Applicability of Director Report point wise

DIVESH GOYAL Mob: +918130757966 Practicing Company Secretary csdiveshgoyal@gmail.com GOYAL DIVESH& ASSOCIATES Twitter: @DiveshGoyal04 Whatsapp: 8130757966 FB: csdiveshgoyal@gmail.com Blog: www.csdiveshgoyal.info Gmail Id: csdiveshgoyal@gmail.com This blog post is not a professional advice but just a knowledge sharing initiative for mutual discuss ion. 1 DIRECTOR REPORT BACKGROUND: It is mandatory for every company, to forward to its members, along with its annual Financial Statement the Board of Director’s report. Report of Board of Directors should be ‘ATTACHED’ to the Balance Sheet laid before the AGM. A director’s report is intended to explain to share holders, the overall financial position of the Company and its operation & Busines s Scope. In Companies Act,2013 , lot of sections makes it mandatory to ma ke disclosure in Boards report contrary to previous Act, where only section 217, t alks about the Boards Report Provisions Relating to Director’s Report: Provisions Relating to Director’s Report: Provisions Relating to Director’s Report: Provisions Relating to Director’s Report:- -- -
Applicability of Provision of Section-134 of Direct or Report: The provision of Director Report (u/s 134) is appli cable only to financial year commencing on or after 1st April, 2014.
Signing of Director’s Report along with Annexure: As per Section 134(6) Board Report and annexure the reto shall be signed by  its ‘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 M anaging Director.  If there is no Managing Director then by Two Direct ors. CONTENT OF ARTICLES A. Provisions B. Disclosure required to be made by every Company. C. Even Based Disclosure. D. Disclosure mandatorily required to be made by Public Company. E. Disclosure mandatorily required to be made by Listed Company DIVESH GOYAL Mob: +918130757966 Practicing Company Secretary csdiveshgoyal@gmail.com GOYAL DIVESH& ASSOCIATES Twitter: @DiveshGoyal04 Whatsapp: 8130757966 FB: csdiveshgoyal@gmail.com Blog: www.csdiveshgoyal.info Gmail Id: csdiveshgoyal@gmail.com This blog post is not a professional advice but just a knowledge sharing initiative for mutual discuss ion. 2 CONTENT OF DIRECTOR REPORT: As per Section 134(3) of Companies Act, 2013 Direct or Report shall include: DISCLOSURE MANDATORY TO BE MADE BY EVERY COMPANY Draft Format of Director Report of Small Companies can be get at csdiveshgoyal@gmail.com S. No. Board Report Content- Every Company I. State of Company’s Affairs- S 134(3)(I) The Directors’ report starts with the financial results of the year which will show the working results for the year under review, the Net Profit Before Tax (PBT) and the Net Profit After Tax (PAT) and the appropriation of profit including the transfer to general reserve which has been left to the Direc tor to decide. The Report will mention yearly total Sales Turnover and Income and Point out any problems faced by the company which have affected t he profits and measures which have been taken to improve the working and re duce costs.- II. Extract of the Annual Return: As per Section 92(3) r/w Rule 12 of Companies (Management & Administration) Rules, Board’s Report required attaching extract of Annual Return of company in form MGT MGT MGT MGT- -- -9 99 9 III. Number Of Board Meeting 134(3) (b) Board Report required to mention the following Deta ils:  Number of Board Meeting held during the year  Date of Board Meetings held during the year  Number and Date of Committee meeting held during the year DIVESH GOYAL Mob: +918130757966 Practicing Company Secretary csdiveshgoyal@gmail.com GOYAL DIVESH& ASSOCIATES Twitter: @DiveshGoyal04 Whatsapp: 8130757966 FB: csdiveshgoyal@gmail.com Blog: www.csdiveshgoyal.info Gmail Id: csdiveshgoyal@gmail.com This blog post is not a professional advice but just a knowledge sharing initiative for mutual discuss ion. 3  No. of Board Meeting attended by the each Directors during the year IV. Inter Corporate Loans And Investments- 186 There is required to disclose by director in Board’ s Report that, the company has complied with the proviso ions of Section 186 of co mpanies Act, 2013 in relation to Loan, Investment & Guarantee given by the compan y during the financial. V. Related Party Transaction- 188 There is required to disclose by director in Board’ s Report all the related party transaction entered along with the justification for entering into such contract and arrangement by the company during financial year. VI. Subsidiaries, JVs or Associate Companies- Rule 8(5)(iv) The name of Company which has become or ceased to b e its subsidiaries, Joint Venture or associate company during the year VII. Report on performance of subsidiaries, associates c ompanies and joint ventures: The Board’s Report shall be prepared based on “STAND ALONE FINANCIAL “STAND ALONE FINANCIAL “STAND ALONE FINANCIAL “STAND ALONE FINANCIAL STATEMENT STATEMENT STATEMENT STATEMENT OF THE COMPANY OF THE COMPANYOF THE COMPANY OF THE COMPANY” ”” ” But the Board’s Report shall contain a Separate sec tion a Separate section a Separate section a Separate section wherein a report on the performance and financial position of each:  Subsidiary  Associate  Joint venture companies, including in the consolida ted financial statement is presented. VIII. Details of Directors/KMP/ appointed/resigned during the year As per Section 134(3)(q) r/w Rule 8(5)(iii) of Companies (Account) Rules,2014 Board Report required to mention the following Deta ils: DIVESH GOYAL Mob: +918130757966 Practicing Company Secretary csdiveshgoyal@gmail.com GOYAL DIVESH& ASSOCIATES Twitter: @DiveshGoyal04 Whatsapp: 8130757966 FB: csdiveshgoyal@gmail.com Blog: www.csdiveshgoyal.info Gmail Id: csdiveshgoyal@gmail.com This blog post is not a professional advice but just a knowledge sharing initiative for mutual discuss ion. 4  Director/KMP appointed during the year.  Director/KMP resigned during the year. IX. Explanation on Auditor Qualification- S 134(3)(f) Explanation or comments by Board on every qualifica tion, reservation or adverse remarks or disclaimer made by Statutory Auditor or Secretarial Auditor (if applicable) in its report. X. Dividends- S 134(3)(K) Where it is proposed to pay dividend, Report shall contain the recommendation of the Board as to the rate of dividend for the year u nder review for the approval of members at the AGM. XI. Material Events Occurring After Balance Sheet Date- S 134(3)(L) Post Balance Sheet Events Post Balance Sheet EventsPost Balance Sheet Events Post Balance Sheet Events Material Changes and Commitments, if any, affecting the Financial position of the Company which have occurred between the end of fina ncial year of the Company to which the financial statement relate and the date of the report. The term material included items, the knowledge of which might influence the decision of use of financial statement. XII. Transfer To Reserve- S 134(3)(J) The report of the Board of Directors shall state th e amount which it proposes to carry to any reserve in the Balance Sheet like debe nture redemption reserve in terms of Section 71(13) etc. XIII. Risk Management Policy- S 134 93) (n) A statement indicating development and implementati on of a risk management policy for the company including identification the rein of elements of risk, if any, DIVESH GOYAL Mob: +918130757966 Practicing Company Secretary csdiveshgoyal@gmail.com GOYAL DIVESH& ASSOCIATES Twitter: @DiveshGoyal04 Whatsapp: 8130757966 FB: csdiveshgoyal@gmail.com Blog: www.csdiveshgoyal.info Gmail Id: csdiveshgoyal@gmail.com This blog post is not a professional advice but just a knowledge sharing initiative for mutual discuss ion. 5 this in the opinion of the Board may threaten the e xistence of the company XIV. Disclosure under Sexual Harassment of Women & Workplace (Prevention, prohibition & redressal) Act, 2013 Company should make disclosure in Board Report rela ting to Sexual Harassment of Women & Workplace. XV. Financial Highlights & Change in the Nature of Busi ness- Rules 8(5)(i) &(ii) Disclosure on financial summary or highlights and C hange in the nature of business, if any. XVI. Voluntary revision of financial statements or Board Report- S131 Detailed reason for revision of such financial stat ement or Board’s Report to be disclosed in the Board’s report in the relevant f.y . in which such revision is being made. XVII. Adequate Internal Financial Control- Rule 8(5)(vii) In case of private limited company board of directo r is required to comment only on the adequacy of Internal Financial Control (Sec - 134(5)(e)} and not on its effectiveness. XVIII. IV. Conservation of energy, technology absorption & for eign exchange dealing: Rule8(3) The report of the Board shall contain the following information and details, namely:- (A) Conservation of energy (A) Conservation of energy (A) Conservation of energy (A) Conservation of energy- (i) the steps taken or impact on conservation of en ergy; (ii) the steps taken by the company for utilizing a lternate sources of energy; (iii) the capital investment on energy conservation equipments; DIVESH GOYAL Mob: +918130757966 Practicing Company Secretary csdiveshgoyal@gmail.com GOYAL DIVESH& ASSOCIATES Twitter: @DiveshGoyal04 Whatsapp: 8130757966 FB: csdiveshgoyal@gmail.com Blog: www.csdiveshgoyal.info Gmail Id: csdiveshgoyal@gmail.com This blog post is not a professional advice but just a knowledge sharing initiative for mutual discuss ion. 6 (B) Technology absorption (B) Technology absorption (B) Technology absorption (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 duri ng 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 h as not taken place, and the reasons thereof; and (iv) the expenditure incurred on Research and Devel opment. (C) Foreign exchange earnings and Outgo (C) Foreign exchange earnings and Outgo (C) Foreign exchange earnings and Outgo (C) Foreign exchange earnings and Outgo- -- - The Foreign Exchange earned in terms of actual infl ows during the year and the Foreign Exchange outgo during the year in terms of actual outflows. XIX. DIRECTOR RESPONSIBILITY STATEMENT 134(3) (c) The Directors‘ Responsibility Statement referred to in clause (c) of sub-section (3) shall State that― - Accounting Standard - Accounting Policy - Proper and efficient care for three things:  Going concern Basis  Adequate Internal Financial Control  Compliances with all applicable law DIVESH GOYAL Mob: +918130757966 Practicing Company Secretary csdiveshgoyal@gmail.com GOYAL DIVESH& ASSOCIATES Twitter: @DiveshGoyal04 Whatsapp: 8130757966 FB: csdiveshgoyal@gmail.com Blog: www.csdiveshgoyal.info Gmail Id: csdiveshgoyal@gmail.com This blog post is not a professional advice but just a knowledge sharing initiative for mutual discuss ion. 7 EVENT BASED DISCLOSURES TO BE MADE BY THE COMPANY S. No . Board Report Content- EVENT BASED I. I.I. I. Disclosure about ESOP and Sweat Equity Share: Director report shall disclose following about Swea t 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 share s. If ESOP has been given, its details are to be disclosed. II. II.II. II. Disclosure of Vigil Mechanism in board Report: If provisions of vigil Mechanism apply on company, then directors required to disclose in Board’s report establishment of Vigil M echanism. Also a requirement in terms of Clause 49(vii)(H)(2) of Clause 49. Applicable to the Companies which have borrowed money from banks & FIs in excess of Rs. 50 Crore. III. III.III. III. Order of Authority: The details of significant and material orders pass ed by the regulators or courts or tribunals impacting the going concern status and co mpany’s operation in future. IV. IV.IV. IV. Disclosure if MD/WTD is receiving remuneration or c ommission from a DIVESH GOYAL Mob: +918130757966 Practicing Company Secretary csdiveshgoyal@gmail.com GOYAL DIVESH& ASSOCIATES Twitter: @DiveshGoyal04 Whatsapp: 8130757966 FB: csdiveshgoyal@gmail.com Blog: www.csdiveshgoyal.info Gmail Id: csdiveshgoyal@gmail.com This blog post is not a professional advice but just a knowledge sharing initiative for mutual discuss ion. 8 MD/WTD or subsidiary Company: As per Section 197(14) of the Act, 2013 A MD/WTD of company can receive remuneration or com mission from any holding company or subsidiary company of such compa ny. This should be disclosed by the company in Board’s Report. V. V.V. V. Details Relating to Deposit:  Details of deposits which are not in compliance wit h 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 VI. VI.VI. VI. Details of Corporate Social Responsibility (CSR) (to be include in limit are trigged) S- 134(3)(o): Composition of CSR Committee, the details about the policy developed and implemented by the Company on Corporate Social Responsibility i nitiatives taken during the year. Details about:  Policy;  Its Implementation;  Spending as per Format FormatFormat Format in CSR Rules. This will go as a separate annexure to the Board Repor t in the formant prescribed in CSR Rules. The concept of CSR is based on the principle ‘ comply or explain’. Hence, if Company fails to spend, the Board shall in its report specify the DIVESH GOYAL Mob: +918130757966 Practicing Company Secretary csdiveshgoyal@gmail.com GOYAL DIVESH& ASSOCIATES Twitter: @DiveshGoyal04 Whatsapp: 8130757966 FB: csdiveshgoyal@gmail.com Blog: www.csdiveshgoyal.info Gmail Id: csdiveshgoyal@gmail.com This blog post is not a professional advice but just a knowledge sharing initiative for mutual discuss ion. 9 reason for not spending the amount and in case it doe s not disclose the reason for not spending, the company shall be punishable with fine. VII. VII.VII. VII. General Disclosures:  Name of retiring directors and whether or not they o ffer themselves for re- appointment.  Casual vacancies in the Board filled during the yea r.  Re-appointment.  Casual vacancy in the Board filed during the year  Changes in Board during the year, by change of nomi nees, appointment of additional directors, death, resignation or any other reason  Details, if anyone is contesting for election as di rector/ small shareholder director. VIII. VIII. VIII. VIII. Provision of Money by Company to purchase its own S hares- S 67(3) (b): If a public company provide financial assistance for the purchase of, or subscription for, fully paid-up shares in the company or its holding company, if the purchase of, or the subscription for, the shares held by trustees for th e benefit of the employees or such shares held by the employee of Company. IX. IX.IX. IX. Issue of Shares with Differential Rights- S 43 r/w Rules 4(4) Company will prescribe details of issue of equity sha res with differential rights. D ISCLOSURE MANDATORY TO BE MADE BY PUBLIC COMPANY Disclosure about receipt of commission by MD/WTD- S 197(14) Any MD/ WTD who receive commission from a company s hall not be disqualified from DIVESH GOYAL Mob: +918130757966 Practicing Company Secretary csdiveshgoyal@gmail.com GOYAL DIVESH& ASSOCIATES Twitter: @DiveshGoyal04 Whatsapp: 8130757966 FB: csdiveshgoyal@gmail.com Blog: www.csdiveshgoyal.info Gmail Id: csdiveshgoyal@gmail.com This blog post is not a professional advice but just a knowledge sharing initiative for mutual discuss ion. 10 receiving commission or remuneration from the Compa ny’s holding or subsidiary if such fact is disclosed by the Company in Board’s Report. DIVESH GOYAL Mob: +918130757966 Practicing Company Secretary csdiveshgoyal@gmail.com GOYAL DIVESH& ASSOCIATES Twitter: @DiveshGoyal04 Whatsapp: 8130757966 FB: csdiveshgoyal@gmail.com Blog: www.csdiveshgoyal.info Gmail Id: csdiveshgoyal@gmail.com This blog post is not a professional advice but just a knowledge sharing initiative for mutual discuss ion. 11 DISCLOSURE MANDATORY TO BE MADE BY LISTED COMPANY The Ration of the Remuneration of each director to the median employee’s Sec 197(12) r/w rules 5 ask for “Elaborate Disclosures” on remuneration, employment and other HR data. This is new and cumbersome requirement. The Act see ks disclosure on Statistics Calculations.  The ratio of remuneration of each director to the m edian remuneration of the employees;  % increase in remuneration of each Director, KMP an d of %