prpri SS-4–Secretarial Standard on Report of Board of Directors SS-4–Secretarial Standard on Report of Board of Directors

COMPANY  SPECIFIC  DISCLOSURES  IN  A  DIRECTOR’S  REPORT

1. Financial summary and highlights-

The financial summary and highlights 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 with regard to the company’s performance.

In case of a listed company which has listed its specified securities, the business highlights should also be reported, to the extent possible, as per the segment reporting requirements. In case of an unlisted company, the financial summary in the Report may be disclosed segment wise.

2. Amount, if any, which the Board proposes to carry to any reserves

The amount proposed to be transferred to any reserves of the company. If no amount is proposed to be transferred to reserves, following statement shall be included in the Report:

“The Board of Directors of your Company, has decided not to transfer any amount to the Reserves for the year under review.”

In case of declaration of dividend, there is no mandate in the Act for the transfer of any amount out of the profits for the year to any reserves. The transfer of profits to reserves is left at the discretion of the Board of Directors. However, disclosure with respect to application of discretion by the Board is considered as a good practice from governance point of view.

3. Dividend

  • The amount of dividend per share and the percentage thereof which the Board recommends for the year and the dividend distribution tax thereon. In case no dividend has been recommended by the Board, a statement to that effect shall be made. The Board may recommend the dividend to be declared by the Members at the Annual General Meeting in accordance with the dividend distribution policy of the company, if any. Unless the Dividend has been recommended by the Board, Members in the AGM cannot on their own declare any Dividend. In addition to the requirements of the Act, Secretarial Standard requires a company to disclose the percentage of the dividend on a per share basis and the amount of applicable tax payable on distribution of such dividend. For example, a dividend of Rs. 7.50 per Equity Share of the face value of Rs. 5 each would indicate that dividend @150% has been recommended by the Board.
  • The amount and the percentage of interim dividend declared, if any, during the year and the dividend distribution tax thereon. Once an Interim Dividend is declared by the Board, noting, approval, confirmation or ratification at a general meeting is not required. However, the Report should mention the amount of Interim Dividend declared and paid by the company during the financial year. The amount of tax paid on the distribution of dividend should also be disclosed in the Report. A statement on the declaration of interim dividend by the Board may be made as under: “The Board of Directors of your company after considering the company’s dividend distribution policy has declared and paid an interim dividend of Rs…..per equity shares of the face value of Rs. ______ each (@____%) during the year. An amount of Rs…… was paid as dividend distribution tax on the interim dividend declared by the Board.”
  • The cumulative amount of dividend including the Interim Dividend declared by the Board and the Final Dividend as recommended by the Board should also be disclosed in the Report. The total amount of dividend for the year may be disclosed as under: “Cumulatively, the Board of Directors of your company has declared / recommended a total Dividend of Rs…..per equity shares (@____%) for the year under review”
  • A statement on compliance with the Dividend Distribution Policy, if applicable, and the reasons for deviation and the rationale for additional parameters considered, if any.

Regulation 43A of the LODR makes it mandatory for top 500 companies to formulate a “Dividend distribution policy”.

The listed companies other than the top 500 listed entities based on market capitalisation may disclose their dividend distribution policies on a voluntary basis in their annual reports and on their websites.

  • The Standard also requires that if any dividend is declared and paid out of free reserves available for this purpose, the same should be disclosed in the Report.

4. Major events occurred during the year

  • State of the company’s affairs
  • Change in the nature of business
  • Material changes and commitments, if any, affecting the financial position of the company, having occurred since the end of the Year and till the date of the Report

5. Details of revision of financial statement or the Report-

In case the company has revised its financial statement or the Report in respect of any of the 3 preceding financial years either voluntarily or pursuant to the order of a judicial authority, the detailed reasons for such revision shall be disclosed in the Report of the year as well as in the Report of the relevant financial year in which such revision is made.

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