Section 134 of the Companies Act, 2013 casts a responsibility on the Board of Directors to prepare a report containing details as discussed below and this report needs to be annexed to the Financial Statements which are laid before the members in the annual general meeting. Companies Act, 2013 also contains provisions regarding revision of Board™s report which has been discussed in Chapter VI of the companies act, 2013 along with revisions of Financial Statements under Section 131.
Manner Of Preparation And Contents Of Board™s Report
Board Report shall be prepared based on the stand alone financial statements of the company and the report must contain a separate section wherein a report on the performance and financial position of each of the subsidiaries, associates and joint venture companies included in the consolidated financial statement is presented. Board™ Report must contain disclosure on the following, except in case of a One Person Company:
- The state of the company™s affairs
- Financial Summary/Highlights
- 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
- Change in the nature of business, if any;
- The amount, if any, which it recommends should be paid by way of dividend
- The amounts, if any, which it proposes to carry to any reserves
- Names of companies which have become or ceased to be its Subsidiaries, joint ventures or associate companies during the year along with reasons
- Details relating to Deposits, covering the following:
(a) Accepted during the year;
(b) Remained unpaid or unclaimed as at the end of the year;
(c) Whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved:
i. at the beginning of the year
ii. maximum during the year
iii. at the end of the year
(d) Details of deposits which are not in compliance with the requirements of Chapter V of the Act
Directors, Board Committees, Kmp And Remuneration
- Details of directors or key managerial personnel who were appointed or have resigned during the year;
- A statement on declaration given by independent directors under sub-section (6) of section 149
- Re-appointment of an Independent director after completion of 5 year term.
- In case of a company covered under sub-section (1) of section 178, company™s policy on directors™ appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under sub-section (3) of section 178
- In case of a listed company and every other public company having a paid up share capital of Rs. 25 Crores or more, calculated as at the end of the preceding financial year, a statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its committees and individual directors;
- Particulars of loans, guarantees or investments under section 186;
- Particulars of contracts or arrangements with related parties referred to in sub-section (1) of section 188 in Form No. 9.5, along with the justification for entering into such contract or arrangement.
- Composition of Audit Committee and reason for not accepting any recommendation of the audit committee
- Details of policy relating to the remuneration of the directors, key managerial personnel and other employees formulated by the Board on recommendation of nomination and remuneration committee.
- Details of establishment of vigil mechanism
- In case of listed companies, following details:
- the ratio of the remuneration of each director to the median remuneration of the employees of the company for the financial year
- Percentage increase in remuneration of each director and CEO in the financial year
- Percentage increase in the median remuneration of employees in the financial year
- Number of permanent employees on the rolls of company
- Explanation on the relationship between average increase in remuneration and company performance
- Comparison of the remuneration of the Key Managerial Personnel against the performance of the company
- The key parameters for any variable component of remuneration availed by the directors
- The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year
- Affirmation that the remuneration is as per the remuneration policy of the company
- A statement showing followingdetails of every employee of the company who was in receipt of remuneration in excess of Rs. 60 Lakhs, if employed throughout the year or Rs. 5 lakhs per month, if employed for part of the financial year or received remuneration in excess of that drawn by the MD/WTD/Manager and holding 2% or more of equity share capital of the company (himself along with spouse and dependent children)
- Name, age and designation of the employee
- Remuneration received.
- Nature of employment, whether contractual or otherwise
- Date of commencement of employment;
- The last employment held by such employee before joining the company
- Percentage of equity shares held in the company along with spouse and dependent children
- Whether any such employee is a relative of any director or manager of the company and if so, name of such director
- Details of Commission/remuneration received by a MD/WTD of the company from the company™s holding or subsidiary company.
Conservation Of Energy, Technology Absorption, Foreign Exchange Earnings And Outgo,
(A) Conservation of energy:
Steps taken / impact on conservation of energy, with special reference to the following:
(i) Steps taken by the company for utilising alternate sources of energy including waste generated
(ii) Capital investment on energy conservation equipments
(B) Technology absorption:
1. Efforts, in brief, made towards technology absorption.
2. Benefits derived as a result of the above efforts, e.g., product improvement, cost reduction, product development, import substitution, etc.
3. In case of imported technology (imported during the last 3 years reckoned from the beginning of the financial year), following information may be furnished:
(a) Details of technology imported.
(b) Year of import.
(c) Whether the technology been fully absorbed
(d) If not fully absorbed, areas where absorption has not taken place, and the reasons therefore.
4. Expenditure incurred on Research and Development
(C) Foreign exchange earnings and Outgo
Disclosure On CSR And Other Policies
- Composition of CSR Committee
- The details about the policy developed and implemented by the company on corporate social responsibility initiatives taken during the year;
- A statement indicating development and implementation of a risk management policy for the company including identification therein of elements of risk, if any, which in the opinion of the Board may threaten the existence of the company;
Qualifications In Audit Reports
- Explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made”
(a) by the statutory auditor in his report; and
(b) by the company secretary in practice in his secretarial audit report;
- 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.
- Extract of the annual return as provided under sub-section (3) of section 92 in form no. 7.9.
- Number of meetings of the Board;
- Secretarial Audit Report under Section 204 of the Act, to be annexed to Board™s report.
- In case of Buy-Back under Section 67, where the voting rights are not exercised directly by the employees in respect of shares to which the scheme relates, following disclosures have to be made
(a) names of the employees who have not exercised the voting rights directly;
(b) reasons for not voting directly;
(c) name of the person who is exercising such voting rights;
(d) number of shares held by or in favour of, such employees and the percentage of such shares to the total paid up capital of the company;
(e) date of the general meeting in which such voting power was exercised;
(f) resolutions on which votes have been cast by persons holding such voting power;
(g) percentage of such voting power to the total voting power on each resolution;
(h) whether the votes were cast in favour of or against the resolution.
- In case of any revision of financial statements or Board™s report made during the financial year, detailed reasons for revision of financial statements or Board™s report to be disclosed.
Directors™ Responsibility Statement
(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;
(b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;
(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
(d) the directors had prepared the annual accounts on a going concern basis; and
(e) the directors, in the case of a listed company, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.
(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Board™s Report For OPC
The report of the Board of Directors to be attached to the financial statement under this section shall, in case of a One Person Company, mean a report containing explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report.
Certification Of Board™s Report
|One Person Company||
Voluntary Revision Of Board™s Report
Section 131 of the Act permits revision of Board™s report in case of non-compliance of any provisions of section 134 subject to the compliance with provisions of that Section.
|Company||Fine which shall not less than Rs. 50,000/- but which may extend to Rs. 25 Lakhs.|
|Every Officer in Default||Imprisonment for a term which may extend to three years
Fine which shall not be less than Rs. 50,000/- but which may extend to Rs. 5 Lakhs
Companies Act 2013 has enhanced the scope and role of Board™s report to a very great extent. The quantum and quality of disclosures required have been made very widespread. Preparing the Board™s report will definitely require the experience and expertise of a professional and the Board will need to be very cautious in certifying the same. The penalty provisions have also been made much more stringent.
Tags: Audit Committee, Board of directors, Companies Act, Companies Act 2013, Compensation and Benefits, Financial statement, Independent director, Public company