MODEL DRAFT BOARD REPORT UNDER THE COMPANIES ACT, 2013

Unlike Section 217 of the old Companies Act, 1956, Section 134 of the new Companies Act, 2013 is very exhaustive and provides lots of useful information about the management and its activities to the Shareholders. Most of the information are ‘Compliance Related’. To name a few, ”Details of Deposits received and the loans made and the guarantees provided,  contracts entered with related parties have to be furnished  in the Board Report. Besides, the details of major shareholders and the Directors have to be given in in MGT-9 which forms as an attachment to the Board Report. In addition to the information to be provided asper Section 134,  the Companies Act, 2013 has also mentioned in some of the other Sections and in the Rules, certain relevant information to be provided in the Board Report. The Professional has the task of going through the applicability of those sections and rules and provide necessary information in the Board Report.

I would like to touch upon one issue which would be bothering the professionals and the Directors.

 Sub Section 2 AA was inserted in Section  217 which provides for a  ”Responsibility Statement in  to be furnished in the Board Report.  Now some more clauses are added in the Responsibility Statement In Subsection 5 of Section 134 in addition to the existing ones. The most talked point in various forums is one point given as a  Responsibility Statement ie.  Clause (f) of Sub Section 5 of Section 134. This is the most  controversial and irrational Statement  which any Director signing the report could give. The Directors have to declare that they have devised proper systems to ensure compliance with the provisions of all the applicable laws and such systems were adequate and operating effectively. The wordings of the  statement is very vague but cannot be ignored. How do we judge whether a system introduced and implemented is adequate and effective. In my view, the Board report should have contained information about the details of important laws applicable to the Company and information with regard to violations in terms of Statutory Remittances, Filing of Returns, Maintenance of Registers and any other matter requiring  compliance. I fear that most of the Companies will get the signatures from the Directors in the Board Report without explaining its significance as the statement is too generic. Almost 90% of the Companies registered in India are either medium sized and small Private Limited Companies. The following points are worth considering in this regard.

a. The Directors who signs the report have to depend on professionals to say that the management has put effective system in place for compliance of various applicable laws.

b. The Professionals have to depend on the management to find which laws are applicable depending on the nature of the Industry.

c. The professional should be knowledgeable enough to advise the client with regard to applicability of various laws.

d. Who has to decide which proper system would be adequate enough to ensure its effectiveness. The Management would say that we have separate consultants  for compliance with each of the important laws viz., Labour Laws, Service Tax, VAT, Income tax and Company Law and other Laws . The Directors would argue that this itself is a proper system for effective compliance. Whether we need to go little further and introduce a proper reporting system and who has to design such a system ? Whether the Board is knowledgeable enough to go through all the records available and then certify ?

e. How does one find which Law is applicable to which Company as we have thousands of laws. Even a professional with reasonable degree of knowledge may not be aware all the applicable laws and may blink if he is questioned.

f. Any violation of a particular provision of an Act may amount to improper system in place resulting in false declaration by the Directors in the Board Report .

g. What is the remedy if proper system is not in place ? Does the Board have the authority to modify  the responsibility statement as no one can force a person to declare a statement which is not true ? Is it possible to give a statement as upto what extent the statement is not true ?

This one responsibility statement is a big subject by itself and would be debated heavily in various forums/seminars in the months to come. Our Honourable minister Mr.Arun Jaitly has assured that the Government shall constitute a group which will keep reviewing the functioning of the Act to realise where the shoe pinches. Let us hope that this responsibility statement drafted irrationally will be reviewed by the group.

The seriousness of the responsibility statement will be known only when one reads the penal provisions. Section 134(8) states that the Company shall be punishable with a fine of not less than Rs.50,000/- and may extend upto Rs.25 lakhs and every officer who is in default shall be punishable with the same amount of fine of Rs.50,000 but may extend upto Rs.5 lakhs or the officers may end up in imprisonment upto a maximum period of three years or both. The officer in default is defined under Section 2(60) of the Act. The prosecuting authority may also invoke Sections 447 and 448 for giving any false Statement.

The professional who is going to handle the finalisation of Accounts this year should apprise the Board about proper compliance of Section 134 and its consequences of non compliance.

A Model Board Report applicable to Unlisted Public Company and Private Limited Companies is given to the viewers to study and make use of it. . Most of the information to be provided in the Board Report could be given by way of Annexures.

BOARD REPORT

To the Members,

Your Directors have pleasure in submitting their ¦¦ Annual Report of the Company together with the Audited Statements of Accounts for the year ended 31st March, ¦¦…

1.FINANCIAL RESULTS

The Company™s financial performance for the year under review alongwith previous years figures are given hereunder :

Particulars For the Year ended ¦¦¦¦¦..

(Amount in ˜000™)
For the year ended For the year ended
…………………………. ………………………..

Net Sales /Income from
Business Operations
Other Income
Total Income
Less Interest
Profit before Depreciation
Less Depreciation
Profit after depreciation and Interest
Less Current Income Tax
Less Previous year adjustment of Income Tax ,
Less Deferred Tax
Net Profit after Tax
Dividend (including Interim if any and final )
Net Profit after dividend and Tax
Amount transfered to General Reserve
Balance carried to Balance Sheet
Earning per share (Basic)
Earning per Share(Diluted)

2. DIVIDEND

In the month of ¦¦¦¦the Company declared an Interim Dividend of Rs¦…per share . Your Directors are pleased to recommend a final dividend of Rs…¦per share aggregating to Rs¦..per share (both inclusive interim and final) for the current financial year. The dividend if approved and declared in the forthcoming Annual General meeting would result a total Dividend outflow of Rs¦¦¦and Dividend Distribution Tax of Rs¦¦ aggregating a total outflow of Rs¦¦¦¦..

or

Your Directors are pleased to recommend a dividend of Rs¦per share aggregating to Rs¦..per share for the current financial year. The dividend if approved and declared in the forthcoming Annual General meeting would result a Dividend outflow of Rs¦¦¦and dividend Distribution Tax of Rs¦¦ aggregating a total outflow of Rs¦¦¦¦..

or

No Dividend was declared for the current financial year due to conservation of Profits/due to loss incurred by the Company /due to insufficient profit.

3. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCTION AND PROTECTION FUND

In terms of Section 125 of the Companies Act, 2013, any unclaimed or unpaid Dividend relating to the financial year¦¦¦¦is due for remittance on¦¦¦¦..to the Investor Eduction and Protection Fund established by the Central Government.

or

Since there was no unpaid/unclaimed Dividend declared and paid last year, the provisions of Section 125 of the Companies Act, 2013 do not apply.

or

The provisions of Section 125(2) of the Companies Act, 2013 do not apply as there was no dividend dlclared and paid last year.

4. REVIEW OF BUSINESS OPERATIONS AND FUTURE PROSPECTS

Your Directors wish to present the details of Business operations done during the year under review:

a. Production and Profitability

b. Sales

c. Marketing and Market environment

d. Future Prospects including constraints affecting due to Government policies

5. MATERIAL CHANGES AND COMMITMENT IF ANY AFFECTING THE FINANCIAL POSITION OF THE COMPANY OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT

No material changes and commitments affecting the financial position of the Company occurred between the end of the financial year to which this financial statements relate on the date of this report

or

The following material changes and commitment occurred during the year under review affecting the financial position of the Company.

 

6. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The information pertaining to conservation of energy, technology absorption, Foreign exchange Earnings and outgo as required under Section 134 (3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is furnished in Annexure…….and is attached to this report.

or

The provisions of Section 134(m) of the Companies Act, 2013 do not apply to our Company. There was no foreign exchange inflow or Outflow during the year under review.

or

The provisions of Section 134(m) of the Companies Act, 2013 do not apply to our Company. The toal Foreign Exchange Inflow was Rs…………….and Outflow was Rs…………………..during the year under review.

7. STATEMENT CONCERNING DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY OF THE COMPANY

The Company has adopted the following measures concerning the development and implementation of a Risk Management Policy after identifying the following elements of risks which in the opinion of the Board may threaten the very existence of the Company itself.
a.
b.
c.
d.

or

The Company does not have any Risk Management Policy as the elements of risk threatening the Company™s existence is very minimal.

8. DETAILS OF POLICY DEVELOPED AND IMPLEMENTED BY THE COMPANY ON ITS CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

The Company has not developed and implemented any Corporate Social Responsibility initiatives as the said provisions are not applicable.

or

The Company has developed and implemented the following Corporate Social Responsibility initiatives during the year under review.

The Annual Report on Company™s CSR activities of the Company is furnished in Annexure¦. and attached to this report.

or

The Company has made the relevant provisions for CSR activities in the Books of Accounts and has deposited the money in a seperate Bank Account. The Company shall find out ways and means to spend the same in the coming months and shall submit the relevant report in the ensuing year. The Company could not spend the money before finalising this report as the time was too short to identify suitable projects for spending the same.

9. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013

The particulars of Loans, guarantees or investments made under Section 186 is furnished in Annexure ¦..and is attached to this report.

or

There was no loans, guarantees or investments made by the Company under Section 186 of the Companies Act, 2013 during the year under review and hence the said provision is not applicable.

10. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES

The particulars of Contracts or Arrangements made with related parties made pursuant to Section 186 is furnished in Annexure¦..and is attached to this report.

or

There was no contract or arrangements made with related parties as defined under Section 188 of the Companies Act, 2013 during the year under review.

11. EXPLANATION OR COMMENTS ON QUALIFICATIONS, RESERVATIONS OR ADVERSE REMARKS OR DISCLAIMERS MADE BY THE AUDITORS AND THE PRACTICING COMPANY SECRETARY IN THEIR REPORTS

There was no qualifications, reservations or adverse remarks made by the Auditors in their report. The provisions relating to submission of Secretarial Audit Report in not applicable to the Company .

or

There was no qualifications, reservations or adverse remarks made by the either by the Auditors or by the Practicing Company Secretary in their respective reports.

or

The explanations /comments made by the Board relating to the qualifications, reservations or adverse remarks made by the Auditors in their report are furnished Annexure ¦ and is attached to this report. The provisions relating to submission of Secretarial Audit Report in not applicable to the Company.

or

The explanations /comments made by the Board relating to the qualifications, reservations or adverse remarks made by the Auditors and the Practicing Company Secretary in their respective reports are furnished Annexure ¦. and ¦.  are attached to this report.

or

The explanations /comments made by the Board relating to the qualifications, reservations or adverse remarks made by the Auditors in their report are furnished Annexure ¦. and is attached to this report. There was no adverse comments, qualifications or reservations or adverse remarks in the Secretarial Audit Report.

12. COMPANY™S POLICY RELATING TO DIRECTORS APPOINTMENT, PAYMENT OF REMUNERATION AND DISCHARGE OF THEIR DUTIES

The provisions of Section 178(1) relating to constitution of Nomination and Remuneration Committee are not applicable to the Company and hence the Company has not devised any policy relating to appointment of Directors, payment of Managerial remuneration, Directors qualifications, positive attributes, independence of Directors and other related matters as provided under Section 178(3) of the Companies Act, 2013.

or

The Company™s Policy relating to appointment of Directors, payment of Managerial remuneration, Directors™ qualifications, positive attributes, independence of Directors and other related matters as provided under Section 178(3) of the Companies Act, 2013 is furnished in Annexure ¦. and  is attached to this report

13. ANNUAL RETURN

The extracts of Annual Return pursuant to the provisions of Section 92 read with Rule 12 of the Companies (Management and administration ) Rules, 2014 is furnished in Annexure ¦.. and is attached to this Report.

14. NUMBER OF BOARD MEETINGS CONDUCTED DURING THE YEAR UNDER REVIEW

The Company had ¦¦Board meetings during the financial year under review.

15. DIRECTORS RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 134(5) of the Companies Act, 2013 the Board hereby submit its 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.- Not applicable to Private Limited Company.
Internal financial control means the policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business including adherence to Company™s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information.

(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.

16. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

The Company does not have any Subsidiary, Joint venture or Associate Company .

or

The details of financial performance of Subsidiary/ Joint Venture/Associate Company is furnished in Annexure ¦. and attached to this report.

17. DEPOSITS

The Company has neither accepted nor renewed any deposits during the year under review.

or

The details of deposits accepted/renewed during the year under review are furnished hereunder

SL.NO PARTICULARS AMOUNT IN RS

a) Amount accepted during the year

b) Amount 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

18. DIRECTORS

There was no Director who got reelected/reappointed during the year under review
Mr¦¦¦¦¦¦who was appointed as Additional Director on ¦¦¦¦¦.and holds the said office till the date of the Annual General Meeting. A notice has been received from a member proposing his candidature for his reappointment.

or

Mr¦¦¦¦¦and Mr¦¦¦¦¦¦¦.retire at this Annual General Meeting and being eligible offer themselves for re election.

19. DECLARATION OF INDEPENDENT DIRECTORS

The Independent Directors have submitted their disclosures to the Board that they fulfill all the requirements as stipulated in Section 149(6) of the Companies Act, 2013 so as to qualify themselves to be appointed as Independent Directors under the provisions of the Companies Act, 2013 and the relevant rules.

or

The provisions of Section 149 pertaining to the appointment of Independent Directors do not apply to our Company.

20. STATUTORY AUDITORS

M/s __________________, Chartered Accountants, ¦¦¦¦¦¦ were appointed as  Statutory Auditors for a period of ¦¦¦.years in the Annual General Meeting held on¦¦¦¦ Their continuance  of appointment and payment of remuneration are to be confirmed and approved in the ensuing Annual General Meeting. The Company has received a certificate from the above Auditors to the effect that if they are reappointed, it would be in accordance with the provisions of Section 141 of the Companies Act, 2013.

21. RISK MANAGEMENT POLICY

The Statement showing the details regarding the development and implementation of Risk Management Policy of the Company is furnished in Annexure¦. and attached to this report . The risk management includes identifying types of risks and its assessment, risk handling and monitoring and reporting.

22. DISCLOSURE OF COMPOSITION OF AUDIT COMMITTEE AND PROVIDING VIGIL MECHANISM

The provisions of Section 177 of the Companies Act, 2013 read with Rule 6 and 7 of the Companies (Meetings of the Board and its Powers) Rules, 2013 is not applicable to the Company.

or

The Audit Committee consists of the following members
a.
b.
c.
The above composition of the Audit Committee consists of independent Directors viz., Mr¦¦¦¦¦¦ and Mr¦¦¦¦.. who form the majority.

The Company has established a vigil mechanism and overseas through the committee, the genuine concerns expressed by the employees and other Directors. The Company has also provided adequate safeguards against victimization of employees and Directors who express their concerns. The Company has also provided direct access to the chairman of the Audit Committee on reporting issues concerning the interests of co employees and the Company.

23. SHARES

a. BUY BACK OF SECURITIES

The Company has bought back ¦¦¦¦..equity shares of Rs¦..each for a total consideration of Rs¦¦¦¦¦in accordance with the provisions of Section 68 of the Companies Act, 2013 read with Rule 17 of the Companies (Share Capital and Debentures) Rules, 2014. The said buy back of shares constituted ¦¦% of the total paid up Capital and free reserves.

or

The Company has not bought back any of its securities  during the year under review.

b. SWEAT EQUITY

The Company has issued ¦¦¦.Equity of Shares of Rs¦..each as Sweat Equity in accordance with the provisions of Section 54 of the Companies Act, 2013 read with Rule 8 of the Companies (Share Capital and Debentures) Rules, 2014

or

The Company has not issued any Sweat Equity Shares during the year under review.

c. BONUS SHARES

The Company has issued ¦¦shares of Rs¦¦¦as Bonus Shares to the existing shareholders of the Company in the proportion of ¦¦.share for every¦¦.shares held in accordance with the provisions of Section 63 of the Companies Act, 2013 read with Rule 14 of the Companies(Share Capital and Debentures), Rules 2014.

or

No Bonus Shares were issued during the year under review.

d.EMPLOYEES STOCK OPTION PLAN

The Company had issued ¦¦¦.Equity Shares of Rs.10/- aggregating to Rs¦¦¦¦¦under the Employees Stock Option Plan during the year under review .

or

The Company has not provided any Stock Option Scheme to the employees.

24. ACKNOWLEDGEMENTS

Your Directors place on record their sincere thanks to bankers, business associates, consultants, and various Government Authorities for their continued support extended to your Companies activities during the year under review. Your Directors also acknowledges gratefully the shareholders for their support and confidence reposed on your Company.

FOR AND ON BEHALF OF THE BOARD OF DIRECTORS

Director                                                 Director

Date:
Place:

 

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About K.S. Ramasubramanian

K.S. Ramasubramanian | Practicing Company Secretary

KSR is a Practicing Company Secretary with over 30 years of experience. He has been rendering professional services in the areas of Company Law, Company Secretarial Practice, Public Issues, Corporate Governance, Administration, Management, International Marketing etc.,

He has designed and developed Csmart - a Company Secretarial Software (http://csmart.co.in/) aimed at making the life of a Company Secretary much easier saving valuable time. Lot of secretarial work is automated using the software.

He could be contacted at ramks17@gmail.com

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