The Directors‘ Report arose out of a general move for greater transparency in corporate governance. It is useful for shareholders to find out issues such as whether the company has good finances, whether the market has potential, and whether the business has the structural capacity to expand into new opportunities.
Section 134 of Companies Act, 2013 mandates certain disclosures to be made in the Board’s Report, and listed company is required to comply with disclosures requirement stated under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Director’s Report is an important document and intended to explain and give overall financial position of the Company and its operations, projects and Business Scope.
1. Address to the Members:
A Formal presentation sentence, such as “Your Directors have pleasure in presenting the (No. of Financial Years) Annual Report of Company and Audited statements of Accounts for the financial year ended March 31…………….. .
2. Financial Performance / Highlights:
|Particulars||Year ended 31st March………..||Year ended 31st March…………|
|Profit Before Tax(PBT)|
|Less: Financial Charges|
|Profit before Depreciation /Amortization (PBDT)|
|Net Profit before Taxation (PBT)|
|Provisions for taxation|
|Profit / Loss after taxation(PAT)|
|Provision for proposed Dividend|
|Transfer to General Reserve|
3. State of Company’s Affairs [Section 134(3)(i)]:
Board briefing about the Company business operation ,highlights, growth, services of the Company, operating profits, performance growths, overview of the business, new projects introduced during the year or any new services undertaken by the company. Details of status of acquisition, mergers, expansion, modernization and diversification, and key business developments.
Besides, it points out the problems faced by the company which has affected the Profits and measures that have been taken to improve the working and reduces the costs.
4. Dividends [Section 134(3)(k):
The amount of Dividend if any, recommended by the board should be paid by way of Dividend, as to the rate under review for the approval of members at the Annual General Meeting AGM.
5. Details of Subsidiary , Joint Venture and Associate Companies (Rule 8(5)(iv):
Details of company that is ceased to its subsidiaries, Joint Venture or associate company.
6. Particulars of Loan and Investments Section 134(3)(g):
Disclosure of all particulars of Loans, guarantees or investments under Section 186.
7. Change in nature of Business, if any:
Details pertaining to change of business of the Company or in the subsidiaries business or in the nature of business carried on by them.
8. Amounts Transferred to reserves, if any:
The board shall states the amount which it proposes to any reserve in the Balance Sheet like debenture redemption reserve in terms of Section 71(13)etc.
9. Changes in share Capital, if any:
Change in total Share capital of the company and any increase during the year under review, pursuant to allotment of equity/preference shares /Right issue/ Private Placement/ preferential allotment/ Employee Stock Option scheme of the Company.
10. Web Link of annual return Section 134(3)(a):
Web address link where annual return of company shall be published.
11. Number of Board Meeting Section 134(3)(b):
The number of Board Meetings held during the year and Committee meeting and details of Board meetings attended by each of the Director should be mentioned.
12. Particulars of Contract and Arrangement with Related Parties Section 188:
Details of all transactions entered along with the justification for entering into such a contract and arrangement by the company during the financial year.
13. Statutory Auditors :
Details about the statutory auditors of the company, any change made during the year, whether existing auditor(s) is/are eligible for reappointment etc. Compliance certificate from either the auditor(s) or practicing company secretaries regarding compliance of conditions of corporate governance shall be annexed with the director’s report.(Para C of Schedule V of Listing Regulations).
14. Explanation to Auditor’s Remarks Section 134(3)(f):
Explanation or comment by the board on every qualification reservation, adverse or disclaimer made by the statutory auditor in his report and /or by the secretarial auditor in the Secretarial Audit Report.
15. Material changes affecting the Financial position of the company Section 134(3)(l):
Details of any material changes / events, if any occurring after balance sheet date till the date of report to be stated.
16. Conservation of energy, technology, absorption, foreign exchange earnings and outgo section 134(3)(m):
The board report shall contain the following details:
17. Conservation of energy:
Impact on the conservation of energy, Company utilization of alternative source, the capital investment on energy conservation types of equipment.
18. Technology absorption:
Research and development expenditure, Advantages of product improvement, cost reduction , product development or impact substitution.
19. Foreign Exchange earnings and outgo:
Terms of actual inflows during the year and the Foreign exchange outgo during the year in terms of actual outflows.
20. Risk Management Policy Section 134(3)(n):
Details of the development and implementation of the risk management policy of the company.
21. Details of Directors and Key Managerial Personnel Rule 8(5)(iii):
Details of Directors and KMP appointed or resigned during the year.
22. Disclosures under Sexual Harassment of women at workplace (Prevention, Prohibition & Redressal) Act, 2013.
Section 22 of Sexual Harassment of Women at Workplace. The employer shall include in its report and report is required to be prepared, intimate such number of cases, if any to the District Officer.
23. Consolidates Financial Statements:
The Board’s Report shall contain a Separate section wherein a report on the performance and financial position of each Subsidiary, Associate, Joint venture companies including in the consolidated financial statement is presented.
24. Director Responsibility Statement Section 134(3)(c):
The Director’s Responsibility Statement referred to in clause (c) of sub section (3) which shall state that-
25. Cost Record:
If provisions of Cost Record applicable on the company have to give details in directors report that Company has maintained proper records and account of the same as required under the act.
If a Company contravenes the provisions of this section shall be punishable with fine which shall not be less than Fifty thousand rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years or fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or both.