# Legal Framework: Branch Accounts under Companies Act 2013

Three provisions of the Companies Act 2013 form the legal backbone for branch account maintenance and audit.

## Section 128(1) — Maintenance of Books of Accounts

Every company must:

Prepare and keep Books of Accounts, relevant books and papers, and Financial Statements at its registered office
The books must give a true and fair view of the state of affairs of the company, including branch offices
Books must be kept on accrual basis using a double entry system
Books may be kept at another location in India if the Board so decides (company must file a notice with the Registrar giving the full address)
Books may be maintained in electronic mode as prescribed

## Section 128(2) — Branch Office Compliance Route

A company with a branch office (in India or abroad) is deemed to have complied with Sec 128(1) if:

1. Proper books of accounts are kept at the branch office, AND

2. Summarised returns are periodically sent from the branch to the registered office (or other approved location)

## Section 143(8) — Audit of Branch Accounts

Situation	Who Audits the Branch?
Branch in India	Company's auditor OR another person appointed under S.139
Branch outside India	Company's auditor OR a person duly qualified under the laws of that country

Flow of the branch audit report:

1. Branch auditor examines branch accounts

2. Branch auditor prepares a report on branch accounts

3. Branch auditor sends the report to the company's auditor

4. Company's auditor deals with it in such manner as he considers necessary in his main report

Worked example

### Example 1

Sec 128(2) in Practice: TechMart Ltd has a branch in Bengaluru. Instead of consolidating all records at the Mumbai registered office daily, TechMart keeps full books at the Bengaluru branch and sends monthly summarised returns to Mumbai. This satisfies Sec 128(2) compliance.

### Example 2

Sec 143(8) — Overseas Branch: InfoCorp Ltd has a branch in Singapore. The Singapore branch accounts are audited by a Singapore-licensed CPA firm (qualified under Singapore law). The Singapore firm prepares its branch report and sends it to InfoCorp's Indian statutory auditor, who incorporates the findings in the main audit report on InfoCorp Ltd.

⚠️ Common exam mistakes

Confusing Sec 128(1) and 128(2): Sec 128(1) is the general rule (books at registered office); Sec 128(2) is the specific compliance route for branches (books at branch + summarised returns sent to HO).
Assuming a foreign branch must be audited by an Indian CA — Sec 143(8) explicitly permits a person qualified under the laws of the host country to audit overseas branches.
Thinking the branch auditor's report goes directly to the Board — under Sec 143(8), it goes to the company's auditor (statutory auditor), not directly to the Board.
Forgetting that 'summarised returns' under Sec 128(2) must be sent periodically — keeping books only at the branch without sending periodic returns to HO does not satisfy compliance.

Bare-Act text Section 143(8) · Companies Act, 2013 · click to expand

Where a company has a branch office, and the accounts of that office shall be audited either by auditor appointed for the company, or by any other person appointed as per S139. If the branch office is situated outside India, the accounts of the branch auditor will be audited by the company's auditor or by any person duly qualified to act as an auditor in accordance with the laws of the country. The branch auditor will prepare a report on the accounts of the branch examined by him and send it to the auditor of the company who shall deal with it in his report in such a manner as he considers necessary.

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Legal Framework for Branch Accounts: Companies Act 2013 – Sections 128 and 143(8)

Worked example

⚠️ Common exam mistakes