it as specified in articles.
- Suppose a Company does not have sufficient funds in any financial year for transfer to maintain the reserves as may be specified in articles. In that case, the company will share the contribution to the reserve amongst the Members in proportion to their patronage in that company’s business in that year.
Issue Of Bonus Shares
Upon recommendation of the Board as well as the passing of the resolution in the general meeting, any Producer Company can issue bonus shares by the capitalization of amounts. Also, these amounts must be from general reserves, which are in proportion to the shares held by the Members on the date of the issue of such shares.
Every registered Company must adhere to the regulations set by the MCA regarding their financial, accounting, and auditing compliances.