Matters to be Included in Board’s Report under Companies Act, 2013

The Board’s report is a message from the company’s Board of Directors to its shareholders. The Board of Directors generally communicates about the company’s financial performance throughout the reporting period, as well as the influence of economic policies on the company and industry. In general, the directors convey their viewpoint and goals for the coming fiscal year in the report. Section 134 of the Companies Act, 2013 (“the Act”) addresses “Financial Statements and Board’s Report, and so on.” The regulations require company to make certain minimal disclosures in the Board’s report. In this article we’ll discuss Matters to be Included in Board’s Report.

But before we shall discuss Matters to be Included in Board’s Report, let us first get acquaint from what actually is Board’s Report.

Key Abstract- Matters to be Included in Board’s Report

This article will go over the Board’s Report. The Board’s Report is required by the Companies Act, 2013. Section 134 of the Companies Act, 2013 is the section relating to the Board’s Report. This must be filed as an attachment to Form AOC-4 with the Ministry of Corporate Affairs (MCA). We must produce the Board’s Report at the conclusion of the fiscal year. Depending on the company, many items must be included in the Board’s Report. This is a comprehensive report that discusses the company’s structure in terms of financial effect, Company Affairs, Board of Directors, Audit framework, and so on.

Meaning of Board’s Report

A Board Report is an important document used by a company to communicate with its shareholders about its position, performance, key changes in policies, documents, plans, future objectives, expansions, and so on. This report is presented to the general meeting together with the financial accounts.

Want to get your company registered? Get your company registered through Legal Window. We also register the companies such as Section 8 Company, Nidhi Company, One Person Company, Producer and NBFC Company.

Matters to be Included in Board’s Report

A report by the Board of Directors should be appended to statements brought before a company in general meeting, which shall include: Every company (required for listed companies to have an official operational website) must post a copy of the annual report on the company’s website, if one exists, and the web link to such annual report must be published in the Board’s report.

The number of Board of Directors Meetings

The following must be included in the directors’ responsibility statement:

• The appropriate accounting rules were followed in the production of the annual accounts, together with sufficient explanations for major deviations.
• The board of directors has chosen and consistently used such accounting rules, as well as made reasonable and prudent judgments and estimates, to provide an accurate and fair picture of the company’s condition of affairs at the conclusion of the fiscal year, as well as its profit and loss for that period.
• The directors had taken necessary and sufficient care to maintain adequate accounting records in accordance with the provisions of this Act in order to secure the company’s assets and to prevent and detect fraud and other irregularities;
• The annual accounts had been produced on a going concern basis by the directors; and
• In the event of a publicly traded business, the board had established internal financial controls for the company to follow, and that such internal financial controls were appropriate and effective.
• The directors had created suitable processes to guarantee compliance with all relevant laws, and that such systems were adequate and functional.

Details on frauds reported by auditors under sub-section 12 of section 143 that are not reportable to the central government.  A declaration made by the independent Director according to Section 149, Subsection (6). Company’s policy on director nomination and compensation, including criteria for assessing qualifications, positive characteristics, a director’s independence, and other items specified in section 178 (3). Explanations or comments by the Board on any qualification, reservation, unfavourable remarks, or disclaimer given by the auditor in his report and, in practise, by the company secretary in his secretarial audit report.

Details of loans, guarantees, or investments made under Section 186

Contracts or agreements involving related parties as referred to in sub-section (1) of section 188. The status of the company’s affairs, or the amount, if any, that it recommends be given as a dividend.

Material Alterations and Commitments

Material changes and obligations impacting the company’s financial situation that happened between the end of the fiscal year to which the financial statements pertain and the date of the report,

• Energy saving, technology adoption, foreign exchange revenues and expenditures
• Energy conservation
  • The efforts performed or the impact on energy conservation,
  • The actions made by the company to use alternative energy sources,
  • Capital investment in energy-saving devices.
• Adoption of technology
  • The efforts made to absorb technology,
  • The advantages gained, such as product enhancement, cost reduction, product development, or import substitution
    • In the case of imported technology (imported during the past three years, commencing with the start of the fiscal year)
    • The specifics of foreign technology
    • The import year
    • Whether or if the technology has been fully assimilated
    • If not entirely absorbed, places where areas have not occurred, as well as the cause for this.

The amount spent on research and development is also countable.

• Earnings and expenditures in foreign currency: The foreign exchange earned in terms of real inflows and outflows during the year.
  • A financial overview or highlights,
  • Any changes in the nature of the business.
  • The names of directors and KMPs who were appointed or resigned during the fiscal year, and 
  • The names of companies that became or ceased to be its subsidiaries, joint ventures, or associate companies during the fiscal year.
  • Details on deposits made during the year, such as:
    • • Accepted throughout the year,
      • Unpaid or unclaimed as of the end of the fiscal year,
      • Whether there was any default in deposit repayment or interest payment throughout the year, and if so, the number of such incidents and total amount involved:
      • At the start of the year,
      • Maximum during the year,
      • At the end of the calendar year,

The specifics of deposits that do not meet the standards of Chapter V of the Act,

• The specifics of substantial and material orders issued by regulators, courts, or tribunals that have an influence on the company’s going concern status and future operations,
• Details on the adequacy of internal financial controls in relation to financial statements.
• Policy Development and Implementation for Risk Management: A declaration showing the establishment and execution of a risk management policy for the company, including the identification of risk factors, if any, that the Board believes may jeopardise the company’s existence. The specifics of the company’s policy on corporate social responsibility actions undertaken during the year.A declaration outlining the way in which formal (annual review of the performance of the Board, its committee, and individual Directors) has been made in the case of a listed business and every other public company with such paid-up capital as may be specified.

• Financial Reports: Other things, such as the Board’s report, should be produced based on the company’s stand-alone financial statements and shall report on the highlights of the company’s performance during the period under report. The details of contracts or agreements with linked parties referred to in sub-section (1) of Section 188 in Form AOC-2 must be included in the board’s report. Details of any applications made or proceedings underway during the year under the Insolvency and Bankruptcy Code, 2016.Details of the difference in the amount of the valuation performed at the time of one-time settlement and the valuation performed while obtaining a loan from a bank or financial institution.Disclosure of whether the company is required to keep expense records as defined by the central government under Section 148 (1) of the Companies Act, 2013, and if such accounts and records are kept and maintained.

Other matters that must be addressed in the Board’s report

The following are the other matters that should be present in the Board’s Report:

• Acknowledgement
• Employee Information
• Confirmation with Secretarial Standards disclosure
• Disclosure of ESOPs, Right Issues, sweat equity, preferential allotment, or any other change in the company’s share capital
• Disclosure of the various auditors’ comments on the auditor’s report and the statutory report, whether good or negative,
• Notification of a change in the company’s registered office address
• Disclosure of a change in the address where the company’s books and accounts are kept.
• Annual financial report of the company
• Information on the amount transferred to reserves
• Key events occurred throughout the year that had an influence on the general operations of the company and the major steps taken by the company in that regard, such as the COVID-19 pandemic.
• Details on the directors and auditors who were appointed and resigned during the fiscal year.

Penalty for failing to prepare the Board’s’ Report

When the board authorises them, the chairman of the company shall sign the board’s report or Directors’ report and its annexures. When the board does not authorise the company’s chairman to sign the report, at least two directors, one of whom must be a managing director, must sign the report. A signed copy of the board of directors’ report should be distributed, issued, or posted on the company’s website.

When a company fails to prepare the board’s report and directors’ report, the company must pay a penalty of Rs.3 lakh, and each officer in default must pay a penalty of Rs.50, 000.

Endnote

The Board’s Report provides stakeholders with both financial and non-financial information, such as the company’s performance and forecasts, pertinent changes in management and capital structure, profit distribution suggestions, and future and ongoing expansion programmes. As a result, it is recommended that all organisations write their Board’s report in order to prevent any penalties.

Feel free to connect with our experts and get the best advices in relation with ITR’s, GST Returns, Annual Compliances and many more.