# Section 128 - Books of Accounts

## Place of Keeping Books of Accounts

Default rule: Books of Accounts (BoA) shall be kept at the Registered Office (RO) of the company.
Alternative location: Books may be kept at any other place in India, provided:
A Board Resolution is passed to that effect, and
The company files the full address with the Registrar of Companies (ROC) in Form AOC-5 within 7 days of such Board decision.

## Books of Accounts in Electronic Mode (Rule 3 of Companies (Accounts) Rules, 2014)

When BoA are maintained in electronic mode, the following conditions must be satisfied:

1. Accessibility: Books must remain accessible in India at all times.

2. Accounting Software Features (as amended):

Records to be retained completely in original and unaltered form.
Audit trail (edit log) facility cannot be disabled.
System must record every change made along with the date of such change.

3. Original and Unaltered Form: Books of the company and its branches must be retained completely in original and unaltered form.

4. Legible Form: The records, when reproduced, must be in legible form.

5. Proper Storage System: A proper system for storage, retrieval, display and printout of electronic records must be maintained.

6. No Disposal of E-records: Such e-records shall not be disposed of unless permitted by law.

7. Backup: The backup of books maintained in electronic mode must be kept on servers physically located in India on a daily basis.

8. Annual Intimation to ROC: The company must intimate the ROC on an annual basis regarding the location of the service provider and the internet protocol address.

## Branch Office Accounts

Where a company has a branch office (in India or outside India), Section 128 is deemed complied with if:

Proper books of accounts relating to branch operations are kept at the branch office, AND
Proper summarized periodic returns are sent to the company at its RO or other place in India where books are kept.

## Inspection of Books of Accounts

### For Books Kept in India:

Who can inspect: Any Director
When: During business hours

### For Books Kept Outside India (Foreign Subsidiary):

Director must make a request to the company
Request shall set out the full details of information sought
Company shall produce the information within 15 days of such request
The request must be made by the director himself (not through power of attorney holder or agent)

## Important Notes on Inspection

Inspection of BoA of a subsidiary company shall be done only by a person authorised by the Board (by resolution).
Where inspection is made, officers and employees of the company shall give all assistance reasonably required by such persons.

Worked example

### Example 1

Example 1: ABC Ltd. has its registered office in Mumbai. On 1st April, the Board decides to keep books of accounts at a place in Pune. By what date must Form AOC-5 be filed with ROC?

Answer: Form AOC-5 must be filed within 7 days of the Board decision, i.e., by 8th April. The notice must contain the full address of the new location.

### Example 2

Example 2: XYZ Ltd. maintains BoA electronically with servers located in Singapore. Is this permitted?

Answer: Yes, but subject to conditions: (i) backup must be maintained on a daily basis on servers located in India, (ii) accessibility must be ensured in India at all times, (iii) annual intimation must be filed with ROC about the location of the service provider and IP address.

### Example 3

Example 3: Mr. P, a director of PQR Ltd., wants to inspect the books of accounts of PQR's Singapore branch. He sends his Chartered Accountant on his behalf to obtain the information. Is this valid?

Answer: No. For inspection of books of a foreign branch, the request must be made by the director himself, setting out full details of information sought. He cannot delegate this to a power of attorney holder or agent. The company must produce the information within 15 days of the director's personal request.

⚠️ Common exam mistakes

Confusing the 7-day filing period for Form AOC-5 with other forms - it is specifically 7 days from the Board decision.
Forgetting that for inspection of foreign branch books, the period for production is 15 days from the director's request.
Assuming a director can use an agent or power of attorney holder to inspect foreign branch books - this is NOT permitted.
Confusing audit trail requirements - the audit trail feature in accounting software must NOT be capable of being disabled.
Thinking subsidiary BoA inspection can be done by any director - it requires a specific Board authorisation.

Bare-Act text Section 128 · Companies Act, 2013 · click to expand

Section 128 - Books of account, etc., to be kept by company: (1) Every company shall prepare and keep at its registered office books of account and other relevant books and papers and financial statement for every financial year which give a true and fair view of the state of the affairs of the company, including that of its branch office or offices, if any, and explain the transactions effected both at the registered office and its branches and such books shall be kept on accrual basis and according to the double entry system of accounting: Provided that all or any of the books of account aforesaid and other relevant papers may be kept at such other place in India as the Board of Directors may decide and where such a decision is taken, the company shall, within seven days thereof, file with the Registrar a notice in writing giving the full address of that other place. (3) The directors may inspect such books of account during business hours.

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Section 128 - Books of Accounts: Location, Electronic Mode and Inspection

Worked example

⚠️ Common exam mistakes