Introduction to Directors Report

The Companies Act, 2013 has marked the end to the era of Companies Act, 1956 with changes in law, rules and brought in transparency in dealing with the affairs of the Company. The governance of Company is witnessing day-by-day considerable changes. The new Act plays a significant role with respect to the responsibilities of the Directors,  and also has widened the contents of Director’s Report commonly known as “Board’s Report” and this book gives an insight into the various provisions in preparation of Director’s Report under the Companies Act, 2013.

New Provision added in Companies ACT-2013 with respect to Directors Report.

The changes – Old v/s New Act:

It’s noteworthy that generally the legal frame work under old Companies Act, 1956 has been maintained however following new provisions are added:

  • Extract of annual return [Section 92(3)],
  • Explanations to adverse qualification in Secretarial audit report, statement on declaration given by independent director, if any [Section (149)],
  • Policy on directors’ appointment, qualifications remuneration etc., particulars of loans, guarantees and investments. [Section 186],
  • Particulars of related party transactions {section 188(1)],
  • Steps taken as per CSR policy approved by the Board,

An Innovative provision u/s. 131(1) (third proviso) that in case of revision of/re-opening of financial statements or Board report, detailed reasons must be stated In the director’s report for such revision of statements or Director’s Report.

Voluntary revision of Board’s Report (New Norms):

This is new provision under Section 131 of the Act. It permits revision of Board’s Report In case of non-compliance of any provisions of section 134 subject to the compliance with provisions of that Section.

Disclosure Requirement in Board’s Report.

Contents of Board’s Report:

1. The extract of the annual return as provided under sub-section (3) of Section 91 (this is a new requirement).

2. The numbers of meetings of the Board held during the financial year. (This already find place under Clause 49 of Listing Agreement in the case of listed companies under corporate governance report).

3. The Directors’ Responsibility Statement (corresponds to the provisions of section 217 (2AA) of old Act).

4. A statement of declaration given by independent directors under sub-section (6) of section 149. (New requirement).

5. All the listed companies and such class of companies as may be prescribed [section 178(1)] must disclose company’s policy on directors’ appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a directors and other matters provided under section 178(3).

6. Explanations or comments by the Board on every qualification, reservation or adverse remark of disclaimer made (a) by the Statutory Auditor in his report, and (b) by the Company Secretary in practice in his Secretarial Audit Report {Section 204(3)] (additional requirement).

7. Particulars of loans, guarantees or investments under section 186 (New requirement).

8. Under Rule 8 of The Companies (Accounts) Rules, 2014 the particulars of contracts or arrangements with related parties referred to in sub-section (1) of section 188 is to be reported in the prescribed AOC.2 (New requirement).

9. The state of the company’s affairs (continuing requirement).

11. The amounts, if any, which it proposes to carry to reserves (continuing requirement).

12. The amount, if any, which it recommends should be paid by way of divided (continuing requirement).

13. 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 or the report. (New requirement).

14. The conservation of energy, technology absorption, forign exchange earning and outgo. (Continuing requirement). The Rule 8(3) of the Companies (Accounts) Rules, 2017 specifies the manner in which these are to be reported.

15. 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. (New requirement). The clause 49 of listing agreement is also having similar reporting requirements.

16. The details about the policy developed and implemented by the company on corporate social responsibility initiative taken during the year. (New requirement).

Directors Report Companies Act 2013 – A referencer

17. The Rule 8(4) of the Companies (Accounts) Rules, 2014 says that in case of a listed company and every other public company having paid-up share capital of 25 crores or more, a statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its committees an individual directors. (New requirement)

18. Such other matters as may be prescribed under 134(3)(q). the Rule 8(5) of the Companies (Accounts) Rules, 2014 prescribes that in addition to the information and details specified in sub-rule (4), the report of the Board shall also contain:

    • The financial summary or highlights; (continuing requirement)
    • The change in the nature of business, if any; (New requirement).
    • The details of directors or key managerial personnel who were appointed or have resigned during the year (new requirement).
    • The names of companies which have become or ceased to be its subsidiaries, joint ventures or associate companies during the year; (New requirement).
    • The details relating to deposits, covered under Chapter V of the Act (New requirement):
    • 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 thereon 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;
    • The details of deposits which are not in compliance with the requirements of Chapter V of the year;
    • The details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operations in future; (New requirement).
    • The details in respect of adequacy of internal financial controls with reference to the Financial Statements. (New requirement).

19. All new concept that the Board’s report shall disclose the composition of audit committee and reasons for not accepting recommendations of audit committee, If any [Section 177(8)]

20. Moreover, the Board to report on establishment of vigil mechanism. [Section 177(10)]

21. The Secretarial Audit Report, If applicable, in prescribed form (Form MR. 3) shall be annexed to Board’s report [Section 204].

22. The Act and Rules are silent for conventional mention of reappointment of retiring directors and retiring auditors; however the tradition may be continued.

23. This is an important & authentic communiqué from the company; therefore, the directors are free to convey other thoughts. There are no restrictions under the provisions of the Companies Act, 2013.

24. In terms of Section 118(10) of the Act, every company shall observe secretarial standards with respect to General and Board Meetings specified by the Institute of Company Secretaries of India (ICSI) and approved as such by the Central Government. Since the Secretarial Standards has now become obligatory & binding on the company, shall also have to be compiled with as and when issued by the ICSI.

Step’s Required for preparation of Director’s Report.

Steps for Annual Report Preparation

Step No. Details Company Act/ Section No.
Step-1 CAG Appointment of Auditors 139
Step-2 Auditors to know about Company 139
Step-3 Auditors will give consent – CAO 141
Step-4 ADT-1 filing Company Secretary/ CAO 141
Step-5 CAO – Auditors – Audit Schedule C & AG Mandate
Step-6 Audit Start — Finish Guidelines
Step-7 Note on Balance Sheet + P/L + Notes to Accounts AS
Step-8 Audit Committee Approval 177
Step-9 Board Approval — Signature 129
Step-10 Signed Copy to Auditors — for his authentication & Report 134
Step-11 Adverse Report by Auditors – Explanation 134
Step-12 Audit Committee Approval to above 177
Step-13 Balance Sheet + Audit Report + P/L = To CAG – 2 Copies 129
Step-14 Directors Report Approval by Board 134
Step-15 Preparation of Board Report + CAG Comments + Balance Sheet + Profit Loss etc. 134
Step-16 Give copy to Company Secretary
Step-17 Company Secretary to convene AGM for adoption of Annual Report 96
Step-18 Filing MCA = AOC 4 137

(i) Importance of Annual Report o/s 22 of POSH.

(ii) Disclosure in Board’s Report – about S-4, S-22 of POSH.

(iii) Disclosure Requirement for Listed Companies.

Sr. No.   Relevant Section & Rule
1. Under ESOP Section 62(1)(b) Companies Act, 2013 read with Rule 12(9) of Companies (Share Capital and Debentures) Rules 2014
2. SEBI Regulations Regulation 14 of SEBI (Share based Employee Benefits) Regulation 16(4) of Companies (Share Capital & Debenture) Rules 2014.
2.1. NSE Listing Agreement Clause 32, 36, 43, 49 of SEBI (Listing obligations & Disclosure Requirements)
3. Producer Company Section 465(1) of Companies Act 2013 read with section 581ZA of Companies Act, 1956.
4. Directions of RBI Direction 5 of NBFC, Acceptance of Public Deposits (Reserve Bank) Directions 1998.

Direction 9 of miscellaneous NBFC (reserve Bank) Directions 1977.

Direction 11 of Residuary Non-Banking Companies (Reserve Bank) Direction, 1987.

5. National Housing Bank Directions Direction 10 of Housing Finance Companies (NHB) Directions, 2001.
6. Sexual Harassment of women at work place Section 21 of Sexual Harassment of women at work place (Prevention, probation & Redressal) Act, 2013.
7. Sweat Equity Rule 8(13) of Companies (Share Capital and Debentures) Rules 2014.
8. Change in the Composition of the Board Section 168(1) of Companies Act, 2013
9. Re-appointment of Independent Director Section 149(10) of Companies Act, 2013
10. Disclosure Related to Employees Rule 5 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014.
11. Annual Performance evaluation of Directors & Committee of Board Rule 8(4) of Companies (Accounts) Rule 2014.

(Exempted for Government Companies GSR 463(E) dtd. 05.06.2015

12 Reporting of Fraud Rule 13(4) Companies (Audit and Auditors) Amendment Rules, 2015

CSR and it’s Disclosure in Board’s Report.

The Relevant Provisions (Sec. 135)

  • The Board’s report under sub-section (3) of section 134 shall disclose the composition of the Corporate Social Responsibility Committee.
  • The Board of every company referred to in sub-section (1) shall,-
  • after taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy in its report and also place it on the company’s website, if any, in such manner as may be prescribed; and
  • ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company.
  • The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent, of the average net profits of the company made during the three mediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy:

Provided that the company shall give preference to the local area and areas around it where it operates for spending the amount earmarked for Corporate Social Responsibility activities:

Provided further that if the company fails to spend such amount, the Board shall, in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount.

Explanation- For the purposes of this section “average net profit” shall be calculated in accordance with the provisions of section 198.”

 Board’s Action :

(a) Approve the CSR policy of the Company after taking into account the recommendations of the CSR Committee;

(b) Disclose the content of policy in its report and place on website, if any of the company;

(c) ensure that the activities as are included in CSR Policy of the company are undertaken by the company;

  • ensure that atleast 2% of average net profits of the company made during three immediately preceding financial years shall be spent on such policy every year.
  • Board shall give in its report the reasons for not spending.
  • While the Act does not specifically provide for any penalties in case a company fails to spend required amount or undertake the activities as prescribed under the policy, it does require to provide an explanation in the Board’s report.

Matters to be prescribed

Section 135(4)(a): Manner of disclosing the contents of CSR Policy in which the contents of CSR policy Board’s Report and the Company’s website.

  • Board meeting to approve:
  • CSR policy with or without change to the recommended draft policy by CSR committee,
  • Annual meeting to earmark some,
  • Regular/quarterly CSR Committee meeting to monitor CSR policy and activities,
  • Board Report to report compliance or failure on CSR activities and spending of earmarked amount, specify reason for any failure, and
  • Go to step one at beginning of every financial year.
  • About CSR expenditure MCA has the power to call for information u/s 206 of Companies Act. 

Importance of Director’s Responsibility

Statement in– Board’s Report –

Director’s Responsibility Statement:

Pursuant to the Provisions of section 134(3)(c) of the Act, the Directors, based on the representations received from the Operating Management, confirm that:

  • In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;
  • The directors had selected such accounting policies and applied them consistency 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 at the end of the financial year and of the profit and loss of the company for that period;
  • the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
  • the directors had prepared the annual accounts on a going concern basis; and
  • the directors, (In the case of a listed company) had laid down Internal financial controls to be followed by the company and that such Internal financial controls are adequate and were operating effectively.
  • 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.
  • Clauses (e) and (f) above are new additions to the Directors’ Responsibility Statement and the addition of the same is one step forward in the right direction towards corporate governance and compliance where an increased focus of the board can be expected towards internal financial controls and systems to ensure compliance with the provisions of applicable laws.

Various Rule under companies Act and 2/s Disclosure norms in Board’s Report.

B.3 New Heading :

Web Link of Annual Return.

Following is web-link,  where the Annual Return filed with Ministry of Corporate Affairs as per requirement of Section 92(3) of Companies Act, 2013, read with MCA’s Notification dated 28.8.2020.

B.4 Composition of Internal Complaint Committee with regard to Section 4 of Sexual Harassment Act.

B.5 Annual Report with regard to Section 22 of Sexual Harassment Act.

B.6 Rule 8(1) of The Companies (Accounts) Rules, 2014:

The report shall contain a separate section wherein 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.

B.7 Rule 8(5)(iv) of The Companies (Accounts) Rules, 2014: The report of the Board shall also contain the names of companies which have become or ceased to be its Subsidiaries, joint ventures or associate companies during the year;

B.8 Rule 8(5)(viii) of The Companies (Accounts) Rules, 2014:     The details in respect of adequacy of internal financial controls with reference to the Financial Statements ;

B.9 Rule 8(5)(vii) of The Companies (Accounts) Rules, 2014: The details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operations in future;

B.10 Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014:

A statement showing following details of every employee of the Company who was in receipt of remuneration in excess of Rs. 60 Lacs, if employed throughout the year or Rs. 5 Lacs per month, if employed for part of the financial year or received remuneration in excess of that drawn by the MD/WTD/Manager & holding 2% or more of equity share capital of the Company (himself alongwith spouse & dependent children):

  • Name, age & designation of the employee
  • remuneration received;
  • nature of employment, whether contractual or otherwise;
    • qualifications and experience of the employee;
    • date of commencement of employment;
    • the age of such employee;
      • the last employment held by such employee before joining the company;
      • the percentage of equity shares held in the alongwith spouse & dependent children ;
      • whether any such employee is a relative of any director or manager of the company and if so, name of such director or manager;

B.11 Section 67(3) of the Companies Act, 2013: Giving of any loans to persons in the employment of the company other than its directors or KMP, for an amount not exceeding their salary or wages for a period of six months to purchase or subscribe for fully paid-up shares in the company or its holding company to be held by them by way of beneficial ownership, then disclosures of voting rights not exercised directly by the employees in respect of shares to which the scheme relates.

B.12 Please find Director’s Attendance F.Y.2020-21 [Already emailed on 8.6.2021, Out.No.2645 – CSD Task 435 (A)].

B.13 Please include MGT-9, F.Y.2020-21 [Already emailed on 31.5.2021 and 8.6.2021. At Clause VI of MGT-9, Please include details of remuneration to Directors & KMP as per AO Salary’s Note bearing No.E-37695 dated 11th June, 2021].

B.14 The Secretarial Audit Report [MR-3] 2020-21 is under progress and will be sent after approval of Board.

  • Filing Requirement of Companies Act-2013.
  • Higher Additional Fee U/S 403 of Companies Act.
  • Amendment – 2017
  • Amendment-2021
  • Importance of Independent Director and it’s
  • Disclosure Role in Director’s Report.

Step’s to be taken before preparation of

Board Report.

List of Section involved in Preparation of Board Report.

CHECK LIST – DIRECTORS’ REPORT

Following are the select provisions of the Companies Act, 2013 and relevant rules:

Sr. No. Title Section/ Rule PARTICULARS Penalty
1. Restriction of purchase by company or giving of loans by it for purchase of its shares. Section 67(3)(c)

 

 

 

 

 

 

Rule 16(4) of the Companies (Share Capital and Debenture) Rules, 2014

Provided that disclosures in respect of voting rights not exercised directly by the employees in respect of shares to which the scheme relates shall be made in the Board’s report in such manner as may be prescribed.

(4) Where the voting rights are not exercised directly by the employees in respect of shares to which the scheme relates, the Board of Directors shall, inter alia, disclose in the Board’s report for the relevant financial year the following details, namely:-

(a) the names of the employees who have not exercised the voting rights directly;

(b) the reasons for not voting directly;

(c) the name of the person who is exercising such voting rights;

(d) the number of shares held by or in favour of, such employees and the percentage of such shares to the total paid up share capital of the company;

(e) the date of the general meeting in which such voting power was exercised;

(f) the resolutions on which votes have been cast by persons holding such voting power;

(g) the percentage of such voting power to the total voting power on each resolution;

(h) whether the votes were cast in favour of or against the resolution.

Section 67(5)

 

 

2. Annual Return Section 92(3)

 

 

Rule 12 of the Companies (Management and Administration) Rule, 2014

An extract of the annual return in such  form as may be prescribed shall form part of the Board’s report.

12. Extract of annual return.-

(1) The extract of the annual return to be attached with the Board’s Report shall be in Form No. MGT.9.

No specific penal provisions, therefore, Section 450 applies.
3. Voluntary revision of financial statements or Board’s report Section 131 (1) If it appears to the directors of a company that-

(a) the financial statement of the company; or

(b) the report of the Board

No specific penal provisions, therefore, Section 450 applies.
4. Financial statements. Section 134 (3) There shall be attached to statements laid before a company in general meeting, a report by its Board of

Directors, which shall include-

( Refer Initial Chpters)

Section 134(8)
5. Corporate Social Responsibility. Section 135(2), (4) & (5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rule 8 of the Companies (Corporate Social Responsibility Policy), 2014

(2) The Board’s report under sub-section(3) of section 134 shall disclose the composition of the Corporate Social Responsibility Committee.

(4) The Board of every company referred to in sub-section

(1) shall,-

(a) after taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose Contents of such Policy in its report and also place it on the company’s website, if any, in such manner as may be prescribed; and…

Provided further that if the company fails to spend such amount, the Board shall, in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount.

(1) The Board’s Report of a company covered under these rules pertaining to a financial year commencing on or after the 1st day of April, 2014 shall include an annual report on CSR containing particulars specified in Annexure.

No Specific penal provisions, therefore, Section 450 applies, i.e., fine upto ten thousand rupees
6. Company to have Board of Directors Section 168(10) (10) Subject to the provisions of section 152, an independent director shall hold office for a term up to five consecutive years on the Board of a company, but shall be eligible for reappointment on passing of a special resolution by the company and disclosure of such appointment in the Board’s report. Section 172
7. Resignation of Directors Section 168(1) (1) A director may resign from his office by giving a notice in writing to the company and the Board shall on receipt of such notice take note of the same and the company shall intimate the Registrar in such manner, within such time and in such form as may be prescribed and shall also place the fact of such resignation in the report of directors laid in the immediately following general meeting by the company: Section 172.
8. Audit Committee Section 177(8) & (10) (8) The Board’s report under sub-section(3) of section 134 shall disclose the composition of an Audit Committee and where the Board had not accepted any recommendation of the Audit Committee, the same shall be disclosed in such report along with the reasons therefor.

(10) Provided that the details of establishment of such mechanism shall be disclosed by the company on its website, if any, and In the Board’s report.

Section 178(8). rupees.
9. Nomination and Remuneration Committee and Stakeholders Relationship Committee Section 178(4) Provided that such policy shall be disclosed in the Board’s report. Section 178(8).
10. Powers of Board. Section 179(3)(g) (g) to approve financial statement and
the Board’s report;
No specific penal provisions, therefore, Section 450 applies.
11. Related party transactions Section 188(2) (2) Every contract or arrangement entered into under sub-section (1) shall be referred to in the Board’s report to the shareholders along with the justification for entering into such contract or arrangement. Section 188(5).
12. Overall maximum managerial . Section 197(12) & (14)

Rules 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

(12) Every listed company shall disclose in the Board’s report, the ratio of the remuneration of each director to the median employee’s remuneration and such other details as may be prescribed.

(14) Subject to the provisions of this section, any director who is in receipt of any commission from the company and who is a managing or whole-time director of the company shall not be disqualified from receiving any remuneration or commission from any holding company or subsidiary company of such company subject to its disclosure by the company In the Board’s report.

5. Disclosure in Board’s report.-

(1) Every listed company shall disclose in the Board’s report.-

(i) the ratio of the remuneration of each director to the median remuneration of the employees of the company for the financial year;

(ii) the percentage increase in remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year;

(iii) the percentage increase in the median remuneration of employees in the financial year;

(iv) the number of permanent employees on the rolls of company;

(v) the explanation on the relationship between average increase in remuneration and company performance;

(vi) comparison of the remuneration of the Key Managerial Personnel against the performance of the company; .

(vii) variations in the market capitalization 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;

(viii) 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;

(ix) comparison of the each remuneration of the Key Managerial Personnel against the performance of the company;

(x) the key parameters for any variable component of remuneration availed by the directors;

(xi) 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

(xii) affirmation that the remuneration is as per the remuneration policy of the company.

(2) The board’s report shall include a statement showing the name of every employee of the company, who-

(i)  if employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than sixty lakh rupees;

(ii)  if employed for a part of the financial year, was in receipt of remuneration for any part of that year, at a rate which, in the aggregate, was not less than five lakh rupees per month;

(iii) if employed throughout the financial year or part thereof, was in receipt of remuneration in that year which, in the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the managing director or whole-time director or manager and holds by himself or along with his spouse and dependent children, not less than two percent of the equity shares of the company.

(3) The statement referred to in sub-rule (2) shall also indicate –

(i) designation of the employee;

(ii) remuneration received;

(iii) nature of employment, whether contractual or otherwise;

(iv) qualifications and  experience of the employee;

(v) date of commencement of
employment;

(vi)  the age of such employee;

(vii) the last employment held
by such employee before
joining the company;

(viii) the percentage of equity
shares held by the
employee in the company
within the meaning of
clause (iii) of sub-rule(2)
above; and

(ix) whether any such employee is a relative of any director or manager of the company and if so, name of such director or manager:

Provided that the particulars of employees posted and working in a country outside India, not being directors or their relatives, drawing more than sixty lakh rupees per financial year or five lakh rupees per month, as the case may be, as may be decided by the Board, shall not be circulated to the members in the Board’s report, but such

particulars shall be filed with the Registrar of Companies while filing the financial statement and Board Reports:

Provided further that such particulars shall be made available to any shareholder on a specific request made by him in writing before the date of such Annual General Meeting wherein financial statements for the relevant financial year are proposed to be adopted by shareholders and such particulars shall be made available by the company within three days from the date of receipt of such request from shareholders:

Provided also that in case of request received even after the date of completion of Annual General Meeting, such particulars shall be made available to the shareholders within seven days from the date of receipt of such request.

Section 197(5)
13. Secretarial Audit f Section 204(1) & (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rule 9 of the Companies (appointment and Remuneration Personnel) Rules, 2014.

(1) Every listed company and a company belonging to other class of companies as may be prescribed shall annex with its Board’s report made in terms of sub-section (3) of section 134, a secretarial audit report, given by a company secretary in practice, in such form[MR-3] as may be prescribed.

(3) The Board of Directors, in their report made in terms of sub-section(3) of section 134, shall explain in full any qualification or observation or other remarks made by the company secretary in practice in his report under sub-section (1).

9. Secretarial Audit Report.-

(1) For the purposes of sub-section (1) of section 204, the other class of companies shall be as under-

a) every public company having a paid-up share capital of fifty crore rupees or more; or

(b) every public company having a turnover of two hundred fifty crore rupees or more.

(2) The format of the Secretarial Audit Report shall be in Form No. MR. 3.

Section 204(4)
14. Merger and amalgamation Section 232(2)(c) (2) (c) a report adopted by the directors of the merging companies explaining effect of compromise on each class of shareholders, key managerial personnel, promoters and non-promoter shareholders laying out in particular the share exchange ratio, specifying any special valuation difficulties; Section 232(8)
15. Schedule V Schedule V  

The following disclosures shall be mentioned in the Board of Director’s report under the heading “Corporate Governance”, if any, attached to the financial statement:-

i) all elements of remuneration package such as salary, benefits, bonuses, stock options, pension, etc., of all the directors;

(ii) details of fixed component and
performance linked incentives along
with the performance criteria;

(iii) service contracts, notice period,
severance fees;

(iv) stock option details, if any, and
whether the same has been issued
at a discount as well as the period
over which accrued and over which
exercisable.

Section 97(15)
16. Rule 4(4) of the Companies (Share Capital and Debentures) Rules, 2014. Equity shares with differential rights (4) The Board of Directors shall, Inter alia, disclose in the Board’s Report for the financial year in which the issue of equity shares with differential rights was completed the following details, namely:-

(a) the total number of shares allotted with differential rights;

(b) the details of the differential rights relating to voting rights and dividends;

(c) the percentage of the shares with differential rights to the total post issue equity share capital with differential rights issued at any point of time and percentage of voting rights which the equity share capital with differential voting right shall carry to the total voting right of the aggregate equity share capital;

(d) the price at which such shares have been issued;

(e) the particulars of promoters, directors or key managerial personnel to whom such shares are issued;

(f)   the change in control, if any, in the company consequent to the issue of equity shares with differential voting rights;

(g) the diluted Earning Per Share pursuant to the issue of each class of shares, calculated in accordance with the applicable accounting standards;

(h) the pre and post issue shareholding pattern along with voting rights in the format specified under sub-rule (2) of rule 4.

No specific penal provisions, therefore Section 450 applies.
17. Rule 8(13) of the Companies (Share Capital and Debenture) Rules, 2014 Sweat equity shares (13) The Board of Directors shall, inter alia, disclose in the Directors’ Report for the year in which such shares are issued, the following details of issue of sweat equity shares namely:-

(a) the class of director or employee to whom sweat equity shares were issued;

(b) the class of shares issue das Sweat Equity Shares;

(c) the number of sweat equity shares issued to the directors, key managerial personnel or other employees showing separately the number of such shares issued to them, if any, for consideration other than cash and the individual names of allottees holding one percent or more of the issued share capital;

(d) the reasons or justification for the issue;

(e) the principal terms and conditions for issue of sweat equity shares, including pricing formula;

(f) the total number of shares arising as a result of issue of sweat equity shares;

(g) the percentage of the sweat equity shares of the total post issued and paid up share capital;

(h) the consideration (including consideration other than cash) received or benefit accrued to the company from the issue of sweat equity shares;

(i) the diluted Earnings Per Share (EPS) pursuant to issuance of sweat equity shares.

No specific penalty
18. Rule 12(9) of the Companies (share Capital and Debenture) Rules, 2014 ESOP (9) The Board of directors, shall, inter alia, disclose in the Directors’ Report for the year, the following details of the Employees Stock Option Scheme:

(a) options granted;

(b) options vested;

(c) options exercised;

(d) the total number of shares arising as a result of exercise of option;

(e) options lapsed;

(f) the exercise price;

(g) variation of terms of options;

(h) money realized by exercise of options;

(i) total number of options in force;

(j) employee wise details of options granted to;-

(i) key managerial personnel;

(ii) any other employee who receives a grant of options in any one year of option amounting to five percent or more of options granted during that year.

(iii) identified employees who were granted option, during any one year, equal to or exceeding one percent of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant;

No specific penal provisions, therefore, Section 450 applies, i.e., fine upto ten thousand rupees.
19. Rule 16(4) of the Companies (Share Capital and Debentures) Rules, 2014 Provision of money by company for purchase of its own shares by employees or by trustees for the benefit of employees  (a) the names of the employees who have not exercised the voting rights directly;

(b) the reasons for not voting directly;

(c) the name of the person who is exercising such voting rights;

(d) the number of shares held by or in favour of, such employees and the percentage of such shares to the total paid up share capital of the company;

(e) the date of the general meeting in which such voting power was exercised;

(f) the resolutions on which votes have been cast by persons holding such voting power;

(g) the percentage of such voting power to the total voting power on each resolution;

(h) whether the votes were cast in favour of or against the resolution.

No specific penalty.
23. Rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014 Matters not to be dealt with in a meeting through video conferencing or other audio visual means (1) The following matters shall not be dealt with in any meeting held through video conferencing or other audio visual means-

(i) the approval of the annual financial statements;

(ii) the approval of the Board’s report;

(iii)…

No specific penal provisions.

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Qualification: CS
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Location: navi mumbai, Maharashtra, India
Member Since: 26 May 2021 | Total Posts: 2
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