The Ministry of Corporate Affairs (MCA) has introduced the Companies (Accounts) Amendment Rules, 2025, bringing significant changes to the accounting and compliance framework for Indian companies. These amendments aim to enhance transparency, strengthen regulatory oversight, and align with global best practices in corporate governance.
- Mandatory Daily Backup of Electronic Records in India
One of the most notable changes is the requirement for companies to ensure that their books of accounts and other relevant records maintained in electronic mode are accessible in India at all times. Furthermore, companies must now back up these records on servers physically located in India on a daily basis. Previously, this backup was required only on a periodic basis. This move aims to bolster data security and ensure that Indian authorities have unimpeded access to corporate records when necessary.
- Enhanced Disclosure Requirements for Foreign Service Providers
In cases where a company utilizes a foreign service provider for maintaining its electronic records, the amended rules mandate that the company disclose the name and address of the person in control of these records within India. This disclosure must be made in the company’s annual filings with the Registrar of Companies (RoC). This provision ensures accountability and facilitates regulatory oversight, especially when records are managed outside the country’s jurisdiction.
- Audit Trail Feature in Accounting Software
The 2025 amendments reinforce the requirement for companies to use accounting software that has an in-built audit trail feature. This feature must record every transaction, create an edit log for each change made, and ensure that the audit trail cannot be disabled. This provision aims to enhance the integrity of financial data and deter fraudulent activities .
- Separate Filing of Corporate Social Responsibility (CSR) Report
Companies are now required to file the CSR report under Form CSR-2 separately, instead of including it with Form AOC-4. This change, applicable for the financial year 2023-2024, emphasizes the importance of CSR activities and ensures that stakeholders receive clear and focused information on a company’s social and environmental initiatives .
- Extended Dematerialization Deadline for Private Companies
The deadline for private companies to convert physical shares into dematerialized form has been extended to June 30, 2025. This extension provides companies additional time to comply with the mandatory dematerialization requirements, facilitating smoother transitions and reducing the risk of non-compliance .
Implications for Companies
These amendments necessitate that companies review and possibly upgrade their accounting systems, data storage practices, and compliance procedures. Non-compliance with these provisions can lead to penalties and other legal consequences as stipulated by the relevant provisions of the Companies Act .
In conclusion, the Companies (Accounts) Amendment Rules, 2025, represent a significant step towards modernizing India’s corporate governance framework. By enhancing transparency, ensuring data security, and promoting accountability, these amendments aim to foster a more robust and trustworthy business environment in India.
