Companies Act Section 129A

Companies Act Section 129A- Periodical Financial Results: Regulatory Requirement for Certain Unlisted Companies

Section 129A was introduced into the Companies Act, 2013 to empower the Central Government to impose specific financial reporting requirements on certain categories of unlisted companies. The objective of this provision is to enhance transparency, accountability, and regulatory oversight over companies that, although not listed on stock exchanges, may have significant public interest implications due to their size, nature of operations, public borrowings, or other factors.

This section enables the Central Government to mandate periodic financial reporting, thereby ensuring that the financial health and performance of these unlisted companies can be regularly monitored by both their stakeholders and regulatory authorities.

Applicability- Classes of Unlisted Companies

The power under Section 129A applies only to unlisted companies, and only to those specific classes or categories of unlisted companies that the Central Government may prescribe through official rules or notifications.

This means that Section 129A does not automatically apply to all unlisted companies   it applies selectively based on criteria such as:

Size of the company (turnover, paid-up capital, net worth, etc.)

Nature of business (public utility companies, systemically important companies, etc.)

Extent of public borrowings or exposure to public funds

Any other criteria as the Government may determine from time to time.

Requirement to Prepare Periodical Financial Results 

Once identified as falling within the prescribed class of unlisted companies, such companies will have a legal obligation to prepare financial results on a periodic basis.

The frequency (e.g., quarterly, half-yearly) and the format of these financial results will be specified by the Central Government through rules. These periodic financial results would essentially provide a snapshot of the company’s:

Revenue and income streams

Expenses and profitability

Assets, liabilities, and cash flow position

This provision ensures that there is a consistent flow of financial information to relevant stakeholders, including regulatory authorities, lenders, creditors, and others with a vested interest in the company’s performance.

Approval by Board and Audit/Review Process

The periodic financial results prepared by the company must not only be prepared but also:

1. Approved by the Board of Directors

The Board of Directors of the company is statutorily responsible for reviewing and approving these financial results. This requirement ensures that the company’s leadership takes direct ownership of the accuracy and completeness of the financial information submitted.

2. Subject to Audit or Limited Review

The periodic financial results must also undergo either an audit or at the very least, a limited review the extent of this review will be prescribed by rules framed under this section. This review is typically performed by the company’s statutory auditors or other qualified professionals, as defined in the applicable rules.

This dual requirement of Board approval and independent review enhances the reliability of the financial data submitted and reduces the risk of misrepresentation or fraud.

Filing with Registrar of Companies

Once the periodic financial results have been:

Prepared in the prescribed form,

Approved by the Board, and

Reviewed/audited as required,

the company must file a copy of these results with the Registrar of Companies (ROC).

Timeline for Filing

This filing must be completed within 30 days from the end of the relevant period for which the financial results are prepared (e.g., within 30 days of the end of a quarter if quarterly results are required).

Prescribed Fees

The filing must be accompanied by the applicable filing fees, which would be specified under the relevant rules.

Objective and Rationale

The introduction of Section 129A reflects the Government’s intent to strengthen financial transparency and corporate governance in the unlisted corporate sector, particularly for larger companies or companies with substantial public interest exposure (such as those with large borrowings from public financial institutions).

Periodic reporting ensures that early warning signs of financial distress, mismanagement, or fraudulent practices can be identified in a timely manner by regulators. It also helps protect the interests of creditors, lenders, investors, employees, and other stakeholders who rely on timely and accurate financial disclosures.