Section 136: Right to the Financial Statements
The section 136 right to financial statements is the earliest and cheapest access route in the Companies Act, 2013 to a company's audited accounts. It runs before the annual general meeting, before the section 137 filing with the Registrar, and it costs the member nothing. Section 136(1) requires the statements, the auditor's report and every other document annexed to them to be sent to every member and to every debenture trustee not less than twenty-one days before the date of the meeting.
Definition
Section 136
of the Companies Act, 2013 requires a copy of the financial statements, including consolidated statements, the auditor's report and every document attached to them, to be sent to every member, to every debenture trustee, and to every other person entitled, not less than twenty-one days before the general meeting at which they are laid. Source: Companies Act, 2013, section 136(1).
Who has the section 136 right to financial statements?
Three groups, named in sub-section (1) itself:
- every member of the company
- every trustee for the debenture-holder of any debentures issued by the company
- all persons other than such member or trustee, being the person so entitled
The last limb is what carries the right beyond the register of members. It reaches anyone the Act or the company's own documents entitle to receive the statements. Section 146, separately, requires all notices of and other communications relating to any general meeting to be forwarded to the auditor of the company.
21 days
The minimum period before the date of the general meeting by which the financial statements and attached documents must be sent under section 136(1)
Source: Companies Act, 2013, section 136(1)
The sub-section used to open with the words "Without prejudice to the provisions of section 101". Those words were omitted by the Companies (Amendment) Act, 2017, being Act 1 of 2018, section 38, with effect from 9 February 2018.
The six provisos to section 136(1)
Each one changes either the deadline, the delivery method, or the population.
| Proviso | What it does |
|---|---|
| First | Documents sent less than twenty-one days before the meeting are deemed duly sent if agreed by members holding a majority in number entitled to vote and representing not less than ninety-five per cent of the paid-up share capital carrying a right to vote, or, where the company has no share capital, having not less than ninety-five per cent of the total voting power |
| Second | A listed company is deemed to comply if the documents are available for inspection at its registered office during working hours for twenty-one days before the meeting and a prescribed statement of salient features, or copies, is sent to every member and debenture trustee at least twenty-one days before, unless shareholders ask for the full financial statements |
| Third | The Central Government may prescribe the manner of circulation for companies of such net worth and turnover as may be prescribed |
| Fourth | A listed company shall place its financial statements, consolidated statements if any, and all attached documents on its website |
| Fifth | A listed company with a subsidiary shall place separate audited accounts of each subsidiary on its website, if any |
| Sixth | For a listed company's foreign subsidiary, the website requirement is met by the foreign subsidiary's consolidated statement where its own country's law requires one, or by an unaudited statement plus an English translation where that country's law does not require an audit and none is done |
Two of those are worth pulling out. The first proviso is a short-notice consent route, not a waiver: a ninety-five per cent threshold is high enough that it belongs to closely held companies rather than to a widely held one. The second proviso is what lets a listed company meet sub-section (1) with a statement of salient features rather than the full accounts, but only alongside its inspection limb, and it carries its own override, the words "unless the shareholders ask for full financial statements".
The last two provisos in the table were substituted by Act 1 of 2018, section 38, with effect from 9 February 2018, for what was then the fourth proviso. The first proviso arrived in the same amendment, which is also why the surviving provisos were renumbered downstream of it.
Inspection, and the subsidiary copy on request
Section 136(2) is a separate right and it survives after the documents have been sent. A company shall allow every member, and every trustee of the holder of any debentures issued by it, to inspect the documents stated in sub-section (1) at its registered office during business hours.
The proviso to section 136(2), inserted by Act 1 of 2018, section 38, with effect from 9 February 2018, is the most useful sentence in the section for anyone reading a group. Every company having a subsidiary or subsidiaries shall provide a copy of the separate audited or unaudited financial statements, as the case may be, prepared in respect of each of its subsidiaries, to any member of the company who asks for it. That right is not confined to listed companies and it is not confined to audited accounts.
What a default costs
Section 136(3) sets a flat consequence with no continuing-failure limb. Where any default is made in complying with the section, the company is liable to a penalty of twenty-five thousand rupees, and every officer of the company who is in default is liable to a penalty of five thousand rupees.
Section 136 against section 137
The two access routes are easy to conflate. They differ on timing, on cost, and on who may use them.
| Section 136 | Section 137 | |
|---|---|---|
| Who may use it | Members, debenture trustees, persons entitled | Any person, through the section 399 inspection right |
| When | At least twenty-one days before the general meeting | After filing, within thirty days of the AGM |
| Cost to the reader | None, the company sends them | Fees as prescribed for inspection or a certified copy |
| What arrives | The full statements, or a salient-features statement for a listed company under the second proviso | Whatever the company filed, including a statement the AGM never adopted |
| Subsidiary accounts | On request, under the proviso to section 136(2) | Only foreign subsidiaries, under the fourth and fifth provisos to section 137(1) |
The practical reading is that a member gets the accounts earlier and free, and the public gets them later and paid for. Anyone who is neither is waiting on the Registrar.
- How to find a company's financial statements at the ROC covers the public route through sections 137 and 399.
- Section 129 financial statements is the standard the circulated statements had to be prepared to.
- Directors' Responsibility Statement is part of the Board's report circulated alongside them under section 134(7).
- What are the minutes of a general meeting covers the record of the meeting at which the statements are laid.
- What is the register of members is the record that determines who counts as a member for the purpose of this right.
Flock reports the filings themselves, each stamped with its date and linked back to the exchange or regulator that published it. What any of it means for you is your call to make.
Frequently asked questions
Who must receive a copy of the audited financial statements?
Every member of the company, every trustee for the debenture-holder of any debentures issued by it, and all persons other than such member or trustee who are so entitled. The copies must be sent not less than twenty-one days before the date of the meeting at which the statements are laid. Source: Companies Act, 2013, section 136(1).
Can a listed company send a salient-features statement instead of the full accounts?
Yes, on two conditions together. Under the second proviso to section 136(1), the documents must be available for inspection at the registered office during working hours for twenty-one days before the meeting, and a prescribed salient-features statement or copies must be sent at least twenty-one days before, unless the shareholders ask for full financial statements. Source: Companies Act, 2013, second proviso to section 136(1).
Can a member get a subsidiary's financial statements?
Yes, on request, and this is not confined to listed companies. Under the proviso to section 136(2), every company having a subsidiary or subsidiaries shall provide a copy of the separate audited or unaudited financial statements prepared for each of its subsidiaries to any member of the company who asks for it. Source: Companies Act, 2013, proviso to section 136(2), inserted by Act 1 of 2018, s. 38.
What is the penalty for a default under section 136?
A flat penalty with no continuing-failure limb. Where any default is made in complying with the section, the company is liable to a penalty of twenty-five thousand rupees and every officer of the company who is in default is liable to a penalty of five thousand rupees. Source: Companies Act, 2013, section 136(3).
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