The Companies Act, 2013, requires the Board of Directors of every company to attach its report to the financial statements to be laid before the members at the annual general meeting

Director Report is very crucial document of a Company. It is is an important means of communication by the Board of Directors of a company with its stakeholders

Section 134 of Companies Act, 2013 mandates certain disclosures to be made in the Board’s Report, additionally, a 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

As per Act this is responsibility of Directors of the Company to Prepare Director Report and become part of e-form AOC-4 as annexure. However, the people who are certifying the e-form AOC-4 have to check whether all the information mentioned in Directors Report are correct or not?

Professional has to check the each and every information mentioned in the Directors’ Report. Therefore, a question arise how to check the information mentioned in Directors Report.

The main thrust of this editorial is “How to Prepare Director Report?” “What are the documents / 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, 2016 i. Check from the Annual Return/Directors’ Report of previous financial year.

ii. Check the incorporation date and calculate to verify.

II. FINANCIAL HIGHLIGHTS:

Language: How To Fill the Figures
The Company’s financial performance for the year ended March 31, _____: Check the Statement of Profit & Loss Account for the year ended March 31, _____. You will find required figures on the FACE of Statement of Profit & Loss Account.
Particulars Year ended

31st March ____

Year ended 31st March ____
Turnover
Profit Before Tax
Less: Current Tax
Deferred Tax
Income Tax earlier years
Profit For The Year
Add: Balance in Profit and Loss Account
Sub Total
 
Less: Appropriation
 
Closing Balance    
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

III. STATE OF AFFAIRS: Section 134(3)(i)

Purpose Language: How to Check the Affairs of the Company
134(3)(I)

 

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, ________.

 

 

  • Company can find the Affairs of the Company from the Notes to Accounts (attached as part of Balance Sheet).
  • Company can find if there is any Change in the affairs of the Company by comparing the Notes to Account of Last financial year TO current financial year.

The state of affairs of the company shall, inter alia, include the following information –

  • segment-wise position of business and its operations;
  • change in status of the company;
  • key business developments;
  • change in the financial year;
  • capital expenditure programmes;
  • details and status of acquisition, merger, expansion,
  • modernization and diversification

IV. DIVIDEND: Section 134(3)(k)

Purpose Language: From where to Check
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, 2016.

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.

V. DETAILS OF SUBSIDIARY, JOINT VENTURE AND ASSOCIATE COMPANIES:

Purpose Language: How to find out Subsidiary, JV and Associates
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:

S.N Name of the Company Subsidiary /JV /Associate Become/ Ceased Effective Date
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.

VI. INTERNAL FINANCIAL CONTROL:

Purpose 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.

VII. PARTICULAR OF LOAN AND INVESTMENT:

Purpose 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). Check the Loan and Investment from the Assets side of Balance sheet and relevant Notes.

Check the Guarantee from the Contingent Liabilities and schedule. Also check from the Notes to Financial Accounts.

VIII. CHANGE IN NATURE OF BUSINESS, IF ANY:

Purpose Language: How to check?
Rules 8(5)(i) There is no change in the business of Company and its Subsidiary Company.

The Board may provide details relating to change in the business carried on by the company or its subsidiaries. This shall also contain details pertaining to classes of business in which the company has an interest.

Check the Followings:

– Main object of the Company

– Notes of the Financial Statement

IX. AMOUNTS TRANSFERRED TO RESERVES, IF ANY:

Provision 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, 2016.

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.

X. CHANGES IN SHARE CAPITAL, IF ANY:

Language: How to check?
During the Financial Year 2014-15, the share capital of the Company has been increased from ____ to ____, pursuant to allotment of____ equity shares of Rs ____ each under Private Placement / Preferential allotment / Rights issue / Employee Stock Option Scheme of the Company Check the Followings:

– Whether any PAS-3 filed

– Check from the Minutes of the Meeting

– Difference b/w amount of Capital in the Balance sheet.

XI. WEB LINK OF ANNUAL RETURN:

Provisions: Language: How to check?
Section 134(3)(a)

the WEB link where annual return 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.

  • First Check whether Company having any website.
  • If Company having website check whether given link is working or not.

XII. NUMBER OF BOARD MEETING:

Purpose Language: How to check?
Section 134(3)(a)

number of meetings of the Board; held during the financial year 2014-15

During the Financial Year 2018-19, [**] meetings of the Board of Directors of the company were held. [Preferable to state the dates of meetings] Check the Minutes of the Board Meeting.

Get the Index of Board Meetings from the Company.

XIII. PARTICULARS OF CONTRACT  AND ARRANGMENT WITH RELATED PARTIES:

Provision: 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 2014-15 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, 2016 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)

XIV. EXPLANATION TO AUDITOR’S REMARKS:

Provision: Language: How to check?
Section 134(3)(f)

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. Check the Auditor Report

XV. MATERIAL CHANGES AFFECTING THE FINANCIAL POSITION OF THE COMPANY:

Provision: Language: How to check?
134(3)(L)

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. Check the following

– Trial Balance

– Financial Position

– Market Condition

XVI. CONSERVATION OF ENERGY, TECHNOLOGY, ABSORPTION, FOREIGN EXCHANGE  EARNINGS AND OUTGO:

Provision: 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.

XVII. RISK MANAGEMENT POLICY:

Provision: 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. DETAILS OF DIRECTORS AND KEY MANAGERIAL PERSONNEL:

Provision: Language: How to check?
Rule 8(5)(iii)

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

– Comparison from last annual return

– Register of Director

XIX. DETAILS OF SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORSOR COURTS OR TRIBUNAL:

Provision: Language: How to check?
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.

XX. VOLUNTARY REVISION OF FINANCIAL STATEMENTS OR BOARD’S REPORT:

Provision: Language: How to check?
This section is notified w.e.f. 01.06.2016    

XXI. DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013

Provision: 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.

XXII. CONSOLIDATED FINANCIAL STATEMENTS:

Provision: Language: How to check?
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
Company doesn’t have any subsidiaries so there is no need to prepare consolidated financial statement for the F. Y. 2014-15.

OR

Consolidated financial statement is prepared and attached with financials.

Check the followings:

– Financial Statement

– Whether company have subsidiary or not

 

(Author – CS DiveshGoyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com).

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