Companies Act Section 294

Companies Act Section 294: Provisions for the Audit of Company Liquidator’s Accounts

Section 294 of the Companies Act lays down a comprehensive framework for the audit and scrutiny of the accounts maintained by a Company Liquidator during the process of company liquidation. This section is integral to ensuring transparency, accountability, and effective oversight of the financial transactions undertaken by the Company Liquidator in the course of executing his duties.

1. Obligation to Maintain Proper Books of Account

Under the first provision of this section, it is mandated that the Company Liquidator must maintain proper, detailed, and accurate books of account. These records must include a complete account of all receipts and payments made by him in connection with the liquidation process. Furthermore, these records are to be maintained in a format and manner that are specifically prescribed by the relevant rules under the Act. This requirement ensures that all financial transactions are traceable, systematic, and open to verification.

2. Periodic Presentation of Accounts to the Tribunal

The second sub-section imposes an obligation on the Company Liquidator to periodically present a formal statement of accounts to the Tribunal. These accounts must relate to all receipts and payments made by him while acting in his official capacity. Importantly, the accounts must be presented in duplicate and in the prescribed form. They must also be verified through a declaration, again, in the form and manner prescribed by the law. The timeline for such submissions is not arbitrary, it must be done at intervals as prescribed, but in any case, not less than two times in each year during the Liquidator’s term in office. This regular reporting mechanism is intended to keep the Tribunal informed and allow for timely interventions if required.

3. Audit by the Tribunal and Requirement to Furnish Supporting Documents

In the third provision, the Tribunal is vested with the authority to arrange for an audit of the accounts submitted by the Company Liquidator. The manner of audit is left to the discretion of the Tribunal, allowing it to decide how thorough or extensive the audit should be, based on the facts and circumstances of each case. For the audit process, the Company Liquidator is duty-bound to provide the Tribunal with all necessary vouchers, documentation, and any additional information that the Tribunal may request. Furthermore, the Tribunal is empowered to inspect or demand the production of the Liquidator’s books of account at any time, thereby reinforcing its supervisory role.

4. Filing and Inspection of Audited Accounts

Once the audit of the accounts is completed, the fourth sub-section mandates that one copy of the audited accounts must be filed with the Tribunal. Simultaneously, another copy must be delivered to the Registrar of Companies. These audited accounts are not confidential, they must be made accessible to any creditor, contributory, or other person having an interest in the company. This provision ensures transparency and permits stakeholders to verify the financial conduct of the Liquidator during the winding-up process.

5. Special Requirement for Government Companies

Sub-section five provides special instructions where the company under liquidation is a Government company. In such cases, the Company Liquidator must forward a copy of the audited account to the relevant government authority, depending on the ownership structure of the company. If the Central Government is a shareholder, a copy must be sent to it. If a State Government holds shares, the copy must be sent to that State Government. In cases where both the Central and State Governments are shareholders, copies must be sent to both. This ensures that government stakeholders remain informed and can exercise oversight where public funds or interests are involved.

6. Circulation of Audited Accounts or Summaries to Creditors and Contributories

The sixth and final sub-section obligates the Company Liquidator to ensure that the audited accounts, or a summary thereof, are printed and made available to all relevant parties. A printed copy must be sent by post to every known creditor and every contributory of the company. However, the Tribunal is vested with discretionary power to waive this requirement if it finds that the circumstances justify such dispensation. This ensures that the process remains flexible and not unnecessarily burdensome in cases where strict compliance may not serve any practical benefit.