Summary: The preparation of a Directors’ Report is a mandatory requirement under Section 134 of the Companies Act, 2013, which must be attached to the financial statements presented at the annual general meeting. The report must include specific disclosures such as the number of board meetings held, explanations to auditor remarks, the state of the company’s affairs, material changes affecting financial position, and details of loans, investments, and related party transactions. For listed companies, additional disclosures per the SEBI (LODR) Regulations, 2015, are also required. It is the responsibility of the directors to ensure the accuracy of the report, and the professionals certifying e-Form AOC-4 must verify the correctness of the information provided. The report must also include compliance with secretarial standards, declarations from independent directors, and details of significant orders passed by regulators. Furthermore, the report should address energy conservation, technology absorption, risk management policies, and any dividends declared or amounts transferred to reserves. Ensuring that these elements are accurately documented is crucial for maintaining regulatory compliance and providing stakeholders with a clear view of the company’s financial and operational status.
Section 134 of the Companies Act, 2013 mandates certain disclosures to be made in the Board’s Report; additionally, a listed company is required to comply with disclosure requirements stated under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
As per the Act, it is the responsibility of the directors of the Company to Prepare a director report and make it part of the e-form AOC-4 as an annexure. However, the people who are certifying the e-form AOC-4 must check whether all the information mentioned in the directors’ report is correct or not.
A professional must check every piece of information mentioned in the Directors’ Report. Therefore, a question arises about how to check the information mentioned in the directors’ report.
The main thrust of this editorial is “How to Prepare a Director’s Report?” “What are the documents or information a person has to check while preparing a Director Report?
I. ADDRESS TO MEMBERS:
| Language: | How To Check the Financial Year |
| Your directors have pleasure in presenting the (No. of Financial Years) Annual Report together with the Audited Statement of Accounts of your Company for the financial year ended March 31, 2024. | i. Check from the Annual Return/ Directors’ Report of previous financial year.
ii. Check the incorporation date and calculate to verify. |
II. WEB LINK OF ANNUAL RETURN:
| Provisions: | Language: | How to check? |
| Section 134(3)(a) and Rule 8A(1)(a) the WEB link where annual return i.e. MGT-7 of FY 2023-24 of company shall be published. | 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. Therefore, no need to of publication of Annual Return. |
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III. NUMBER OF BOARD MEETING:
| Provisions: | Language: | How to check? |
| Section 134(3)(a) and Rule 8A(1)(b) Number of Meetings of the Board; held during the financial year 2023-24 | During the Financial Year 2023-24, [**] meetings of the Board of Directors of the company were held. [Preferable to state the dates of meetings] |
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IV. EXPLANATION TO AUDITOR’S REMARKS:
| Provisions: | Language: | How to check? |
| Section 134(3)(f) and Rule 8A(1)(e) 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. | 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. |
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V. STATE OF AFFAIRS:
| Provisions: | Language: | How to check? |
| 134(3)(I) and Rule 8A(1)(f)
The State of The Company’s Affairs; |
The Company is engaged in the business of _________________. There has been no change in the business of the Company during the financial year ended 31st March, ________.
Or there is _________________________ Changes in the business of the Company during the financial year ended 31st March, ________.
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VI. FINANCIAL HIGHLIGHTS:
| Language: | How To Fill the Figures | |||||||||||||||||||||||||||||||||||||||
| The Company’s financial performance for the year ended March 31, 2024:
Sec 134 (3)(q) r/w Rule 8(5) (i)&(ii)of and Rule 8A(g) |
Check the Statement of Profit & Loss Account for the year ended March 31, 2024. You will find required figures on the FACE of Statement of Profit & Loss Account.
Company can mention round off or actual figure as per their convenience. |
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Turnover: Section- 2(91)- “turnover” means the gross amount of revenue recognized in the profit and loss account from the sale, supply, or distribution of goods or on account of services rendered, or both, by a company during a financial year.]
Deferred tax: As per Accounting Standard (AS) 22, deferred tax is the tax effect of timing differences. |
The financial summary and highlights thereof should be accompanied by the macro-economic, geo-political, financial, industry specific as well as any company specific information affecting the business of the company and the market in which it operates, along with the industry performance vis-à-vis the company’s performance
VII. MATERIAL CHANGES AFFECTING THE FINANCIAL POSITION OF THE COMPANY:
| Provisions: | Language: | How to check? |
| Sec 134 (3) (L) and Rule 8A (1)(h)
Details regarding any material changes / events, if any, occurring after balance sheet date till the date of the report to be stated |
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.
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Check the following
– Trial Balance – Financial Position – Market Condition |
VIII. DETAILS OF DIRECTORS AND KEY MANAGERIAL PERSONNEL:
| Provisions: | Language: | How to check? |
| Sec 134 (3)(q) r/w Rule (8)(5)(iii) of Cos (Accounts) Rules, 2014 & Rule 8A(i)
Details of Directors and KMP appointed or resigned during the year. Details of directors retiring by rotation in the ensuing Annual General Meeting |
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 | Check the Following:
– DIR-12 – MCA Data – Comparison from last annual return – Register of Director |
IX. DETAILS OF SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORSOR COURTS OR TRIBUNAL:
| Provisions: | Language: | How to check? |
| Sec 134 (3)(q) r/w Rule 8 (5) (vii) of Cos (Accounts) Rules and Rule 8A (1)(j)
Details of the order passed by the authorities which impacts the going concern status and company’s operations in future |
No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company’s operations in future | Get the information from the Management of the Company and take MR Letter also. |
X. PARTICULARS OF CONTRACT AND ARRANGMENT WITH RELATED PARTIES:
| Provisions: | Language: | How to check? |
| Section- 134(3)(h)
The Particulars of contracts or arrangement s with related party referred to in Section 188(1) of the Companies Act, 2013 for the Financial Year 2023-24 in the prescribed format AOC-2, has been enclosed with the report. |
All related party transactions that were entered into during the financial year ended 31st March, 2024 were on an arm’s length basis and were in the ordinary course of business. Therefore, the provisions of Section 188 of the Companies Act, 2013 were not attracted. Further, there are no materially significant related party transactions during the year under review made by the Company with Promoters, Directors, or other designated persons which may have a potential conflict with the interest of the Company at large. Details of the transactions are given in AOC-2 | Check the following:
– AS-18 – Minutes of Board Meeting & General Meeting (If any Resolution passed) – RPT Registers – Proof of Arm Length price |
XI. COMPLIANCE OF SECRETARIAL STANDARD:
| Provisions: | Language: | How to check? |
| Secretarial Standard – I
There is requirement to disclose in Directors Report that Company has complied with the provisions of Secretarial Standard. |
The Company has complied with the provisions of Secretarial Standards. | Check the following:
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FOR COMPANIES OTHER THAN OPC AND SMALL:
XII. DECLARATION BY INDEPENDENT DIRECTOR:
| Provisions: | Language: | How to check? |
| Sec 134 (3) (d) r/w Sec 149 (6)A statement of Declaration by Independent Director |
The Company has received the declaration from the Independent Director. | Check the Copy of Declaration given by Independent Director. |
XIII. PARTICULAR OF LOAN AND INVESTMENT:
| Provisions: | Language: | How to check? |
| Section 134(3)(g)
particulars of loans, guarantees or investments under section 186; |
Particular of Loans given, investments made, guarantee given and securities provided along with the purpose for which the loan or guarantee or security is proposed to be utilized by the recipient are provided in the financial statement (please refer Note _______ to the standalone balance sheet). |
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XIV. AMOUNTS TRANSFERRED TO RESERVES, IF ANY:
| Provisions: | Language: | How to check? |
| Section- 134(3)(J)
The Board of the company has decided/ proposed to carry Rs____ to its reserves |
No amount was transferred to the reserves during the financial year ended 31st March, 2024.
The Board of the company has decided/proposed to carry Rs____ to its reserves. |
Check the Assets side of Balance sheet, if there is increase in reserve other than the balance of profit and loss account. |
XV. DIVIDEND:
| Provisions: | Language: | How to check? |
| Section- 134(3)(k)
The amount, if any, which it recommends should be paid by way of dividend; |
In view of the sustained working results during the year under review, the Board of Directors are pleased to recommend a dividend of Rs ___/- per equity share
OR In view of the planned business growth, your Directors deem it proper to preserve the resources of the Company for its activities and therefore, do not propose any dividend for the Financial Year ended March 31, 2024.
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First:
Check the Face of Statement of Profit and Loss Account; Amount of Dividend will be mention there. Second: Check the Copy of General Meeting resolution in case of final Dividend and check the Board Meeting resolution in case of interim Dividend.
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XVI. CONSERVATION OF ENERGY, TECHNOLOGY, ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO:
| Provisions: | Language: | How to check? |
| 134(3)(M)
The details of Energy, Technology, Absorption, Foreign Exchange Earnings and Outgo are as under: a) Conservation of Energy: b) Technology Absorption: c) Foreign Exchange Earnings/ Outgo: |
The particulars as required under the provisions of Section 134(3) (m) of the Companies Act, 2013 in respect of conservation of energy and technology absorption have been furnished considering the nature of activities undertaken by the company during the year under review. | Check the following
– Financial of the Company. – Check with directors. – Take a MR Letter. |
XVII. RISK MANAGEMENT POLICY:
| Provisions: | Language: | How to check? |
| 134(3)(N)
Statement indicating the development and implementation of the risk management policy of the company Moreover, in case the Company has constituted a risk management committee, then the constitution and the terms of reference of the same to be disclosed. |
The Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. | Check the policy prepared by the Company. If not prepare get it prepare. |
XVIII. DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013
| Provisions: | Language: | How to check? |
| Section 22 of Sexual Harassment of Women at Workplace.
The employer shall include in its report the number of cases filed, if any, and their disposal under this Act in the annual report of his organization or where no such report is required to be prepared, intimate such number of cases, if any, to the District Officer. |
The Company is committed to provide a safe and conducive work environment to its employees. During the year under review.
Your Directors further state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 |
Get the information from the Management of the Company and take one MR Letter. |
XIX. DETAILS OF SUBSIDIARY, JOINT VENTURE AND ASSOCIATE COMPANIES:
| Provisions: | Language: | How to check? | ||||||||||
| Rule 8(5)(iv)
The name of companies which have become or ceased to be its Subsidiaries, joint ventures or associate companies during the year; |
The Company does not have any Subsidiary, Joint Venture or Associate Company.
OR The names of companies which have become or ceased to be the Company’s subsidiaries, joint ventures or associate companies during the year under review is provided below:
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First Check:
Check the Investment of the Company from Non Current Investment in the Balance Sheet, check the relevant Note and analyze about Subsidiary, Associate and Joint Venture as per definition given u/s 2(87) and 2(6) of the Companies Act, 2013.
Second: Check from the (Accounting Standard) AS-18. |
XX. INTERNAL FINANCIAL CONTROL:
| Provisions: | Language: | How to check? |
| Rule 8(5)(viii)
ICAI guidance note on adequacy of internal financial controls with reference to financial statements can be referred for this Purpose. |
The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weakness in the design or operation was observed | Most listed companies are reading requirements related to IFC as those referring to IFC for financial reporting along with limited focus on the operational controls aspect.
Auditors are required to certify that the IFC in relation to financial statement are designed and operate effectively. |
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Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at [email protected]).
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