Board’s Report under Companies Act 2013

Introduction

The Board’s Report stands as the primary channel of communication between a company’s Board of Directors and its shareholders. It is an exhaustive document that informs shareholders about the company’s performance, key policies, management changes, and future plans. Beyond shareholders, it also serves as a tool for lenders, bankers, government entities, and the public to assess the company’s standing and performance. 

The Companies Act of 2013 prioritizes increased disclosures and transparency. The Board’s Report, a critical document, necessitates a comprehensive understanding of its subject matter for its preparation. According to the Act, the Board of Directors is required to disclose various aspects such as risk management, board evaluation, implementation of Corporate Social Responsibility (CSR), and a declaration by independent directors. Additionally, the Secretarial Audit Report is mandated to be annexed to the Board’s Report.

Every company’s Board of Directors is legally obligated to present financial statements to shareholders along with its report, referred to as the “Board’s report,” at each annual general meeting. The Board’s Report allows shareholders, lenders, bankers, government officials, prospective investors, all stakeholders, and the public to assess the company’s performance, prospects, and level of corporate governance.

Disclosure in the Board’s Report as per Companies Act,2013

Section 134 of the Companies Act, 2013

This Section mandates the Board to prepare its report for shareholders and attach it to the financial statements presented at the annual general meeting, in accordance with Section 129 of the Act. According to Section 134 (3) of the Companies Act,2013, the Board’s Report shall include:

a) The web address, if available, where the annual return has been placed.

b) Number of Board Meetings held during the year.

c)  Director’s Responsibility Statement:

Pursuant to Section 134(5) of the Companies Act, 2013, the board of directors, to the best of their knowledge and ability, confirm that:

1.  in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed and there are no material departures;
2. they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;
3. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities
4. they have prepared the annual accounts on a going-concern basis;
5. In the case of a listed company, the directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and operating effectively.
6. They have devised a proper system to ensure compliance with the provisions of all applicable laws and such systems are adequate and are operating effectively.

c.(a) Details in respect of frauds reported by auditors under sub-section (12) of section 143, other than those reportable to the Central Government, should be included in the Board’s Report. These details should encompass:

• Nature of Fraud with description;
• Approximate Amount involved;
• Parties involved, if remedial action not taken; and
• Remedial action taken.

The auditor is required to report matters related to details of fraud under sub-section (12) of section 143 to the Central Government if they involve an amount of Rupees One Crore or above.

d)  Statement on declaration given by independent director under section 149(6);

e) Companies which are required to constitute a Nomination and Remuneration Committee, the Board’s Report must include the company’s policy on Directors’ appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director, and other matters provided under Section 178 (3);

f) Explanation or comments of the Board on qualifications, reservations made by Auditors

or Secretarial auditors;

g) Particulars of loan, guarantees, or investments under section 186 of the Companies Act,2013;

h) Particulars of contracts and arrangements with related parties

i)  The state of the company’s affairs;

j) The amount proposed to carry to any reserve;

k) The amount proposed to be paid by way of dividend;

l) Conservation of energy, technology absorption, foreign exchange earnings, and outgo;

m) Statement relating to risk management policy;

n) Statement on corporate social responsibility;

o) Every listed company and every other public company with a paid-up share capital of twenty-five crore rupees or more, calculated at the end of the preceding financial year, must include in the report by its Board of directors a statement indicating the manner in which formal annual evaluation has been conducted by the Board of its own performance, that of its committees, and individual directors;

p) such other matters as may be prescribed

Rule 8 (5) of the Companies (Accounts) Rules, 2014

This Rule  prescribes that the Board’s Report shall also include the following matters:

1. The financial summary or highlights;

2. The change in the nature of business, if any;

3. The details of directors or key managerial personnel who were appointed or have resigned during the year;

4. A statement regarding the opinion of the Board with regard to integrity, expertise, and experience (including the proficiency) of the independent directors appointed during the year”

5. The names of companies that have become or ceased to be its Subsidiaries, joint ventures, or associate companies during the year;

6. The details relating to deposits, covered under Chapter V of the Companies Act, 2013-

(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, the number of such cases and the total amount involved–

• at the beginning of the year;
• maximum during the year;
• at the end of the year;

(d) the details of deposits which are not in compliance with the requirements of Chapter V of the Act;

7. The details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and the company’s operations in the future;

8. The details in respect of the adequacy of internal financial controls with reference to the Financial Statements.

9. 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,

10. A statement that the company has complied with provisions relating to the constitution of the Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

11. the details of the application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 during the year along with their status as at the end of the financial year.

12. the details of the difference between the amount of the valuation done at the time of one-time settlement and the valuation done while taking a loan from the Banks or Financial Institutions along with the reasons thereof.

Other Disclosures under the Companies Act,2013

• Independent Director (Section 149 (10) of the Companies Act, 2013

An Independent Director is a person who is not related to the promoters or the other members of the company. As per section 149(10), 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 the passing of a special resolution by the company and disclosure of such appointment in the Board’s report.

• Disqualification of Director under Section 164(2) of the Companies Act, 2013

Disclosure of disqualification of Director on account of non-filing of financial statements or annual returns for a continuous period of 3 years or non-repayment of deposits, non-redemption of debentures, non-payment of declared dividend.

• Changes in the Composition of the Board of Directors

Any appointment, reappointment, or change in the office of a director, including whole-time directors, additional directors, alternate directors, or directors filling a casual vacancy, whether due to rotation, resignation, death, or other reasons, must be disclosed in the Board’s Report. 

Section 168(1) of the Companies Act mandates that the resignation of a director should be recorded in the report of directors presented at the next general meeting of the company following the resignation.

• Redemption of shares/debentures/ Variation in the rights

In accordance with Section 164(2), Section 167(1), and Schedule V Part II of the Companies Act, 2013, certain disclosures are required in the Board’s Report regarding debentures, preference shares, and variations in the rights of shareholders:

1. Redemption of Debentures or Preference Shares: If the redemption of debentures or preference shares was due during the year but did not take place, the Board’s Report must explain the reasons for this non-redemption.
2. Variation in Rights of Shareholders: If there is any variation in the rights of a particular class of shareholders, the Board’s Report should include the following details:

1. Type of shareholder (e.g., ordinary shareholders, preference shareholders)
2. Number of shares held by each shareholder affected by the variation
3. The existing amount per share or the original terms of the shares
4. Type of variation in the rights (e.g., change in dividend rights, voting rights, etc.)
5. Details of the resolution passed by the company approving the variation

• Vigil Mechanism

The company must communicate the existence of this vigil mechanism within the organization and disclose details of its establishment on the company’s website, if available, and in the Board’s Report.

• Audit Committee

The composition of the Audit Committee and any recommendations made by the committee that were not accepted by the Board must be disclosed in the Board’s Report under Section 134(3) of the Companies Act, 2013. If the Board has decided not to accept any recommendation of the Audit Committee, the reasons for such non-acceptance must be clearly stated in the Board’s Report.

• Nomination and Remuneration Committee

Responsibilities of the Nomination and Remuneration Committee:

• Formulating criteria for determining the qualifications, positive attributes, and independence of directors.
• Making recommendations for the appointment of directors, Key Managerial Personnel (KMP), and other employees.
• Developing and recommending policies relating to the remuneration of directors, KMP, and other employees.

Disclosure Requirements in the Board’s Report:

• The Board’s Report must disclose the criteria formulated by the Nomination and Remuneration Committee for determining qualifications, positive attributes, and independence of directors.
• The report should also disclose the policy relating to the remuneration of directors, KMP, and other employees.

• Secretarial Audit for Bigger Companies

According to Section 204(1) of the Companies Act, 2013, every listed company and certain prescribed companies as defined in Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are required to annex a secretarial audit report with the Board’s Report.

This secretarial audit report is prepared by a Company Secretary in practice and must be included in the company’s annual report. The Board of Directors, in its report, must explain any qualifications or remarks made by the Company Secretary in practice in the secretarial audit report.

If there are any observations or non-compliances noted in the report, these should be adequately addressed and disclosed in the Board’s Report.

Abridged Board’s Report for OPC and Small Company

(1.) The Board’s Report of One Person Company and Small Company shall be prepared based on the stand-alone financial statement of the company, which shall be in abridged Form and contain the following:-

1. the web address, if any, where the annual return has been placed;
2. number of meetings of the Board;
3. Directors’ Responsibility Statement ;
4. Details in respect of frauds reported by auditors under Section 143(12) other than those which are reportable to the Central Government;
5. Explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report;
6. the state of the company’s affairs;\
7. the financial summary or highlights;
8. material changes from the date of closure of the financial year in the nature of business and their effect on the financial position of the company;
9. the details of directors who were appointed or have resigned during the year;
10. the details or significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operations in future.

(2.) The Report of the Board shall contain the particulars of contracts or arrangements with related parties referred to in section 188(1) in the Form AOC-2.

Approval and Signing of Board’s Report

The Board’s Report should be considered, approved, and signed at a meeting of the Board duly convened, whether in person or through video conferencing or other audio-visual means.

The Board’s Report and any annexures as per section 134(3) of the Companies Act must be signed by the chairperson of the company if authorized by the Board. If the chairperson is not authorized, the report must be signed by at least two directors, with one of them being a managing director, or by the sole director if there is only one.

Filing of Board’s Report

The Board’s Report must be attached to the financial statements of the company. Copies of the financial statements, along with all required annexed documents, should be filed with the Registrar of Companies within 30 days of the annual general meeting. This filing should be done using Form AOC-4, accompanied by the applicable fees as specified in the Companies (Registration Offices and Fees) Rules, 2014.

Right of Members to receive Copies of Financial Statements, Board’s Report

Section 136 of the Companies Act, 2013 provides that a copy of the financial statements, including consolidated financial statements, if any, auditor’s report, and every other document required by law to be annexed or attached to the financial statements, which are to be laid before a company in its general meeting, shall be sent to 

• every member of the company,
•  to every trustee for the debenture-holder of any debentures issued by the company, 
• and to all persons other than such member or trustee, being the person so entitled, not less than twenty-one days before the date of the meeting

However if the copies of the documents are sent less than twenty-one days before the date of the meeting, they shall, notwithstanding that fact, be deemed to have been duly sent if it is so agreed by members-

(a) holding, if the company has a share capital, the majority in number entitled to vote and who represent not less than ninety-five percent. of such part of the paid-up share capital of the company as gives a right to vote at the meeting; or

(b) having, if the company has no share capital, not less than ninety-five percent. of the total voting power exercisable at the meeting.

In the case of section 8 companies, the said documents shall be sent to the members not less than fourteen clear days before the date of the annual general meeting.

Penalty for Non-Compliance

If a company fails to comply with the provisions of this section, it will be subject to a penalty of three lakh rupees. Additionally, every officer of the company who is responsible for the default will be liable to a penalty of fifty thousand rupees.

Board’s Report Format

BOARD’S REPORT

To,

The Members

Company Name

Your Directors take immense pleasure in presenting the Sixth Annual Report of the Company along with the Boards’ Report and Audited Annual Accounts for the year ended________

1. WEB LINK OF ANNUAL RETURN, IF ANY:

As the company does not have any web address, Annual Return is not placed on the same. 

2. EXTRACT OF ANNUAL RETURN:

The extract of the Annual Return pursuant to the provisions of Section 92 read with Rule 12 of the Companies (Management and Administration) Rules, 2014 is applicable/not applicable due to exemption notification issued by the Ministry of Corporate Affairs dated 05th March 2021.

3. NUMBER OF MEETINGS:

1. BOARD MEETINGS: Twelve meetings of the board were held during the year. The meetings were conducted on _________________________
2. ANNUAL GENERAL MEETINGS: ___________
3. EXTRAORDINARY GENERAL MEETINGS: Three extraordinary general meetings were held during the year. The meetings were conducted on ______________________________

4. DIRECTORS RESPONSIBILITY STATEMENT:

Pursuant to Section 134(5) of the Companies Act, 2013, the board of directors, to the best of their knowledge and ability, confirm that:

1. In the preparation of the Annual Accounts, the applicable Accounting Standards have been followed and there are no material departures;
2. They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and Loss of the Company for that period;
3. They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
4. They have prepared the annual accounts on a going-concern basis;
5. They have devised a proper system to ensure compliance with the provisions of all applicable laws and such systems are adequate and are operating effectively.

5. AUDITORS’ REPORT:

There were no qualifications, reservations or adverse remarks made by the Statutory Auditors and Secretarial Auditor in their report. 

6. DETAILS IN RESPECT OF FRAUD REPORTED BY AUDITORS OTHER THAN THOSE WHICH ARE REPORTABLE TO THE CENTRAL GOVERNMENT

There are no frauds reported by the auditor as per Sec 143(12) of the Companies Act, 2013.

7. STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS AS PER SEC 149 (6) OF COMPANIES ACT, 2013:

 As per Sec 149 (4) of the Companies Act, 2013 appointment of Independent directors is not applicable to the Company. Therefore, no such statement on declaration is given by the Independent directors.

8. COMPANY’S POLICY ON DIRECTORS’ APPOINTMENT AND REMUNERATION AS PER SEC 178 (3) OF COMPANIES ACT, 2013:

As per Sec 178 (1) of the Companies Act, 2013 constitution of the Nomination and Remuneration Committee is not applicable to the Company. Therefore, there is no such formulation of the company’s policy on directors’ appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director, and other matters as provided under Section 178 (3) of the Companies Act, 2013. 

9. ANNUAL EVALUATION OF THE PERFORMANCE OF THE BOARD, ITS COMMITTEES, AND OF INDIVIDUAL DIRECTORS:

This clause is not applicable, as our company is a Private Limited Company.

10. PARTICULARS OF LOANS AND INVESTMENTS BY THE COMPANY:

There are no Loans, guarantees and investments made by the Company under Section 186 to be disclosed in the financial statements.

11. PARTICULARS OF RELATED PARTIES TRANSACTION:

There are no contracts or arrangements made with related parties as defined under Section 188 of the Companies Act, 2013 during the year.

12. FINANCIAL RESULTS:

 Amount in Rupees: –

13. RESERVES:

In view of the profit incurred by the Company, the Company proposes to invest the profits into the business and also does not propose to carry any amount to the Reserves. All the Requirements as laid down in the Companies Act, 2013 and the Rules made thereunder are complied with.

14. DIVIDEND:

The directors do not recommend any dividend for the year ended _______________.

15. EMPLOYEE STOCK OPTION PLAN :

The Company has implemented Employee Stock Option Plan (ESOP) Plan ________vide Ordinary Resolution passed in the extraordinary general meeting dated _________ in the relevant financial year.  

The total pool is __________ options:

16. MATERIAL CHANGES AND COMMITMENTS BETWEEN THE DATE OF THE BALANCE SHEET AND THE DATE OF THE REPORT:

There are no material changes between the date of the balance sheet and the date of this report that would affect the financial position of the company.

17. CONSERVATION OF ENERGY, TECHNOLOGICAL ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO:

(A) Conservation of energy

Considering the nature of business activities carried out by the Company, the Company takes out all efforts to save and conserve energy with regard to conservation of energy as required under Section 134 (3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014.

(B) Technology absorption

It is the policy of the management to keep abreast of technological developments in the field in which the Company is operating and to ensure that the Company uses the most suitable technology.

(C) Foreign exchange earnings and Outgo

Foreign Exchange earned in terms of actual inflows during the year is Nil/- and Foreign Exchange outgo during the year was NIL/-.

18. RISK MANAGEMENT POLICY:

In terms of the requirement of the Act, the Company has developed and implemented the Risk Management Policy and the same is reviewed periodically by the Board of Directors. Salient features of the policy are as under:-

• Your Company is committed to the identification and comprehensive management of risk.
• Risk is the effect of uncertainty on a company’s objectives and is inherent in our business. Risk management allows us to prevent losses or capitalize on opportunities.
• Understanding risk and our appetite for risk will be key considerations in our decision making.
• We aim to achieve a risk management culture through a series of risk management principles.

19. STATE OF COMPANY’S AFFAIRS

The company is taking necessary steps to increase its operations successfully.

20. OTHER MATTERS:

Following are the other matters to be covered pursuant to Section 134(3)(q) of the Companies Act, 2013 read with Rules made thereunder:

21. PARTICULARS OF DIRECTORS AND KMP

There were no changes in the composition of the Board of Directors.

22. DISCLOSURES UNDER SECTION 197 (14) OF THE COMPANIES ACT, 2013

No Managing Director or Whole-Time Director of the Company was in receipt of any remuneration or commission from the Company’s Holding or Subsidiary Companies during the financial year.

23. DISCLOSURES AS PER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has zero tolerance for sexual harassment at the workplace and has adopted a Policy on Prevention, Prohibition and Redressal of Sexual Harassment at the workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under for prevention and redressal of complaints of sexual harassment at workplace.

The Company has not received any complaint on sexual harassment during the financial year_____________.

24. CORPORATE SOCIAL RESPONSIBILITY (CSR) 

Your company, being a Private Limited Company is not required to develop and implement policy on Corporate Social Responsibility initiatives taken during the FY_____________.

25. SECRETARIAL STANDARDS

The Company complies with all applicable mandatory Secretarial standards issued by the Institute of Company Secretaries of India.

26. ACKNOWLEDGEMENT

The directors thank the Company’s employees, customers, and vendors for their continuous support. The directors also thank the government of India and all concerned departments/agencies for their co-operation. The directors appreciate and value the contributions made by every member of the __________________________ family.

FOR AND ON BEHALF OF THE BOARD OF DIRECTORS

FOR ______________________________

____________________                                               _______________________                                                      

DIRECTOR                                                                 DIRECTOR                                                     

DIN:                                                                              DIN:

Date:

Place: 

Conclusion

The Board’s Report is a comprehensive document that includes both financial and non-financial information, intended to inform stakeholders about the company’s overall financial position, operations, and business scope. Directors have the discretion to incorporate additional relevant matters in the Board’s Report beyond legal requirements, providing valuable insights or disclosures.

It is crucial to carefully consider the provisions of the Companies Act, 2013 (the Act) pertaining to the board’s report and ensure that the report is drafted accurately and in compliance.

For further information and assistance in drafting your Board’s Report effectively, please 📞 Contact Us at Registration Arena.