With the implementation of almost more than half of the provisions under the Companies Act, 2013 (Act) including Section 134 of the Act w.e.f. 1st April, 2014, companies now need to develop a design a framework for reporting and disclosure of various information in its Board’s Report which are now required additionally to some of the disclosures under the Companies Act, 1956. While The Ministry of Corporate Affairs has put in its efforts to replace the Act 1956 with Act 2013 to make a shift towards self-governance rather than the regulatory governance, the disclosure requirements under the Board’s Report seems to be more of a regulatory compulsion than the self-governance.

Additional Disclosures in the Board’s Report

The disclosure of performance evaluation criteria of Directors, particulars of loans, guarantees or investment under Section 186 of the Act, remuneration and appointment policy for Directors would be challenges for the companies to disclose in the Report for Financial year ended March 2015. In certain circumstances, Ministry needs to issue clarification to ensure adequate and proper disclosure in the Board’s report, eg – in case of a company where the Nomination and Remuneration Committee is constituted on 31st March 2015 itself (since the Ministry vide its amendment to the Companies (Meetings and Powers of Board) Rules, 2014 dated 12th June, 2014 permitted constitution of committee within one year from the commencement of these rules or appointment of independent directors by them, whichever is earlier) the policy relating to the remuneration for Directors, Key Managerial Personnel (KMP) and other employees can only be framed post constitution of the Committee and thereafter can be recommended to the Board for its approval. Similarly for evaluation of every director’s performance, the Committee would need to establish criteria which in any case can be framed only after March 2015 in the above cases. Hence new reporting requirements under the Board’s report may lead to piecemeal information in case of such a company.

In addition to the requirement under the Act, Revised Clause 49 of the Listing Agreement also mandate companies to make some more disclosures apart from those as were required under Clause 49. Nonetheless, these disclosure requirements as enacted under the Act and the Listing Agreement lead to an era of good governance and transparency. In order to ensure adherence to the above requirement, companies would need to compile many information from the very beginning of a calendar year 2015 to make adequate and statutory disclosure in its
Board’s Report.

The requirements under the Companies Act, 2013 are no longer similar to the requirements under the Companies Act, 1956, wherein the Section 217 of the Companies Act, 1956 contained the provisions relating to disclosures in the Board’s Report.

The Act 2013 has shaped an enclave of various requirement under various relevant provisions to be disclosed in the Board’s Report for the financial year 31st March. 2015 onwards. In context of the above, a brief summary of the requirement under the Act as well as the Listing Agreement is stated below:

Additional Disclosures as required under the Act:

 The additional disclosures which are required now under the Companies Act, 2013 may be summarised as follows:

1. Number of Board Meetings held during the year, Composition of Audit Committee, and CSR Committee.

2. Extract of Annual return as prescribed in Form MGT 9 [Section 134(3)(a) of the Act]

3. Additional information in Directors’ Responsibility Statement relating to the statement 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 and in case of listed companies, statement that directors had laid down internal financial controls and such controls are adequate and operating effectively. [Section 134(5) of the Act]

4. Disclosures relating to Directors / KMP :

  • Details of Directors or KMP appointed or resigned during the year
  • Statement on declaration given by Independent Directors (IDs)
  • Policy on appointment of Directors
  • In case of re-appointment of IDs disclosure of such appointment
  • Receipt of commission by whole time Director / Managing Director from its holding / subsidiary company, if any. [Section 134(3)(d) & (e), 149(10) and 197(14) of the Act]

5. Disclosures relating to policies:

  • Policy relating to the remuneration of the Directors, KMP and other employees [Section 178(4) of the Act]
  • Statement indicating development and implementation of Risk Management Policy [Section 134(3)(n) of the Act]
  • Details about the CSR policy developed and implemented as well as CSR report as per prescribed format [Section 134(3)(o) of the Act and Rule 9 of the Companies (Accounts) Rules, 2014]
  • Details of establishment of vigil mechanism [Section 177(10) of the Act]

6. Disclosures on remuneration of Directors / KMP / Employees:

  • The ratio of the remuneration of each director to the median remuneration of the employees
  • The percentage increase in remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year
  • The percentage increase in the median remuneration of employees in the financial year, the number of permanent employees
  • The explanation on the relationship between average increase in remuneration and company performance
  • Comparison of the remuneration of the Key Managerial Personnel against the performance of the company
  • Variations in the market capitalisation of the company, price earnings ratio as at the closing date of the current financial year and previous financial year and percentage increase over decrease in the market quotations of the shares of the company in comparison to the rate at which the company came out with the last public offer in case of listed companies, and in case of unlisted companies, the variations in the net worth of the company as at the close of the current financial year and previous financial year
  • Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration
  • Comparison of the each remuneration of the Key Managerial Personnel against the performance of the company
  • The key parameters for any variable component of remuneration availed by the directors
  • The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year; and affirmation that the remuneration is as per the remuneration policy of the company. [Section 197(12) of the Act and Rule 5 of the Companies (Appointment & Remuneration of managerial Personnel) Rules, 2014]

7. Disclosures on performance evaluation of the Board, its committees and individual directors [Section 134(3)(p) of the Act], Criteria for determining qualifications, positive attributes and independence of a Director [Section 134(3)(e) of the Act]

8. Disclosures on related party transactions – particulars of contracts or arrangement with related parties in prescribed form AOC 2. [Section 134(3)(h) of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014]

9. Disclosure of particulars of loans, guarantees or investments made under Section 186 of the Act. [Section 134(3)(g) of the Act]

10. Disclosure of a report on the performance and financial position of each of the subsidiaries, associates and joint venture companies included in the consolidated financial statement is presented. Names of companies which have become or ceased to be its Subsidiaries, joint ventures or associate companies during the year. [Rule 8 of the Companies (Accounts) Rules, 2014]

11. Disclosures relating to Deposits – Deposits accepted, remained unpaid or unclaimed at the end of a year and the details of deposits which are not in compliance with the requirements of Chapter V of the Act. [Rule 8(5)(v) of the Companies (Accounts) Rules, 2014]

12. Disclosures on ESOP – options granted, options vested, options exercised, the total number of shares arising as a result of exercise of option, options lapsed, the exercise price, variation of terms of options, money realized by exercise of options , total number of options in force and employee wise details of options granted to KMP, specified employees. [Rule 12(9) of the Companies (Share Capital and Debentures) Rules, 2014]

13. Secretarial Audit Report. [Section 204 of the Companies Act, 2013]

14.  Other details – in respect of adequacy of internal financial controls with reference to the Financial Statements, 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) of the Companies (Accounts) Rules, 2014]

Additional Disclosures as required under the Listing Agreement:

Additional requirements under Revised Clause 49 of the Listing Agreement may be summarised as follows:

1. Web link providing details of familiarisation programmes for IDs.

2. Web link for accessing the policy for determining material subsidiaries.

3. Web link for accessing the policy dealing with related party transactions.

4. Evaluation criteria for performance as established by Nomination and Remuneration Committee.

Penalty for non-compliances

With the intent to make the Board more responsible and transparent, the Act prescribes hefty penalty for non-compliance. It is Rs.50,000 for a company which may extend up to Rs.25 lakhs and for every officer of the Company who is in default, the Act prescribes an imprisonment for a term which may extend to 3 years or with fine of minimum Rs.50,000 which may extend up to Rs.5 lakhs or both.

Voluntary Revision of Board’s Report:

Section 131 of the Act, which is yet to be notified 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. Such revision however can be made in respect of any three preceding financial years and would also require approval of the National Company Law Tribunal.


Though the compilation of all these information pertaining to the disclosures to be made in the Board’s Report would be a herculean task for many companies at the initial stage but these disclosures in the Board’s Report are certainly required to ensure accountability of the Board and to build up transparency in reporting norms. The disclosures as required under the Companies Act, 2013 would also align the reporting norms and responsibilities of the Board with the standard global practices followed by foreign countries.

Ravi VarmaAuthor : Ravi Varma (renowned CS faculty)

Email Id: ravivarma8@gmail.com

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October 2020