Companies to Maintain Daily backup of Books of Accounts: MCA

Rule 3 of Companies (Accounts) Rules states about, Manner of Books of Account to be Kept in Electronic Mode 

The books of account and other relevant books and papers maintained in electronic mode shall remain accessible in India, at all times so as to be usable for subsequent reference.

There shall be a proper system for storage, retrieval, display or printout of the electronic records as the Audit Committee, if any, or the Board may deem appropriate and such records shall not be disposed of or rendered unusable, unless permitted by law.

The Ministry of Corporate Affairs (MCA) in India has introduced new rules that impact how companies, especially multinational corporations operating in the country, manage their accounting records. According to the latest changes under Indian company law, companies must now facilitate real-time access to their electronic books of accounts for government authorities, even if the servers hosting this data are located outside India.

The key requirement is the Daily backup of accounts, which must be stored on servers physically located within India. This implies that, irrespective of the global location of the servers hosting electronic books of accounts, companies must maintain a daily copy of this data within the country’s borders. The move represents a significant tightening of regulations surrounding the electronic maintenance of accounting records.

The company shall intimate to the Registrar on an annual basis at the time of filing of financial statement-

 (a) the name of the service provider; 

(b) the internet protocol address of service provider; 

(c) the location of the service provider (wherever applicable);

(d) where the books of account and other books and papers are maintained on cloud, such address as provided by the service provider. 

(e)where the service  provider  is  located  outside  India,  the  name  and address  of  the  person  in control of the books of account and other books and papers in India

The motivation behind these changes is to ensure that books of accounts and related documents, when stored electronically, are constantly accessible to Indian authorities. The emphasis is on maintaining the ability for local law enforcement agencies to utilize this information for reference whenever necessary. This measure is a response to the increasing use of cloud infrastructure and servers located abroad, making it imperative for companies to comply with the stipulated daily backup requirement on servers within India.

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