Section 338 of the Companies Act, 2013
Section 338 of the Companies Act, 2013 deals with the liability where proper accounts are not kept by a company that is being wound up.
📘 Section 338 – Liability for Not Keeping Proper Books of Account
✅ Key Provisions:
Applicability:
This section applies when a company is being wound up, and it is found that the company has not kept proper books of account during the 2 years immediately preceding the commencement of winding up (or from incorporation if shorter).
Liability:
In such a case, every officer of the company who is responsible for the default is punishable.
Punishment:
Imprisonment for up to 1 year,
or
Fine between ₹1 lakh to ₹3 lakh,
or both.
What are "Proper Books of Account"?
Records that give a true and fair view of the company's financial transactions and state of affairs.
Include day-to-day entries, cash and bank transactions, receipts and payments, etc.
⚠️ Purpose:
To ensure that companies maintain transparency and accountability in financial records, especially before insolvency or winding up.
📌 Example:
If ABC Ltd. is going through winding up and it is discovered that its accounts were not maintained for the last two years, the Managing Director and CFO (being responsible officers) may be prosecuted under Section 338.
RELATED Blog
0 comments