Author: By Harsha Sharma
Section 134 (3) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 prescribes the following contents of the Board’s Report which is as follows-
a. the web address, if any, where annual return of the Company has been placed;
b. number of meetings of the Board
c. Directors’ Responsibility Statement
ca. The details of frauds reported by the auditors under Section 143(12) of the Companies Act, 2013, other than those which are reportable to the Central Government, shall be disclosed.
d. A statement on declaration given by Independent Directors
e. in case of a Company covered under requirement to form Nomination and Remuneration committee, 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.
The clause (e) shall not apply in case of Government Company.
f. Explanation or comments by the Board on every qualification reservation or adverse remark or disclaimer made by the auditor in Auditors Report and by the company secretary in his secretarial audit report.
g. particulars of loans, guarantees or investments under Section 186 of the Companies Act, 2013.
h. The Report of the Board shall contain the particulars of contracts or arrangements with related parties referred to in sub-section (1) of section 188 in the Form AOC-2. [Sub-rule (2) of Rule 8].
i. The state of the company’s affairs.
j. The amounts, if any, which it proposes to carry to any reserves.
k. The amount, if any, which it recommends should be paid by way of
l. 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 statement relate and the date of the report.
m. The conservation of energy, technology absorption, foreign exchange earnings and outgo shall be disclosed in such manner as may be prescribed, except for government companies engaged in producing defence equipment [Sub-rule (3) of Rule 8]
(A) Conservation of energy–
(i) the steps taken or impact on conservation of energy;
(ii) the steps taken by the company for utilizing alternate sources of energy;
(iii) the capital investment on energy conservation equipment’s.
(B) Technology absorption–
(i) the efforts made towards technology absorption;
(ii) the benefits derived like product improvement, cost reduction, product development or import substitution;
(iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year).
(a) the details of technology imported;
(b) the 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 thereof; and
(iv) the expenditure incurred on Research and Development.
(C) Foreign exchange earnings and Outgo– The Foreign Exchange earned in terms of actual inflows during the year and the Foreign Exchange outgo during the year in terms of actual outflows.
n. 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;
o. The details about the policy developed and implemented by the Company on corporate social responsibility initiatives taken during the year
p. Every listed company and every other public company having a paid up share capital of twenty five crore rupees or more calculated at the end of the preceding financial year shall include, in the report by its Board of directors, 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 [Sub-rule (4) of Rule 8].
q. Other matters prescribed by sub rule (5) of Rule 8 are as follows:-
(i) the financial summary or highlights;
(ii) the change in the nature of business, if any;
(iii)the details of directors or key managerial personnel who were appointed or have resigned during the year;
(iiia) a statement regarding opinion of the Board with regard to integrity, expertise and experience (including the proficiency) of the independent directors appointed during the year.
For the purposes of this clause, the expression “proficiency” means the proficiency of the independent director as ascertained from the online proficiency self-assessment test conducted by the institute notified under sub-section (1) of section 150.
(iv) the names of companies which have become or ceased to be its Subsidiaries, joint ventures or associate companies during the year;
(v) the details relating to deposits, covered under Chapter V of the Act,-
(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;
(vi) the details of deposits which are not in compliance with the requirements of Chapter V of the Act;
(vii) 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;
(viii) The details in respect of adequacy of internal financial controls with reference to the Financial Statements.
(ix) A disclosure, as to whether maintenance of cost records as specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013, is required by the Company and accordingly such accounts and records are made and maintained,
(x) A statement that the company has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 [14 of 2013]
(xi) The details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year along with their status as at the end of the financial year.
(xii) The details of difference between amount of the valuation done at the time of one time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof.
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.
The Board’s Report and any annexures thereto shall be signed by- its chairperson of the company, if he is authorized by the Board; where he is not authorized, shall be signed by at least two directors, one of whom shall be a managing director; or by the director where there is one director.
The Directors’ Responsibility Statement referred to in clause (c) of sub-section (3) of Section 134 shall state that—
(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.
Section 134(8) states that if a company is in default in complying with the provisions of section 134, the company shall be liable to a penalty of Rs. 3,00,000 (three lakh rupees), and every officer of the company who is in default shall be liable to a penalty of Rs. 50,000 (fifty thousand rupees).
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