Disclosures in Board’s Report in Private Limited
Company
Introduction
A company is regulated by the Board of Directors. And Board of Directors
are responsible for the management of the company, and are appointed by the Shareholders
for efficient management, but have you wondered, how these Shareholders get to
know about the Company Affairs?
It is important for the Board to give necessary and timely disclosures
to the shareholders as shareholders have right to know where their funds is
getting used and how is that helping the business to grow.
The Annual Report consisting of Notice of Annual General Meeting, Board
Report, Audit Report, Financial Statements, Disclosures of Related party
transactions, and other related annexure(s) is the best way to make the shareholders
aware about the business and the stakeholders including the management of the
company transparent and corruption free.
In this article we will peep into the certain provisions and amendments regarding
Board Reports.
FAQ’s on-Board Report: -
What is
Board Report?
Board
Report means report by collective body of the Directors of the company. It is
also called Director’s Report.
It is basically
a gist of all the financial activities done during the financial year and is
attached to the financial statement of the company which is laid before the
members in the General Meeting, after the board approval in Board Meeting.
When Board Report is to be
signed?
A board
report is required to be signed on or after the date of Board Meeting wherein
the financials got approved, i.e. the date of signing of board report should be
either on the date of approval of financials or after the date of approval of
financials.
Who to sign Board Report?
Every
Company should make sure that the board report be signed by its chairperson of
the company if he is authorized by the Board and where he is not so authorized,
be signed by at least two directors, one of whom shall be a managing director
or by the director where there is one director. In case of OPC where there is
only one Director, Board Report can be signed by only one Director.
Is Board Report of a company available
to be viewed by Public?
After the
company files the Annual Report, it can be viewed by the stakeholders by View
public documents at MCA
Let’s discuss about the Mandatory
items to be disclosed in the Board Report
a)
State of Company Affairs i.e. Financial Summary or Highlights
b)
The web
address, if any, where annual return has been placed
c)
Number of meetings of the Board
d)
The
details of directors who were appointed or have resigned during the year
e)
Directors’ Responsibility Statement
f)
Details in respect of frauds reported by the auditors (other
than the ones reportable to central govt)
g)
Subsidiaries,
JVs or Associate Companies
h) Report on performance
of subsidiaries, associates companies and joint ventures
i)
Statement on declaration given by independent directors
j)
Company’s
policy on directors’ appointment and remuneration including criteria for
determining qualifications, positive attributes, independence of a director and
other related matters
k)
Appointment
or Re-Appointment of Independent Director
l)
**A
disclosure, as to whether maintenance of cost records as specified under
Section 148(1) of the Act, is required by the Company and accordingly such
accounts and records are made and maintained**
m)
**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**
n)
Comments by the Board on every qualification, reservation or
adverse remark or disclaimer made by the Auditor/ Practicing Company Secretary
o)
Particulars of Loans, guarantees or investment
p)
Particulars of contracts or arrangements with related parties referred to in Section 188(1) in Form
AOC-2.
q)
The state of the company’s affairs
r)
The conservation of energy, technology absorption, foreign
exchange earnings and outgo
s)
Details about the Corporate Social Responsibility (CSR)
**Newly inserted sub clause by The Companies
(Accounts) Rules, 2014**
The Additional items that can be
included in Board Report (Optional and to be added when applicable)
a)
The
amounts, if any, which it proposes to carry to any reserves
b)
The
amount, if any, which it recommends should be paid by way of dividend
c)
Material changes and commitments after the closure of
financial year up to the date of Board Meeting in which the report got approved
d)
Orders
passed by the regulators or courts or tribunals impacting the going concern status
and company’s operations in future.
e)
A statement indicating development and implementation of a
risk management policy
f)
In case of a listed company and every other public company
having such paid-up share capital, and a statement of annual evaluation of
performance of its Board and its committees
g)
Details
Relating to Deposit
h)
Disclosure
about ESOP and Sweat Equity Share
i)
Disclosure
of Vigil Mechanism in board Report
j)
Disclosure
if MD/WTD is receiving remuneration or commission from a MD/WTD or subsidiary Company
k)
General
Disclosures
l)
Such other matters as may be prescribed
Now moving towards the changes, the MCA has amended
the Companies (Accounts) Rules, 2014 which got effective from 31st July, 2018.
Approximately, there are 30-40 transactions that
are required to be mentioned in the Board Report (as per Rule 8 of The
Companies (Accounts) Rules, 2014), but with the introduction of New Sub Rule
that is Rule 8(6), One Person Company or Small Company are exempted from this
rule, and also with the introduction of New Rule i.e. Rule 8A, the OPC or Small
Company is required to disclose 10 transactions in its Board Report.
As per New Rule 8A – Matters to be included in Board’s Report for One
Person Company and Small Company
|
S.NO
|
PARTICULARS
|
SMALL COMPANY/OPC
|
|
1.
|
Basis of Preparation- Stand alone financial
statement of the company
|
Included
|
|
2.
|
The Web Address, if any, where annual return
92(3) has been placed
|
Included
|
|
3.
|
Number of Board Meeting
|
Included
|
|
4.
|
Directors Responsibility statement 134(5)
|
Included
|
|
5.
|
Details in respect of frauds reported by auditors
143(12), other than those reportable to Central Govt
|
Included
|
|
6.
|
Explanation or comments by Board on every
qualification, reservation or adverse marks made by auditor
|
Included
|
|
7.
|
State of companies affairs
|
Included
|
|
8.
|
Financial summary or Highlights
|
Included
|
|
9.
|
Material changes from date of closure of
financial year in the nature of business and the effects they have on the
financial position of the company
|
Included
|
|
10.
|
Details of directors appointed or resigned during
the year
|
Included
|
|
11.
|
Details of significant and material order passed
by regulators, courts or tribunal effecting the status of companies operation
|
Included
|
|
12.
|
Contracts and arrangement with related party in
AOC-2 188(1)
|
Included
|
This
amended has relieved small companies/OPC by limiting the number of transactions
to be included in Board Report; moreover, requirement to prepare MGT-9 by small
companies/OPC has been done away with.
