The government has made it obligatory for unlisted companies, or private firms, with outstanding loans of Rs 100 crore or more to file their financial audit reports from financial year 2020-21. These private firms will now have to carry out mandatory audits and submit the audit reports with the government.
Under the Companies (appointment and remuneration of managerial personnel) Rules, 2020, which will come into effect from April 1, 2020, a private company that has a paid-up share capital of Rs 10 crore or more would have to have a company secretary (CS) on its rolls.
Furthermore, businesses with unpaid loans or borrowings of Rs 100 crore or more from banks or public financial institutions of will be required to file their audit reports and findings with the Ministry of Corporate Affairs or MCA.
As per present norms, private firms do not need to furnish financial statements; only listed companies are required to disclose their statements every 3 months. Data from the MCA states that of 11.65 lakh active companies, around 10.94 lakh companies are private which includes more than 25,000 one person companies as of November 2019.
Businessmen are lauding this move as it is seen as a significant means of making improvements in corporate governance. As this move comes under secretarial compliance’s, the audit will be conducted to check compliance with rules including the Companies Act.
