Rules 4 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rules 4 to 7 deal with the information directors can demand from books kept outside India, what form the financial statements take, the AOC-1 statement of salient features of subsidiaries, associates and joint ventures, when consolidation can be skipped, and the transitional rule on accounting standards. This article states the rules as amended up to G.S.R. 357(E) dated 30 May 2025 (in force 14 July 2025) per the MCA e-book, with the e-Form AOC-1 wording applied from that notification. Later amendments should be checked.
A company's consolidation follows Schedule III and the applicable accounting standards (rule 6), but a company need not prepare consolidated financial statements if it is a wholly owned subsidiary (or a partially owned one whose other members, duly intimated in writing, do not object), is unlisted and not in the process of listing, and its ultimate or an intermediate holding company files compliant consolidated statements with the Registrar. The statement of salient features of subsidiaries, associates and joint ventures is in e-Form AOC-1 (rule 5).
Rule 4: directors and books kept outside India
- 4(1). Summarised returns of books of account kept outside India are sent to the registered office at quarterly intervals, kept there and open to directors for inspection.
- 4(2). If a director requires any other financial information maintained outside the country, he furnishes a request to the company giving full details of the information sought and the period for which it is sought.
- 4(3). The company must produce the information within fifteen days of receiving the written request.
- 4(4). The director must seek the information himself, not through a power of attorney holder, agent or representative.
Rule 4A: form and items of financial statements
The financial statements must be in the form specified in Schedule III to the Act and comply with Accounting Standards or Indian Accounting Standards as applicable. A proviso says the items in the financial statements are prepared in accordance with the definitions and other requirements specified in those standards. See Section 129: Financial Statements.
Rule 5: the AOC-1 statement
The statement containing the salient features of the financial statement of a company's subsidiary or subsidiaries, associate company or companies and joint venture or ventures under the first proviso to section 129(3) is in e-Form AOC-1. The word "e-Form" was substituted for "Form" by G.S.R. 357(E) of 30 May 2025, in force 14 July 2025, which also replaced the form itself.
Rule 6: consolidation
| Provision | What it says |
|---|---|
| Rule 6 | Consolidation of financial statements is made in accordance with Schedule III and the applicable accounting standards |
| First proviso | A company covered by section 129(3) that is not required to prepare consolidated statements under the Accounting Standards need only comply with the consolidation provisions in Schedule III |
| Second proviso, conditions (i) to (iii) | Rule 6 does not apply to a company that meets all three conditions below |
| Further provisos | Two provisos for the financial year 2014-2015 (companies with only associates or joint ventures; companies with only foreign subsidiaries), which have run their course |
The three conditions, all of which must be met, are:
- (i) the company is a wholly owned subsidiary, or a partially owned subsidiary of another company and all its other members, including those not otherwise entitled to vote, having been intimated in writing (with proof of delivery of the intimation available with the company), do not object to the company not presenting consolidated financial statements;
- (ii) its securities are not listed, or in the process of listing, on any stock exchange in India or outside India; and
- (iii) its ultimate or any intermediate holding company files consolidated financial statements with the Registrar in compliance with the applicable Accounting Standards.
So a wholly owned subsidiary that is unlisted and whose ultimate or intermediate parent files compliant consolidated statements need not prepare its own. A partially owned subsidiary must also show that the other members were told in writing and did not object. The consolidation timetable in practice, including the order of audits and approvals, is discussed in Holding Company AGM and Subsidiary Accounts: Consolidation Sequence. The related question of what counts as an associate is in Is a Subsidiary's Associate Also an Associate of the Holding Company. For consolidation planning, see our books of accounts compliance service.
Rule 7: transition to accounting standards
- 7(1). The standards of accounting specified under the Companies Act, 1956 are deemed to be the accounting standards until standards are specified by the Central Government under section 133.
- 7(2). Till the National Financial Reporting Authority is constituted under section 132 of the Act, the Central Government may prescribe the standards of accounting or any addendum, as recommended by the Institute of Chartered Accountants of India in consultation with and after examination of the recommendations of the National Advisory Committee on Accounting Standards constituted under section 210A of the 1956 Act.
Rule 7 is quoted as printed and the references to the 1956 Act and to a body to be constituted are historical; check the current accounting standards position before relying on it. The standards notified under section 133 are described in Section 133: Accounting Standards and, for the Rules of 2021 and AS 22, in Companies (Accounting Standards) Rules, 2021.
A worked example
Summit Textiles Limited (invented) is a listed company with two subsidiaries and an associate. It prepares consolidated financial statements under Schedule III and the applicable standards and attaches a statement of the salient features of the subsidiaries, associate and joint ventures in e-Form AOC-1. One subsidiary, Summit Dyeing Private Limited, is wholly owned and unlisted, and Summit Textiles files compliant consolidated statements with the Registrar. Summit Dyeing meets the three conditions and need not prepare consolidated statements of its own. A director of Summit Dyeing who needs a ledger held at an overseas branch writes to the company giving full details and the period; the company must produce it within fifteen days, and the request cannot be made through a power of attorney holder.
Practical points
- Document the written intimation and proof of delivery to other members before relying on the exemption for a partially owned subsidiary.
- Check that the ultimate or intermediate holding company in fact files its consolidated statements with the Registrar.
- Use the current e-Form AOC-1 for financial statements filed after 14 July 2025.
- Keep quarterly summarised returns from overseas books at the registered office.
Need help with consolidation and AOC-1?
Whether to consolidate, which entities to include and how to complete AOC-1 are decisions that need the group structure in front of you. Our books of accounts compliance service can prepare the AOC-1 statement, test the exemption conditions and align the reporting with the AOC-4 filing in Rules 10 to 12.
Key takeaways
- Books kept abroad: summarised returns quarterly to the registered office; other information to a director within fifteen days of his own written request.
- Financial statements follow Schedule III and applicable accounting standards.
- AOC-1 is now an e-Form.
- Consolidation exemption: wholly owned (or partially owned with no objection), unlisted, and a parent files compliant consolidated statements.
- Rule 7 is transitional.
Read next
- Section 129: Financial Statements
- Holding Company AGM and Subsidiary Accounts: Consolidation Sequence
- Rules 1 to 3: books of account in electronic mode
- Rules 10 to 12: AOC-3, circulation and AOC-4
Disclaimer: Based on the Companies Act, 2013 rules (and the Companies (Auditor's Report) Order, 2020) named above as consolidated in the MCA e-book (consulted on 3 October 2026), with the later notifications the article names. Later amendments, fees, forms and the Companies Act, 2013 provisions referred to should be checked. This article is general information, not legal advice; check the official text before acting.