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Boards’Reports

Learn about the significance and mandatory disclosures in a company's Board Report, including the performance of subsidiaries, associates, and joint venture companies.

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Boards’Reports

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  1. Boards’Reports 05/05/2018 CS J J Gandhi Practicing Company Secretary & Insolvency Professional F-46, India Bulls Mega mall, Besides Dinesh mill, Jetalpur - 390007 Email : jjgandhics@gmail.com, Mobile: 9374620085

  2. Board Report has become very important informative annual document prepared every year and forming part of Annual Report. • At present, many companies are facing prosecution not because they did not expend towards CSR, but because required justification was not mentioned in the Boards Report. • The Board need to be very cautious in certifying it. Contents of Board Report required to be verified thoroughly, so that mandatory disclosure may not get skipped. CS J J Gandhi - Practising Company Secretary

  3. Board’s Report shall be prepared based on the stand alone financial statements. • It should have separate section to include report on the performance and financial position of each of the Subsidiaries, Associates and Joint Venture Companies included in the consolidated financial statement. • The Company is free to give more information and disclosures of its own voluntarily. However, mandatory disclosure and reporting should not be omitted. CS J J Gandhi - Practising Company Secretary

  4. Mandatory Disclosures • State of the affairs of the Company - Sec. 134(3)(i) • Financial summary or highlights - Rule 8(5)(i) • Change in the nature of business, if any - Rule 8(5)(ii) • Amounts transferred to any Reserves - Sec. 134(3)(j) • Recommendation of dividend, if any - Sec. 134(3)(k) • Material changes and commitments which affect the financial position of the Company which have occurred between the end of the financial year and the date of the report - Sec. 134(3)(l) CS J J Gandhi - Practising Company Secretary

  5. Subsidiaries, Associates & Joint venture Co • Disclosure on the performance and financial position of each of the subsidiaries, associates and joint venture companies included in the consolidated financial statement. - Rule 8(1) • Names of companies which have become or ceased to be its Subsidiaries, joint ventures or associate companies during the year to be disclosed - Rule 8(5)(iv) CS J J Gandhi - Practising Company Secretary

  6. Associate Company Sec. 2(6) • In the definition of Associate Company explanation is inserted by the Companies Amendment Act, 2017 to provide that significant influence means control of atleast 20% of total voting power (instead of total share capital) or control or participation in business decision under an agreement. • Definition is amended to include participation in business decisions and concept of “share capital” is replaced by “Voting power.” CS J J Gandhi - Practising Company Secretary

  7. Disclosures relating to Deposits - Rule 8(5)(v) • Deposits Accepted during the year; • Remained unpaid or unclaimed as at the end of the year • Whether there has been any default in repayment of deposits or payment of interest during the year and if so, number of such cases and the total amount involved: • at the beginning of the year • maximum during the year • at the end of the year • Details of deposits which are not in compliance with the requirements of Chapter V of the Act • Private Company can accept deposits from shareholders not exceeding paid up capital, free reserves and securities premium amount (Notification dt. 05.06.2015) CS J J Gandhi - Practising Company Secretary

  8. In case of public company amounts received from Directors who have given declaration that it is out of their own funds to be reported in Boards Report. (Rule 2(c)(viii) of the Companies (Acceptance of Deposit) Rules 2014) • In case of Private Company, amounts received from Directors or relatives of Directors who have given declaration that it is out of their own funds to be reported in Boards Report. (Rule 2(c)(viii) of the Companies (Acceptance of Deposit) Rules 2014) CS J J Gandhi - Practising Company Secretary

  9. Directors • Number of BMheld during the FY Sec. 134(3)(b) • Details of appointment and resignation of Directors/ KMP - Rule 8(5)(iii) • Details of Cessation and retirement of Directors/ KMP • Statement on declaration given by independent directors as per Sec. 149(6) - Sec. 134(3)(d) • Disclosure if independent Directors appointed by special resolution - (sec. 149(10)) • Commission, if any, received by the MD or WTD from Holding company or subsidiary company - (sec. 197(14)) CS J J Gandhi - Practising Company Secretary

  10. For Listed Company Sec. 197(12) Rule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 • Ratio of the remuneration of each Director to the median employee’s remuneration for FY. • The percentage increase in remuneration of each director, CEO, CFO, CS or manager, if any, in the FY. • Percentage increase in the median remuneration of employees in the FY. • Number of permanent employees on the role of the Company • Average percentile increase in the salaries of employees (other than managerial personnel) compare with percentile increase in managerial remuneration and its justification. • Affirmation that the remuneration is as per remuneration policy of the Company. CS J J Gandhi - Practising Company Secretary

  11. Employee Remuneration Rule 5(2) • Details of top ten employees in terms of remuneration drawn • Details of employees drawing remuneration of Rs. 1.02 crore or more p.a. or Rs. 8.50 lakhs or more p.m. • Details of employee drawing remuneration more than MD/ WTD/ Manager and holds (by himself along with spouse and dependent children) 2% or more equity shares. CS J J Gandhi - Practising Company Secretary

  12. Remuneration Policy • Applicable to Listed Public Company and unlisted public company (with paid up share capital Rs. 10 Cr. or more or Turnover 100 Cr. or more or aggregate outstanding loans, debentures, deposits more than Rs. 50 Cr.) (Related to Nomination and Remuneration Committee) • Salient features of the Policy and changes, if any, along with web link of company on Appointment and Remuneration of Directors and KMP and Senior management showing balance between fixed and incentive pay reflecting short and long-term performance objectives (section 178(4)) - Sec. 134(3)(e) •  Criteria for determining qualifications, positive attributes, independence of a Director (section 178(3)) - Sec. 134(3)(e) CS J J Gandhi - Practising Company Secretary

  13. Directors’ Responsibility Statements • Sec. 134(3)(c) • That 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. • That Directors have prepared the annual accounts on going concern basis. CS J J Gandhi - Practising Company Secretary

  14. Risk Factor & Internal financial controls • A statement indicating development and implementation of a risk management policy for the company. • To identify elements of risk, if any, which in the opinion of the Board may threaten the existence of the company Internal financial controls • Adequacy of Internal Financial controls with reference to the Financial Statements Rule 8(5)(viii) CS J J Gandhi - Practising Company Secretary

  15. Audit/ Audit Committee • Recommendation of Board for appointment of Auditor • Explanations on qualification adverse remark or disclaimer made in the Audit Report - Sec. 134(3)(f) Audit Committee • Composition of Audit Committee - (sec. 177(8)) • Recommendations of the Audit committee which are not accepted by the Board along with its reasons for non acceptance (sec. 177(8)) • Details of fraud reported to Audit Committee or the Board but not reported to the Central Govt. u/s 143(12) Sec. 134(3)(ca) CS J J Gandhi - Practising Company Secretary

  16. Secretarial Audit Report • Secretarial Audit Report in Form MR 3 Applicable to • All Listed Company • Unlisted Public Company - If paid up share capital is Rs. 50 cr. or more or If Turnover is Rs. 250 cr. or more • Not applicable to Private Company. • Explanations on qualification adverse remark or disclaimer made in the Secretarial Audit Report. • Board Report will mention that it is attached as an Annexure CS J J Gandhi - Practising Company Secretary

  17. Annual Evaluation - Sec. 134(3)(p) & Rule 8(4) • Annual Evaluation is applicable to listed company and other public company having a paid up capital of Rs. 25 Cr. or more at the end of the preceding FY. • A statement indicating how formal annual evaluation has been made by the Board of Directors • of its own performance • committees of Board and • individual Directors CS J J Gandhi - Practising Company Secretary

  18. Vigil Mechanism - sec. 177(10) & (Rule 7) • Vigil means careful and more strict to prevent any illegal or wrong occurrence • Directors andemployees report their genuine concerns or grievances • There is safeguard against victimization of employees or Directors who avail vigil mechanism. • Applicable to • Listed company • companies which accept deposits from the public • companies which have borrowed money from banks and public FI in excess of Rs. 50 Cr. CS J J Gandhi - Practising Company Secretary

  19. RPT disclosure - Form AOC 2 • To provide details of material contracts or arrangement or transactions at arm’s length basis and not at arm’s length basis separately • Name of Related party, nature of relationship, nature of contract, duration of contract, salient terms, date of approval, Advance paid • For RPT not at arm’s length Justification for entering into contract and date of approval of Board and date of AGM/ EOGM. • AOC 2 shall be signed by the persons who have signed the Board’s report CS J J Gandhi - Practising Company Secretary

  20. CSR Reporting - Sec. 134(3)(o) • Composition of CSR Committee • Link of Website where CSR Policy is available – Rule 9 • Name of CSR project or activity • Sector in which project is covered • Name of Dist. & state where project is implemented • Project wise budgeted expenditure • Project wise expd. with break up of Direct expd. and overhead • Cumulative expd. uptothe date of Board Report • Project carried by the Company or through Implementing Agency (Give name of implementing Agency) CS J J Gandhi - Practising Company Secretary

  21. If the Company failed to spend 2% or any part thereof - reasons to be provided for not spending the amount. • Statement of CSR committee that the implementation and monitoring of CSR policy is as per CSR objectives and Policy of the Company. • CSR reporting to be signed by the Chairman of CSR Committee and MD or CEO or Director CS J J Gandhi - Practising Company Secretary

  22. Other disclosures • Conservation of energy, technology absorption, foreign exchange earnings and outgo – It is attached as an Annexure- Sec. 134(3)(m) and Rule 8 (3) • Web address, if any, where Annual Return is placed Sec. 134(3)(a) • significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operations in future [Rule 8(5)] • If ESOP is issued disclosure as per requirement of Rule 12(9) of the Companies (Share Capital and Debentures) Rules, 2014 CS J J Gandhi - Practising Company Secretary

  23. Sexual Harassment of Women at workplace (Prevention of, Prohibition and Redressal) Act, 2013 • Every organization/ unit having 10 or more employees is required to constitute the Internal Complaints Committee. Envenif there is no female employee and evenif there is no complaint. • Constitution of Internal Complaint committee is must • Committee composition include one female member form NGO or Association. CS J J Gandhi - Practising Company Secretary

  24. Compliance of Secretarial Standard • New Requirement applicable to Board Report of FY 2017-18 and thereafter. • The Report of the Board of Directors shall include a statement on compliances of applicable Secretarial Standards. (Revised SS1 std. No. 9) CS J J Gandhi - Practising Company Secretary

  25. Signatory to Boards’ Report • The Board’s report and its annexure shall be signed by the chairperson of the company (if he is authorized by the Board) or • signed by two Directors. (If there is MD out of two one signatory should be MD) CS J J Gandhi - Practising Company Secretary

  26. Boards Report of One Person Company • Boards’ Report of OPC means 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. • If Board consist of one Director – signed by one Director • If Board consist of more than one Director signed by chairperson, if authorized by Board or two Directors (If there is MD out of two one signatory should be MD) CS J J Gandhi - Practising Company Secretary

  27. Voluntary Revision of Board’s Report • Sec. 131 of the Act, permits the Directors of the Company to voluntary revise the Board’s Report if it does not comply with the requirements of Section 134 of the Act. • However, revision can be made in respect of any 3 preceding financial years and it requires approval of the National Company Law Tribunal. (NCLT) CS J J Gandhi - Practising Company Secretary

  28. Penalty for contravention • Company • Minimum fine of Rs. 50,000/- which may extend upto Rs. 25 lacs • Every officer who is in default • imprisonment upto 3 years or • Minimum fine of Rs. 50,000/- which may extend upto Rs. 5 lacs • or with both CS J J Gandhi - Practising Company Secretary

  29. Welcome CS J J Gandhi - Practising Company Secretary

  30. Thank You CS J J Gandhi Practicing Company Secretary & Insolvency Professional F-46, India Bulls Mega mall, Besides Dinesh mill, Jetalpur - 390007 Email : jjgandhics@gmail.com, Mob. 9374620085

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