Section 136 of the Companies Act, 2013 introduces transparency and shareholder rights. It states that the companies are compelled to provide the members and other stakeholders with essential financial documents like the audited financial statements, auditor's reports, and other annexures relevant to it. Under this section, companies are liable to present these documents prior to the general meeting as well as permit shareholders to inspect them for accountability purposes. Apart from making such documents available in hard copy, companies listed are also required to make them available on their official website. This makes the mode of availability more enhanced. Section 136 also lays down certain penalties in case of non-compliance.

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Detail Analysis  of Section 136 of the Companies Act 2013

Here's a detailed breakdown of Section 136 of the Companies Act, 2013, which deals with the right of members to access copies of audited financial statements:

Sub-section 1

1. General Rule:

Every member of a company, debenture trustee, and any person entitled to attend general meetings has the right to receive copies of the company’s financial documents.

2. Documents required to be sent:

These documents include:

• Financial Statements

• Consolidated Financial Statements (if any),

• The Auditor’s Report, 

• Any other required annexures.

3. Notice Period: 

These documents must be sent at least 21 days prior to the general meeting where they will be presented.

Provisos of Sub-section 1

1. Special Provisions for Listed Companies

• Availability for Inspection: Listed companies can meet the requirement by making documents available for inspection at the registered office for 21 days before the meeting.

• Summary Statement Option: They may provide either a summary of the financial documents or full copies, based on shareholder preference.

• Online Access: Listed companies must upload their financial statements, consolidated financials, and other attached documents on the company’s official website.

2. Central Government’s Role

• Alternate Circulation Methods: The Central Government may specify alternative methods for distributing financial documents for companies meeting certain net worth and turnover criteria.

3. Requirements for Companies with Subsidiaries

• Separate Audited Accounts: Companies with subsidiaries must also publish separate audited accounts for each subsidiary on the company’s website.

• Copies on Request: They are required to provide these accounts to any shareholder who requests them.

Sub-section 2 

• Inspection Rights: Any member or debenture trustee has the right to inspect the specified documents at the company’s registered office during business hour

Sub-section 3

1. Penalties for Non-Compliance:

• Company Penalty: If the company fails to comply, it faces a penalty of ₹25,000.

• Officer Penalty: Each responsible officer incurs a penalty of ₹5,000.

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Illustration of Section 136 of the Companies Act, 2013:

Imagine XYZ Ltd., a publicly listed company with several shareholders and a few subsidiaries. In preparation for its upcoming annual general meeting (AGM), XYZ Ltd. is required to share its financial documents, including the standalone and consolidated financial statements, auditor’s report, and other mandatory attachments, with each of its shareholders.

To comply with Section 136 of the Companies Act, XYZ Ltd. does the following:

1. Sending Financial Documents: At least 21 days before the AGM, XYZ Ltd. sends a copy of the financial documents to each shareholder and debenture trustee. For shareholders who only want a summary, they provide a document highlighting the salient points.

2. Public Accessibility: Being a listed company, XYZ Ltd. uploads these financial documents on its official website for easy access. This allows any interested party to view the complete financial information well in advance of the meeting.

3. Subsidiary Financials: XYZ Ltd. also has several subsidiaries. Following Section 136, the company places separate audited financials for each subsidiary on its website and ensures that any shareholder requesting a copy can access it.

4. Inspection Opportunity: XYZ Ltd. makes its registered office available for shareholders to inspect these documents during working hours for the 21 days leading up to the AGM.

This compliance ensures that all shareholders have the information necessary to participate meaningfully in the AGM and vote on matters of company policy and governance. By following Section 136’s guidelines, XYZ Ltd. promotes transparency and trust, upholding good corporate governance practices

In Summary,

The Companies Act, 2013, section 136, provides that the shareholders of a company must be given timely access to the financial statements of a company, thereby making it more transparent and accountable. It requires the companies to send a copy of the financial statements, consolidated reports, if any, auditor's report, and other documents to every member and debenture trustee at least 21 days prior to the general meeting. For listed companies, the above must be accessible on the company's website and available for perusal on the registered office during working hours, in addition to separate audited accounts for subsidiaries on request or on the website of the parent company.

Non-compliance with the provisions comes complete with penalties not only to the company but also to responsible officers, so the importance of these provisions must be underscored for corporate governance. Thus, Section 136 ensures the availability of the information with the shareholders so that they can consider these in arriving at the informed decision, hence enhancing corporate transparency and trust.

FAQs on Section 136 of the Companies Act, 2013

1. For what purpose does Section 136 of the Companies Act, 2013 provide?

Section 136 provides for providing statements and information, including financial statements, to the shareholders much in advance of seeking the companies to meet the shareholders.

This would allow them to take informed decisions and also would be a matter of transparency in corporate governance.

2. At what point of time would companies have to deliver financial statements?

Such documents must reach the shareholders at least 21 days before a general meeting by the companies. This is long enough for them to analyze it and prepare themselves in anticipation of its discussion.

3. Are listed companies required to do anything extra under Section 136?

Yes, listed companies are required to place the financial statements on the company website at least 21 days before the meeting. This increases public access and corporate transparency.

4. Can shareholders request a full set of financial statements?

Absolutely. If the owners want to know, they may request the full financial statements instead of a summary to get all the information for decision-making.

5. What happens if Section 136 is violated?

If companies contravene these provisions, they will face financial fines. There is a potential negative impact on the credibility of the company and therefore on the trust of the shareholders.