BOARD REPORT

  Thecompaniesact2013.com     2017-05-05 05:39:04

Board Report is Mandatory for every company whether it is public or private to forward to its members, along with its annual financial statement. It is a material document containing complete review of the performance of the company during the year and other information as mentioned in Section 134 (3) to (6); corresponding to Section 217 of the previous Act.

 The Board of Directors of the company are responsible to prepare an exhaustive report containing all the details as prescribed under Section 134(3) of the Companies Act, 2013 and the same needs to be annexed to the Financial Statements which are laid before the members in the annual general meeting.

Signing of Board report: -

The Board Report and Annexure thereto shall be signed by

• ‘CHAIRPERSON’ if he is authorized by Board of director; Where he is not so authorized
• By, at least 2 (Two) Director, one of whom shall be a Managing Director;
• If there is no Managing Director then by Two Directors;

Key points of Board Report:-

• Section 179 (3) of the Act provides that Approval of Board Report shall done only in duly Convened Meeting of the Board of Director (neither by “Circulation Resolution”, nor by “Video Conferencing”.)

• The Board resolution for approval of Board Report required being file with ROC in form “MGT 14” within 30 days of passing of Board Resolution.

BASIS OF BOARD’S REPORT:-

The Board’s Report shall be prepared based on Stand Alone financial statement of the company.

But the Board’s Report shall contain separate section wherein a section report on the performance and financial position of each.

• Subsidiary
• Associate
• Joint Venture including in the consolidated financial statement is presented.

 

CONTENT OF BOARD REPORT:-

 As per Section 134(3) of Companies Act, 2013 Director Report shall include:

1. Extract of Annual Return [Section 92(3) and Clause (a) of 134 (3)]:- Extract of Annual Return in Form No: MGT-9 shall form part of Board’s report.

II. No. of Board’s meeting [Clause (b) of Section 134 (3)] :-The Report shall contain Number of board meetings held during the financial year. 

III. Director’s Responsibility Statement [Clause (c) of Section 134 (3)] :- The Directors’ Responsibility Statement 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.

 Explanation: - For the purposes of this clause, the term internal financial controls 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.

IV. Declaration about Independent Director [Clause (d) of Section 134 (3) and Section 149 (6) & (7)]:- Directors shall disclose the statement              on declaration given by Independent Directors.

V. Report of the Nomination and Remuneration Committee on Company’s Policy on Director’s remuneration in Listed Company and other companies [Clause (e) of Section 134 (3)]:- The director will disclose in Board’s Report:

• The policy of qualification

• The remuneration of directors as, formulated under section 178(3)

VI. Explanations or Comments by Board on every qualification,reservationor adverse mark made by the Statutory auditor and secretarial Auditor  in  their  reports[Clause (f) of Section 134 (3)]

VII. Particulars of Loan, guarantees or investments [Clause (g) of Section 134 (3) and Section 186]:- There is required to disclose by director in Board’s Report that, the company have complied with the provisions of Section 186 of companies Act, 2013 in relation to Loan, Investment & Guarantee given by the company during the financial.

VIII. Disclosure of Related Party Transaction [Clause (h) of Section 134 (3) and Section 188 (1) ] :- The directors  in Board’s Report mention all the related party transactions entered by the company during financial year in form AOC 4.

IX. Statement of affairs of the Company [Clause (i) of Section 134 (3)] :- Generally following information is given about current year and pervious year:

• Turnover
• Profit
• Production of year

X. Dividend Recommended [Clause (k) of Section 134 (3)]:- If any dividend was declared by the company during the financial year the financial year. Directors required disclosing in Board Report regarding status payment of same.

XI. Material changes and commitments, [Clause (l) of Section 134 (3)]:- 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 report. Generally there is gap of 4 to 5 month between financial year ending and preparation of report of Board of Director’s. If the yearend is 31st March, report of board of Directors commitments affecting the financial position of company between these periods.

XII. The Conversation of energy, technology absorption, foreign exchange earnings and outgo , in such manner [Clause (m) of Section 134 (3): The report of the Board shall contain the following information and details, namely :

(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 equipments;

(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

(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

XIII. Risk Management Policy [Clause (n) of Section 134 (3)]:- A statement indicating development and implementation of a risk management policy for the company including identification therein of elements of risk, if any, this in the opinion of the Board may threaten the existence of the company.

XIV. Corporate Social Responsibility [Clause (o) of Section 134 (3)]:-): Directors required to disclose in the Board Report the details about the policy developed and implemented by the company on Corporate Social Responsibility initiatives taken during the year.

XV. Secretarial Audit Report [Rule 9 of the Companies Appointment and Remuneration of Managerial Personnel]:-Every listed company and a company belonging to other class of companies as may be prescribed shall annex with its Board’s Report, a Secretarial audit report. The following class of companies shall be required to Annex Secretarial Audit Report with Director Report, namely:

a) All Listed Companies

b) Every Public Company having a Paid4Up Share Capital of Rs. 50 Crore (fifty crore rupees) or more

c) Every Public Company having a Turnover of Rs. 250 Crore (two hundred fifty crore rupees) or more

XVI. Disclosure about cost Audit: Full particular of cost auditor, along with due date and actual filling of cost audit report by the cost auditor.

XVII. Disclosure if MD/WTD is receiving remuneration or commission from a MD/WTD or Subsidiary Company: As per Section 197(14) of the Act, 2013 A MD/WTD of company can receive remuneration or commission from any holding company or subsidiary company of such company. This should be disclosed by the company in Board’s Report.

XVIII. Disclosure of Vigil Mechanism: - If provisions of vigil Mechanism apply on company, then directors required disclosing in Board’s report establishment of Vigil Mechanism.

XIX. Disclosure of composition of Audit committee and their recommendations not accepted: Section 117(8)

• Composition of Audit Committee shall be disclosed in Board’s Report of the Company.

• If the board doesn’t recommendation of Audit Committees, it shall be disclosed along with reason in Board’s report.

XX. Details Relating to Deposit:

• Details of deposits which are not in compliance with the requirement of chapter V of the Act.

• Deposit Accepted during the year.

• Unpaid and unclaimed deposit at the end of the year.

• If there is any default in repayment of deposit or payment of interest thereon during the year then; Number of such cases and total amount involved

• At the beginning of the year
• Maximum during the year
• At the end of the year

XXI. Details of Director and KMP: There should be disclosure in the Director’s Report about:

• Directors & KMP appointed during the Year.
• Directors & KMP appointed Resigned the Year.

XXII. General Disclosures:

• Name of retiring directors and whether or not they offer themselves for re- appointment.
• Casual vacancies in the Board filled during the year.
• Re-appointment.
• Casual vacancy in the Board filed during the year.
• Changes in Board during the year, by change of nominees, appointment of additional directors, death, resignation or any other reason
• Details, if anyone is contesting for election as director/ small shareholder director.

XXIII. Disclosure about ESOP and Sweat Equity Share: Director Report shall disclose following about Sweat Equity Shares: [Rule 7 of Unlisted Companies (Issue of Sweat Equity Share] Rules, 2003

• Number of Share issued Condition of issue of shares.

• Pricing formula

• Total Sweat equity share issued.

• Money realized and benefit accrued

• Diluted EPS pursuant to issue of sweat equity shares.

           Provided If ESOP has been given, its details are to be disclosed

XXIV. Director Perception of Future of Company: In this report director’s perception of future of company  given in consideration of;

•  Market Competition
•  Production constraints
•  Government Policies etc.

XXV. Order of Court: The details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operation in future.

XXVI. Details of employees drawing salary above prescribed limits: Every listed company shall disclose in the Board’s Report the ratio of the remuneration of each director to the median employee’s remuneration and such other details as maybe prescribed. [197(12)]. The disclosures are summarized as below:

• Comparison between remuneration managerial personnel and remuneration to employees.
• Details of employees drawing salary of Rs. 500,000/4 or more per month.
• Details of remuneration to person holding 2% or more equity shares
• Details of employees (who are not directors or relatives) posted outside India.

XXVII. Other Details:

• The names of Companies which have become or ceased to be its Subsidiaries, Joint ventures or associated company during the year.
• The change in the nature of business, if any;
• The financial summary or highlights;
• The details in respect of adequacy of internal financial controls with reference to the financial Statements.
• Major evens concerning the company are highlighted.

PUNISHMENT FOR DEFAULT

If company fails to comply with the provision of Board report, then:

The company shall be punishable with

• fine of fifty thousand rupees which may extend to twenty five lakh rupees and

Every officer in default shall be punishable with

• Imprisonment up to three years or
• Fine of fifty thousand rupees and up to five lakh rupees or both.

 

CONCLUSION:  Drafting a Board’s Report under the New Act will be a challenge to the Company Secretaries as the scope of the Report has been widened .Enlarged scope of Directors Responsibility statement casts a huge responsibility on the board of directors as they are required 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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