Regulatory updates

Rule 3 of the Companies (Accounts) Rules, 2014 (the Accounts Rules) prescribes the manner in which companies are required to maintain the books of account in electronic mode. On 5 August 2022, the Ministry of Corporate Affairs (MCA), notified amendments to the Accounts Rules by issuing the Companies (Accounts) Fourth Amendment Rules, 2022 (the Accounts Amendment Rules). Following amendments have been made to the existing set of requirements in the Accounts Rules:

• Rule 3(1): The books of account and other relevant books and papers maintained in electronic mode should remain accessible in India, at all times so that they can be used for subsequent reference (requirement to remain accessible at all times was not prescribed earlier)
• Rule 3(5): The back-up of the books of account and other books and papers of a company maintained in electronic mode, including at a place outside India, if any, should be kept in servers physically located in India on a daily basis (earlier, Rule 3(5) required entities to maintain backup in servers physically located in India on a periodic basis)
• Rule 3(6): Where a service provider has been used by a company for maintenance of books of accounts in an electronic form, the company is required to intimate to the Registrar of Companies certain details regarding the service provider on an annual basis¹.
  The Accounts Amendment Rules now provide that in cases where the service provider is located outside India, in addition to the existing details, companies should intimate the registrar of companies the name and address of the person in control of the books of account and other books and papers in India. (Additional details to be provided to the Registrar of Companies.)

On 21 August 2022, the Institute of Chartered Accountants of India (ICAI) issued an announcement in which they performed a pre and post analysis of the Accounts Rules as a result of the notification of the Accounts Amendment Rules.

To access the text of the MCA notification, please click here

To access the text of the ICAI announcement, please click here

1. These details are provided at the time of filing of the financial statements. Before the issuance of the Accounts Amendment Rules, the details that were required to be intimated to the registrar of companies on an annual basis included:
   1. the name of the service provider
   2. the internet protocol address of the service provider
   3. the location of the service provider (wherever applicable)
   4. where the books of account and other books and papers are maintained on a cloud, such address as provided by the service provider