MCA has further amended Companies (Accounts) Rules, 2014, these rules called Companies (Accounts) Amendment Rules, 2018. MCA has came up with new rule 8A on 31st July, 2018 with Abridged form of Directors report disclosure and prescribed separate bunch of disclosures for Small Company and One Person Company (OPC).
As per Companies amendment Act, 2017 it was proposed that MCA shall issue abridge form of Directors Report for One Person Company and Small Company.
Major Change:
A new sub Rule 6 added after sub Rule 5 in Rule 8; I.e. “This Rule shall not apply to OPC and Small Company”.
Therefore, Rule 8 shall not apply on the OPC and Small Company.
SECOND MAJOR CHANGE
No need to prepare the MGT-9 for One Person Company and Small Company.
MCA has introduced new Rule 8A after rule 8 under Section 134 of Companies Act, 2013
Rule 8A: As per rule 8A “Matters to be included in Board’s Report for One Person Company and Small Company:
First:
Director’s report of OPC and Small Company shall be prepared on the basis of “Stand Alone Financial Statement” of the Company.
Second:
Disclosures to be mentioned in Directors’ Report:
a) The web address, if any, where annual return referred to in sub-section (3) of section 92 has been placed;
b) Number of Meeting of Board of Directors
c) Directors responsibility statement as referred in sub-section 5 of section 134
d) Details in respect of frauds reported by auditors under sub-section (12) of section 143 other than those which are reportable to the Central Government.
e) Explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report.
f) The state of the Company’s affairs;
g) The financial summary and highlights;
h) Material changes from the date of closure of the financial year in the nature of business and their effect on the financial position of Company.
i) The details of directors who were appointed or have resigned during the year;
j) The details or significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operation in future. With this amendment, the number of matters to be stated in Board’s Report of OPC and small companies has been drastically brought down and understandably so.
However, even based disclosures still have to be give by such Companies Board Report Like : CSR, ESOP, A case in point herein is disclosure regarding compliance with applicable SS as per para 9 of Secretarial Standard-1 etc .
Third:
The report shall contain the particulars of contracts or arrangements with related parties referred to in sub section (1) of section 188 in the form AOC-2.
NOTE:
Related party transaction in relation to transaction mentioned in section 188(1) – there are 7 transactions (a to g) shall be mentioned in AOC-2.
DRAFT FORMAT OF ABRIDGED DIRECTORS’ REPORT (APPLICABLE TO OPC AND SMALL COMPANIES)
Dear Members,
XYZ PRIVATE LIMITED
Your Directors have pleasure in presenting the (No. of AGM) Annual Report together with the Audited Statement of Accounts of your Company for the Year ended March 31, _______.
1. FINANCIAL SUMMRAY
The Company’s financial performance, for the year ended March 31, __________:
(Rs in Lacs)
| Particulars | Year ended 31st March ___ | Year ended
31st March ____ |
| Turnover | ||
| Profit Before Tax | ||
| Less: Current Tax | ||
| Deferred Tax | ||
| Income Tax earlier years | ||
| Profit For The Year | ||
| Add: Balance in Profit and Loss Account | ||
| Sub Total | ||
| Less: Appropriation | ||
| Adjustment relating to Fixed Assets | ||
| Transferred to General Reserve | ||
| Closing Balance | ||
2. STATE OF AFFAIRS / HIGHLIGHTS
- The Company is engaged in the business of ___________________________. There has been no change in the business of the Company during the financial year ended 31stMarch, _________.
2. There has been no change in the business of the Company during the financial year ended 31st March, ___________.
3. CHANGE IN DIRECTORSHIP
There has been no change in the constitution of Board during the year under review i.e. the structure of the Board remains the same.
OR
If there is any change, mentioned that Mr. …… has been resigned/ appointed w.e.f. ____________ as Director / MD/ etc of Company.
4. BOARD’S COMMENT ON THE AUDITORS’ REPORT
The observations of the Statutory Auditors, when read together with the relevant notes to the accounts and accounting policies are self explanatory and do not call for any further comment.
OR
(Explanation or comment by the Board on every qualification, reservation, adverse remark or disclaimer made by the statutory auditor in his report and/or by the secretarial auditor in the secretarial Audit Report)
5. MEETINGS OF BOARD OF DIRECTORS
(No. of Board Meeting) ___________Board Meetings were held during the Financial Year ended March 31, __________ i.e. (Dates of Board Meetings).
6.WEB LINK OF ANNUAL RETURN, IF ANY.
The Company is having website i.e.___________________________ and annual return of Company has been published on such website. Link of the same is given below:
OR
The Company doesn’t having any website.
7. MATERIAL CHANGES AND COMMITMENTS
No material changes and commitments affecting the financial position of the Company occurred between the end of the financial year to which this financial statement relates and the date of this report
OR
The following material changes and commitment occurred during the year under review affecting the financial position of the Company.
8. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS, COURTS AND TRIBUNALS
No significant and material order has been passed by the regulators, courts, tribunals impacting the going concern status and Company’s operations in future.
OR
The details of a significant material order passed by the Hon’ble High Court which may impact the going concern status of the Company and its future operations is provided in Annexure ___and forms part of this report
9. DIRECTOR’S RESPONSIBILITY STATEMENT
Pursuant to Section 134(5) of the Companies Act, 2013 the Board of Directors of the Company confirms that-
a) In the preparation of the annual accounts for the year ended March 31, __________, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same.
b) The Directors have 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 as at March 31,__________ and of the profit of the Company for the year ended on that date.
c) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.
d) The Directors have prepared the annual accounts on a ‘going concern’ basis.
e) The Company being unlisted, sub clause (e) of section 134(3) of the Companies Act, 2013 pertaining to laying down internal financial controls is not applicable to the Company.
f) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such system are adequate and operating effectively.
ACKNOWLEDGMENT
Your Directors would like to express their sincere appreciation for the assistance and co-operation received from the banks, Government authorities, customers, vendors and members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services by the Company’s executives, staff and workers.
—————–
SIGNING OF BOARD REPORT:
134(6) The Board’s report and any annexures thereto under sub-section (3) shall be signed by its chairperson of the company if he is authorised by the Board and where he is not so authorised, shall be signed by at least two directors, one of whom shall be a managing director, or by the director where there is one director.
———-
FAQ’S ON NEW ABRIDGED DIRECTORS’ REPORT (APPLICABLE TO OPC AND SMALL COMPANIES)
A. Whether these rules impact the Annual Filing of OPC and Small Company for the f.y. ended 31.03.2018?
As per notification rules shall be applicable from the date of publication in official Gazette. If these rules published in official gazette before holding of Board Meeting in which Directors Report shall be approved then these rule shall impact that Directors Report.
Note: In general it’s published in Official Gazette immediately or with in some days.
B. Whether Rule 8 i.e. “Matters to be Included in Board’s Report” shall be applicable on OPC and Small Company?
A new sub Rule 6 added after sub Rule 5 in Rule 8; I.e. “This Rule shall not apply to OPC and Small Company”.
Therefore, Rule 8 shall not apply on the OPC and Small Company
C. Whether OPC and Small Companies are required to prepare MGT-9 after notification of these rules?
Requirement of preparation of MGT-9 shall not be applicable on OPC and Small Companies. Because, only transaction mentioned in Rule 8A are applicable on these companies for the purpose of Directors’ Report.
D. Whether it is mandatory to mention the Dates of Board Meeting and presence of Directors in Board Report?
As per Rule 8A(b) Company have to mention the Numbers of Meeting, Neither Dates nor presence of Directors.
Therefore, one can opine that there is no need to mention the date of Meetings and presence of Directors in Board Report.
E. Whether these rules applicable on Financial Year 2017-18?
As per notification rules shall be applicable from the date of publication in official Gazette. If these rules published in official gazette before holding of Board Meeting in which Directors Report shall be approved then these rule shall impact that Directors Report.
Note: In general it’s published in Official Gazette immediately or with in some days.
F. Whether it is mandatory to mention the Dates of Board Meeting and presence of Directors in Board Report?
As per Rule 8A(b) Company have to mention the Numbers of Meeting, Neither Dates nor presence of Directors.
Therefore, one can opine that there is no need to mention the date of Meetings and presence of Directors in Board Report.
G. Which material changes Company have to mention in Directors’ Report?
- Material changes from the date of closure of financial year.
- Financial changes in the nature of Business and
- Financial changes with impact on the financial position.
H. Whether it is mandatory to mention the Dates of Board Meeting and presence of Directors in Board Report?
As per Rule 8A (b) Company have to mention the Numbers of Meeting, Neither Dates nor presence of Directors.
I. Details of all related party transaction is required to be mention in AOC-2?
The report shall contain the particulars of contracts or arrangements with related parties referred to in sub section (1) of section 188 in the form AOC-2.
NOTE:
Related party transaction in relation to transaction mentioned in section 188(1) – there are 7 transactions (a to g) shall be mentioned in AOC-2.
(Author CS Divesh Goyal is Company Secretary in Practice from Delhi and can be contacted at [email protected]).
Checkout the Draft Format of Director’s Report for Private Company 2018
Author Bio
How can we ignore the points mentioned under Section 134 which were also mandatory and stick just to the points in the Rules.
Annual Return in E-Form MGT-7 has to be prepared after the AGM and information regarding AGM held, and Board Report is prepared before the AGM.
Kindly suggest how we may place Annual Return of the Before the preparation and approval of Board Report as the AGM is to be held.
AoC-2 is to be provided by small companies. There is no reference to same in your format.
What about auditors appointment/ratification reporting?
Sir – Section proviso of 92(1) [Provided further that the Central Government may prescribe abridged form of annual return for “One Person Company, small company and such other class or classes of companies as may be prescribed.] is not yet prescribed. I think unless this is notified, publishing in the website is not yet effective. Please clarify.
2. Also, can you clarify on what basis you made this statement – “No need to prepare the MGT-9 for One Person Company and Small Company”.