"We don't do monthly MIS": what the Companies Act requires

Key point: Section 128 requires every company to keep accrual-basis, double-entry books that give a true and fair view — with the s.128(6) fine falling personally on the managing director, the whole-time director in charge of finance, the CFO, or the person charged by the Board — not an optional monthly report for the bank.

Illustrative case: a Bengaluru SaaS startup had ₹85 lakh in its current account and what looked like profitable printouts. At the bank's annual credit review, the relationship manager asked for six months of management accounts. The founder had none — just unprocessed ledger reports — and the cash-credit limit was frozen until a CA reconstructed six months of reports, a process that took eight weeks.

Founders often treat monthly management information system (MIS) reports as infrastructure for later — something a funded company with a finance team builds. The Companies Act 2013 and the banking system take a different view.

What Section 128 actually requires

"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 ... and such books shall be kept on accrual basis and according to the double entry system of accounting" (s.128(1), Companies Act, 2013).

"True and fair view" is a positive obligation, not an aspiration. A company whose books show ₹45 lakh in debtors when ₹15 lakh is irrecoverable has not produced a true and fair view, even with complete raw entries. Giving that view reliably calls for month-end adjustments — bad debt provisions, accruals, inventory write-downs — which a regular monthly close makes dependable. Section 128 sets no monthly frequency; the monthly close is good practice that makes s.128 compliance reliable, not a statutory requirement.

The rest of Section 128 is equally concrete:

• Section 128(2): where the company has a branch office, proper books are kept at the branch and "proper summarized returns periodically are sent by the branch office to the company at its registered office".
• Section 128(3): books kept in India "shall be open for inspection at the registered office of the company ... by any director during business hours". A director cannot inspect what does not exist.
• Section 128(5): books and vouchers "relating to a period of not less than eight financial years immediately preceding a financial year" must be kept in good order — longer if the Central Government so directs while an investigation is pending under Chapter XIV.
• Electronic books: books kept electronically must "remain accessible in India so as to be usable for subsequent reference", be retained complete and unaltered, and their back-up "shall be kept in servers physically located in India on a daily basis" (Rule 3, Companies (Accounts) Rules, 2014, as amended 2022) — and accounting software must retain an audit trail (edit log) of every transaction, which auditors report on.

The penalty, and who personally carries it

"If the managing director, the whole-time director in charge of finance, the Chief Financial Officer or any other person of a company charged by the Board with the duty of complying with the provisions of this section, contravenes such provisions, [they] shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees" (s.128(6)).

The fine range is a single band for all companies — ₹50,000 to ₹5,00,000 (s.128(6)). Section 446B's lesser-penalty relief applies only where a penalty is payable, not to the s.128(6) fine imposed by a court, so no reduced band is stated here.

This is a personal fine, not a company fine. If you are the director in charge of finance and the accounts are in disorder, the fine falls on you individually.

Why your bank asks for monthly MIS

Section 128 governs the books you keep. Your bank's sanction letter governs what you report from them — and the two are linked. Working-capital sanction letters commonly require the borrower to submit periodic stock and book-debt statements, and persistent default on those submissions can jeopardise the facility, including enhanced monitoring of the account. A company that closes its books monthly can produce these statements on demand; one that does not scrambles at review time.

The six schedules a disciplined monthly close includes

Well-structured monthly management accounts are not one document — they are six schedules:

• P&L — month and year-to-date, from 1 April, with gross margin, overhead categories, EBITDA and PAT tracked monthly so a margin squeeze is caught before it becomes a cash crisis.
• Balance sheet as at month-end, showing whether the company sits inside its bank covenants — current ratio and debt-equity position.
• Stock and debtors statement, with debtors aged into 0–30, 31–60, 61–90 and over-90-day buckets and inventory valued under the applicable accounting standard — the schedule a bank cross-checks against the cash-credit drawing power.
• Creditors aging with MSME payables shown separately — payment to micro and small suppliers beyond 45 days carries consequences under the MSMED Act (s.15: agreed payment terms "in no case" beyond "forty-five days from the day of acceptance"), with tax implications your CA should confirm.
• Bank reconciliation statements, one per account, with anything unreconciled past 30 days flagged.
• Budget vs actual variance analysis, with commentary on material movements — the evidence base for the board's record of oversight and each director's duty to "exercise his duties with due and reasonable care, skill and diligence" (s.166(3)).

What happens without them

• Bank credit: missing periodic stock statements risks enhanced monitoring or curtailment of the facility; restoring clean credit status takes sustained compliant submissions afterward.
• Tax exposure: thin, reconstruction-era books complicate tax audit and any scrutiny assessment far more than contemporaneous monthly records do.
• Funding due diligence: financial due diligence goes faster and cleaner with twelve trailing months of organised accounts; founders without them face delayed closes and harder negotiations.

Setting up your monthly close

• Lock the prior period early in the following month — no backdated entries without a signed journal voucher.
• Physical stock count at month-end, reconciled to the inventory ledger; material discrepancies go to the board.
• Clear every bank reconciliation — current, CC, OD, escrow — before closing.
• Provision current tax and all statutory dues on the accrual basis Section 128(1) requires — TDS, GST, PF/ESI and the current-tax provision — regardless of the actual payment date. (Advance tax instalments are payments against that liability, not a separate item to provision.)
• Accrue outstanding expenses: vendor invoices, spillover salary, professional fees payable.
• Prepare the six schedules within days of month-end, not weeks.
• Submit the stock statement to the bank by the sanction letter's deadline.
• Circulate a one-page management commentary — revenue, EBITDA, cash balance, debtors — to all directors, creating a documented record of board oversight.

For a review of your company's monthly close, speak to your chartered accountant.

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See Also

• Fast-track merger under Section 233 of the Companies Act: eligibility, process and effects
• Section 248: Select closure route — inactive company
• FC-GPR: Report share issue — within 30 days