Contents of Board Report for Unlisted and Private Limited

Introduction

Financial reporting is necessary for companies as it provides details of the state of a company and its compliance with financial, corporate social responsibility and accounting standards. Public and private limited companies must file a financial document called the directors’ report at the end of the financial year. The directors’ report is the report prepared by the Board of Directors of the company and should be attached to every financial statement.

Applicability of the Directors’ Report

All companies need to prepare the directors’ report, except One Person Company (OPC) and small companies.

Contents of a Directors’ Report as per Companies Act, 2013

According to Section 134(3) of the Companies Act, 2013 (‘Act’), the board’s report should include the following information:

• the web address, if any, where annual return referred to in sub-section (3) of section 92 has been placed;
• number of meetings of the Board;
• Directors’ Responsibility Statement;
• details in respect of frauds reported by auditors under sub-section (12) of section 143other than those which are reportable to the Central Government;
• a statement on declaration given by independent directors under sub-section (6) of section 149;
• in case of a company covered under sub-section (1) of section 178,company’s policy on directors’ appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under sub-section (3) of section 178;
• explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made—
• by the auditor in his report; and
• by the company secretary in practice in his secretarial audit report;
• particulars of loans, guarantees or investments under section 186;
• particulars of contracts or arrangements with related parties referred to in sub-section (1) of section 188in the prescribed form;
• the state of the company’s affairs;
• the amounts, if any, which it proposes to carry to any reserves;
• the amount, if any, which it recommends should be paid by way of dividend;
• material changes and commitments, 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 statements relate and the date of the report;
• the conservation of energy, technology absorption, foreign exchange earnings and outgo, in such manner as may be prescribed;
• a statement indicating development and implementation of a risk management policy for the company including identification therein of elements of risk, if any, which in the opinion of the Board may threaten the existence of the company;
• the details about the policy developed and implemented by the company on corporate social responsibility initiatives taken during the year;
• in case of a listed company and every other public company having such paid-up share capital as may be prescribed, a statement indicating the manner in which formal 8[annual evaluation of the performance of the Board, its Committees and of individual directors has been made;
• such other matters as may be prescribed.

Penalty for not preparing the Directors’ Report

The board’s report or Directors’ report and its annexures should be signed by the company’s chairperson when the board authorises them. When the board does not authorise the company’s chairperson for signing the report, at least two directors should sign the report, one of whom must be a managing director. A signed copy of the directors’ report should be circulated, issued or published on the company website.

When a company defaults in the preparation of the board’s report and directors’ report, the company has to pay a penalty of Rs.3 lakh, and every officer of the company in default has to pay a penalty of Rs.50,000.