In a Company Shareholders are the ultimate owners of the company, as they hold shares representing ownership interests and the board of directors is a group of individuals elected by shareholders to oversee the management of the company. The relationship between the board of directors and shareholders is crucial for effective corporate governance. The board acts as a fiduciary for shareholders, ensuring that their interests are represented and protected in company decisions and operations. Effective communication and transparency between the board and shareholders are essential for maintaining trust and accountability within the company.
The Companies Act, 2013 requires the Board of Directors of every company to present annual accounts to the shareholders along with its report, known as the “Board’s Report”. Disclosures in the Board’s Report are specified under various sections of the Act
The Board’s Report is the most important means of communication by the Board of Directors of a company with its stakeholders. The Board’s Report should, so far as is material for the appreciation of the state of the company’s affairs by its members, deal with any changes which have occurred during the financial year. The Board’s Report should cover wide spectrum of information that stakeholder’s need, in addition to financial data, to understand fully the prospects of the company’s business and the quality of the management.
Mandatory Disclosures in the Board’s Report:
| Disclosures requirements under Section 134 (3) of Companies Act, 2013. | (a) the web address, if any, where annual return referred to in sub-section (3) of section 92 has been placed
(b) number of meetings of the Board; (c) Directors’ Responsibility Statement; (ca) 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;] (d) a statement on declaration given by independent Directors under sub-section (6) of section 149 (e) in case of a company covered under sub-section (1) of section 178, company’s policy on Directors’ appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under sub-section (3) of section 178 (f) explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made— (i) by the auditor in his report; and (ii) by the company secretary in practice in his secretarial audit report; (g) particulars of loans, guarantees or investments under section 186; (h) particulars of contracts or arrangements with related parties referred to in sub-section (1) of section 188 in the prescribed form; (i) the state of the company’s affairs; (j) the amounts, if any, which it proposes to carry to any reserves; (k) the amount, if any, which it recommends should be paid by way of dividend; (l) 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 of the report; (m) the conservation of energy, technology absorption, foreign exchange earnings and outgo, in such manner as may be prescribed; (n) 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; (o) the details about the policy developed and implemented by the company on corporate social responsibility initiatives taken during the year; (p) in case of a listed company and every other public company having such paid-up share capital as may be prescribed, a statement indicating the manner in which formal 8[annual evaluation of the performance of the Board, its Committees and of individual Directors has been made; |
| Disclosure requirements under Section 131(1) of the Companies Act, 2013: | Provided also that the detailed reasons for revision of such financial statement or report shall also be disclosed in the Board’s report in the relevant financial year in which such revision is being made. |
| Disclosure requirements under Section 168 (1) of the Companies Act, 2013: | (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: |
| Disclosure requirements under Section 149 (10) of the Companies Act, 2013: | (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 |
| Disclosure requirements under Section 177 (8) & (10) of the Companies Act, 2013: | (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) The vigil mechanism under sub-section (9) shall provide for adequate safeguards against victimisation of persons who use such mechanism and make provision for direct access to the chairperson of the Audit Committee in appropriate or exceptional cases:
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. |
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| Disclosure requirements under Section 178 (4) of the Companies Act, 2013: | Provided that such policy (Policies by the nomination and remuneration committee) shall be placed on the website of the company, if any, and the salient features of the policy and changes therein, if any, along with the web address of the policy, if any, shall be disclosed in the Board’s report. |
| Disclosure requirements under Section 178 (4) of the Companies Act, 2013: | (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. |
| Disclosure requirements under Section 197(12) and (14) of Companies Act, 2013 | (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. | |
| Disclosure requirements under Section 204 (3) of Companies Act, 2013 | (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). |
| Disclosures requirements under Rule 8 of The Companies (Accounts) Rules, 2014, | (1) The Board’s Report shall be prepared based on the stand alone financial statements of the company and shall report on the highlights of performance of subsidiaries, associates and joint venture companies and their contribution to the overall performance of the company during the period under report .
(2) The Report of the Board 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. (3) The report of the Board shall contain the following information and details, namely:- (A) Conservation of energy- (i) the steps taken or impact on conservation of energy; (ii) the steps taken by the company for utilising alternate sources of energy; (iii) the capital investment on energy conservation equipments; (B) Technology absorption- (i) the efforts made towards technology absorption; (ii) the benefits derived like product improvement, cost reduction, product development or import substitution; (iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year)- (a) the details of technology imported; (b) the year of import; (c) whether the technology been fully absorbed; (d) if not fully absorbed, areas where absorption has not taken place, and the reasons thereof; and (iv) the expenditure incurred on Research and Development. (C) Foreign exchange earnings and Outgo- (4) Every listed company and every other public company having a paid up share capital of twenty five crore rupees or more calculated at the end of the preceding financial year shall include, in the report by its Board of directors, 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 and individual directors. (5) In addition to the information and details specified in sub-rule (4), the report of the Board shall also contain – (i) the financial summary or highlights; (ii) the change in the nature of business, if any; (iii) the details of directors or key managerial personnel who were appointed or have resigned during the year; (iiia) a statement regarding opinion of the Board with regard to integrity, expertise and experience (including the proficiency) of the independent directors appointed during the year”. (iv) the names of companies which have become or ceased to be its Subsidiaries, joint ventures or associate companies during the year; (v) the details relating to deposits, covered under Chapter V of the Act,- (a) accepted during the year; (b) remained unpaid or unclaimed as at the end of the year; (c) 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- (i) at the beginning of the year; (ii) maximum during the year; (iii) at the end of the year; (vi) the details of deposits which are not in compliance with the requirements of Chapter V of the Act; (vii) 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; (viii) the details in respect of adequacy of internal financial controls with reference to the Financial Statements. (ix) a disclosure, as to whether maintenance of cost records as specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013, is required by the Company and accordingly such accounts and records are made and maintained, (x) a statement that the company has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. (xi) the details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year along with their status as at the end of the financial year. (xii) the details of difference between amount of the valuation done at the time of one time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof.] |
| Disclosures requirements under Rule 4 (4) of the Companies (Share Capital and Debentures) Rules, 2014 | (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. |
| Disclosures requirements under Rule 8 (13) of the Companies (Share Capital and Debentures) Rules, 2014 | (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 issued as 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. |
| Disclosures requirements under Rule 12 (09) of the Companies (Share Capital and Debentures) Rules, 2014 | (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; |
| Disclosures requirements under Rule 16 (4) of the Companies (Share Capital and Debentures) Rules, 2014 | (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. |
| Disclosure requirements Rule 5 of Companies (Share Capital and Debentures) Rules, 2014 | (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; 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; (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 names of the top ten employees in terms of remuneration drawn and the name of every employee, who- (i) if employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than one crore and two 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 eight lakh and fifty thousand 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: |
| Disclosure requirements under Rule 8 of Companies (Corporate Social Responsibility) Rules, 2014 | (1)The Board’s Report of a company covered under these rules pertaining to any financial year shall include an annual report on CSR containing particulars specified in Annexure I or Annexure II, as applicable. |
| Disclosures Requirements Under SEBI (Listing Obligations Disclosure Requirements), 2015 | |
| Disclosure requirements under regulation 24A(1) SEBI (Listing Obligations Disclosure Requirements), 2015 | 24A. (1) Every listed entity and its material unlisted subsidiaries incorporated in India shall undertake secretarial audit and shall annex a secretarial audit report given by a company secretary in practice, in such form as specified, with the annual report of the listed entity |
| Disclosure requirements under regulation 32(4) SEBI (Listing Obligations Disclosure Requirements), 2015 | The listed entity shall furnish an explanation for the variation specified in sub-regulation (1), in the directors’ report in the annual report. |
| Disclosure requirements under regulation 32(7A) SEBI (Listing Obligations Disclosure Requirements), 2015 | (7A) Where an entity has raised funds through preferential allotment or qualified institutions placement, the listed entity shall disclose every year, the utilization of such funds during that year in its Annual Report until such funds are fully utilized.] |
| Disclosure requirements under regulation 34(2) SEBI (Listing Obligations Disclosure Requirements), 2015 | (2) The annual report shall contain the following:
a) audited financial statements i.e. balance sheets, profit and loss accounts etc and Statement on Impact of Audit Qualifications as stipulated in regulation 33(3)(d), if applicable b) consolidated financial statements audited by its statutory auditors; c) cash flow statement presented only under the indirect method as prescribed in Accounting Standard-3 or Indian Accounting Standard 7, as applicable, specified in Section 133 of the Companies Act, 2013 read with relevant rules framed thereunder or as specified by the Institute of Chartered Accountants of India, whichever is applicable; d) directors report; e) management discussion and analysis report – either as a part of directors report or addition thereto; f) for the top one thousand listed entities based on market capitalization, a Business Responsibility and Sustainability Report on the environmental, social and governance disclosures, in the format as may be specified by the Board from time to time: Provided that the assurance of the Business Responsibility and Sustainability Report Core shall be obtained, with effect from and in the manner as may be specified by the Board from time to time: (3) The annual report shall contain any other disclosures specified in Companies Act, 2013 along with other requirements as specified in Schedule V of these regulations. |
| Disclosure requirements under regulation 43A SEBI (Listing Obligations Disclosure Requirements), 2015 | The top 1000 listed entities based on market capitalization (calculated as on March 31 of every financial year) shall formulate a dividend distribution policy which shall be disclosed on the website of the listed entity and a web-link shall also be provided in their annual reports. |
| Disclosure requirements under regulation 53SEBI (Listing Obligations Disclosure Requirements), 2015
(Obligations Of Listed Entity Which Has Listed Its Non-Convertible Securities) |
53. (1)]The annual report of the listed entity shall contain disclosures as specified in Companies Act, 2013 along with the following:
(a) audited financial statements i.e. balance sheets, profit and loss accounts etc [, and Statement on Impact of Audit Qualifications as stipulated in regulation 52(3)(a), if applicable;]321 (b) cash flow statement presented only under the indirect method as prescribed in Accounting Standard-3/ Indian Accounting Standard 7, mandated under Section 133 of the Companies Act, 2013 read with relevant rules framed thereunder or by the Institute of Chartered Accountants of India, whichever is applicable; (c) auditors report; (d) directors report; (e) name of the debenture trustees with full contact details ; (f) related party disclosures as specified in Para A of Schedule V. |
| Disclosure requirements under regulation 53 SEBI (Listing Obligations Disclosure Requirements), 2015
(Obligations Of Listed Entity Which Has Listed Its Indian Depository Receipts |
(2) The annual report shall contain the following:
(a) Report of board of directors; (b) Balance Sheet; (c) Profit and Loss Account; (d) Auditors Report; (e) All periodical and special reports( if applicable); (f) Any such other report which is required to be sent to security holders annually. (3) The listed entity shall comply with the requirements with respect to preparation and disclosures in financial results in annual report as specified in Part B of Schedule IV. |
| Disclosure requirements under regulation 77 SEBI (Listing Obligations Disclosure Requirements), 2015
(Obligations Of Listed Entity Which Has Listed Its Indian Depository Receipts |
(1) The listed entity shall ensure that the underlying shares of IDRs shall rank pari-passu with the existing shares of the same class and the fact of having different classes of shares based on different criteria, if any, shall be disclosed by the listed entity in the annual report. |
| Disclosure requirements under SCHEDULE V SEBI (Listing Obligations Disclosure Requirements), 2015 | A. Related Party Disclosure:
B. Management Discussion and Analysis: C. Corporate Governance Report: D. Declaration signed by the chief executive officer stating that the members of board of directors and senior management personnel have affirmed compliance with the code of conduct of board of directors and senior management. E. Compliance certificate from either the auditors or practicing company secretaries regarding compliance of conditions of corporate governance shall be annexed with the directors’ report. F. Disclosures with respect to demat suspense account/ unclaimed suspense account (1) The listed entity shall disclose the following details in its annual report, as long as there are shares in the demat suspense account or unclaimed suspense account, as applicable : (a) aggregate number of shareholders and the outstanding shares in the suspense account lying at the beginning of the year; (b) number of shareholders who approached listed entity for transfer of shares from suspense account during the year; (c) number of shareholders to whom shares were transferred from suspense account during the year; (d) aggregate number of shareholders and the outstanding shares in the suspense account lying at the end of the year; (e) that the voting rights on these shares shall remain frozen till the rightful owner of such shares claims the shares. G. Disclosure of certain types of agreements binding listed entities (1) Information disclosed under clause 5A of paragraph A of Part A of Schedule III of these regulations. |
| SS-4 | Disclose the amounts, if any, which have been transferred during the year to the Investor Education and Protection Fund under sub-section (2) of section 125 of the Act and the IEPF (Accounting, Audit, Transfer and Refund) Rules, 2016. |
| SS-4 | if a company has failed to complete or implement any corporate action within the specified time limit, the Report should disclose the fact and the reasons for such failure. This will also include any cancellation of the corporate action announced by the company. |
Conclusion: The Board’s Report serves as a crucial channel for communication between the board of directors and stakeholders. Mandatory disclosures outlined in various sections of the Companies Act, 2013 ensure transparency, accountability, and adherence to corporate governance standards. Understanding these requirements is essential for fostering trust and confidence among shareholders and stakeholders.
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