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Thursday 12 February 2015

Board’s Report - Companies Act 2013



Board’s Report

Section 134 of the Companies Act 2013,
Rule 8, 9, and 10 of Companies (Accounts) Rules, 2014,
Section 217 of the Companies Act 1956
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Introduction:

The Board’s report now forms part of the financials under the Companies Act (CA) 2013, which mandates the Boards of companies to provide additional disclosures in their report.

A Bird’s eye-view of the Board’s report covering the following areas is presented before you for your easy reference:

-       Disclosures in Board’s Report under the CA 2013 and the respective rules as applicable to Private, Public, Listed and One Person Companies

-       Disclosures in Board’s report under the CA 1956 and CA 2013.

-       Penalty for Non – compliance

a.   Disclosures in Board’s Report:

Pursuant to Section 134 (2) of the Companies Act 2013 and Rules 8, 9 and 10 of Chapter IX, Companies (Accounts) Rules, 2014 the contents of the Board’s report are highlighted below:

The following is applicable to all Companies

(i)   New Disclosure requirements Under Companies Act 2013

-          Extract of Annual Return as specified in sec 92(3) of the CA 2013 in MGT 9 format specified in Chapter VII Rules.

-          Number of meetings of the Board held during the year

-          A statement on declaration by independent directors under sec 149 (6).

-          Particulars of loans, guarantees or investments by company under sec 186.

-          Particulars of contracts or arrangements with related parties referred to in sec 188 (1) in Form AOC – 2 format specified in Chapter IX.

-          A statement indicating development and implementation of a risk management policy for the company including identification of elements of risk, if any, which in the opinion of the Board may, threaten the existence of the company.

-          The contents of Corporate Social Responsibility Policy along with the details of the initiatives taken by the company during the year, if any, or the reason why the funds were not utilized towards the CSR activities.(if CSR is applicable for the company).

-          Director’s Responsibility Statement

o   The directors, in the case of a listed company, have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.
o   The directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

(ii)  New Disclosure requirement under Companies (Accounts) Rules, 2014:

In addition to the disclosure requirements under the Companies Act 2013 the rules further provide the following disclosures to form part of the Board’s report:

1.    Performance and financial position of the company, each subsidiary, associate and Joint Venture Company included in the consolidated financials if any.

2.    Changes in the nature of the business, if any.

3.    The details of directors or key managerial personnel who were appointed or have resigned during the year;

4.    The names of companies which have become or ceased to be its Subsidiaries, joint ventures or associate companies during the year;

5.    The compliance and non-compliance details relating to deposits, covered under Chapter V of the Act.

6.    The details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operations in future;

7.    The details in respect of adequacy of internal financial controls with reference to the Financial Statements.

8.    Statement containing salient features of financial statements referred to in section 136 (1) of the CA 2013, shall be disclosed in Form AOC-3.


In addition to the above the following are required to be included in the board’s report of all the Listed Companies and Certain Classes of Public Companies:

All the below requirements are applicable to the Board’s Report of a Listed Company and to different classes of Public Companies as summarised below:

Particulars
Applicable Classes of Public Companies
An explanation or comment by the Board on every qualification, reservation or adverse remark made by the company secretary in practice in his secretarial audit report.

-          Paid up share capital >= Rs. 50 Crores
                                    Or
-          Turnover >= Rs. 250 Crores or more

Company’s policy on directors’ appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters [ sec 178 (1)].


§  Paid up capital > = Rs. 10 Crores

                        Or

§  Turnover >= Rs. 100 Crores

                   Or

§  Having in aggregate, outstanding loans or borrowings or debentures or deposits >  50 Crores

A Statement on formal annual evaluation, made by the Board of its own performance and that of its committees and individual directors in the board’s report.



Paid up share capital > = Rs. 25 Crores

calculated at the end of the preceding financial


Details of establishment of Vigil mechanism

(i)            Those who have accepted deposits from public;
 
(ii)          Those who have borrowed money from banks and public financial institutions

>= Rs.50 Crores


b.  The following disclosures specified under the CA 1956 still continue to form part of the Board’s report under the CA 2013:

-          Director’s Responsibility Statement

-          Explanations or comments by the Board on every qualification, reservation or adverse remark made by the  by the auditor in his report;

-          State of affairs of the Company

-          The amounts, if any, which it proposes to carry to any reserves;

-          The amount, if any, which it recommends should be paid by way of dividend;

-          Material changes and commitments, if any, affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the report;

-          The conservation of energy, technology absorption, foreign exchange earnings and outgo, in such manner as may be prescribed;

c.   Signing of Board’s Report:

The Board’s report and any annexure thereto shall be signed by chairperson of the company if he/she is authorised by the Board and where the Chairperson is not so authorised, it shall be signed by at least two directors, one of who shall be a managing director, or by the director where there is one director.

d.   Board’s report of a One Person Company:

The board’s report of a One Person Company need only contain the responses to every qualification, reservation or adverse remark or disclaimer made by the auditor in his report by way of explanations or comments.

e.   Penalty – Sec 134 (8)

If a company contravenes the provisions with regard to Board’s Report,

Company:

Fine > = Rs. 50,000 - Rs. 25 Lac



Officer of the Company who is in Default:
 

a.    Imprisonment > = 3 years       

  Or                                                                               

b.    Fine > = Rs. 50,000 – Rs. 5 Lac  

                          Or 

            c. Both Imprisonment and fine



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