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
