Companies Act now calls for more disclosure

Feb 10.2014

India Inc will have to make over three-dozen mandatory disclosures or more in the Board of Director's (BoDs) report under the new Companies Act, 2013 compared to only a handful in the old Companies Act of 1956. Experts said this would contribute to the increased cost of compliance for companies.

The BoDs report is relied by stakeholders like creditors, employees, regulators to get an understanding of the affairs and management of the company.

Some of the new disclosures that are finalised and will have to be included in the report from next fiscal include declarations on independent directors and their independence, explanation on adverse remarks made by auditors, reasons for not spending on corporate social responsibility (CSR) initiatives, and the manner in which annual evaluation was made by the board of its own performance among others.

"The entire list of disclosures is not provided in Section 134. It will have to been seen by reading various other provisions of the Act," said Lalit Kumar, partner in J Sagar Associates, a law firm.

Post notification, India Inc will also need to incorporate disclosures like the composition of the CSR committee, mention of CSR activities performed in the year, company’s policy for appointment and remuneration for directors, key managerial personnel and other employees.