Abridged Directors Report For Small & One Person Company (OPC)
The small company concept was introduced by the government to provide various benefits to the people of India, the small company will not specifically be registered with a specific name but will be registered under a private company with a smaller amount of investment and turnover. In this blog, we will have an overview of the small company and recent amendments under the same.
Before the Finance Budget, 2021 the small company was defined as"small company" means a company, other than a public company-
- Paid-up share capital should not exceed Rs. 50 Lacs or such higher amount as may be prescribed which shall not be more than 10croresrupees: and
- Turnover should not exceed Rs. 2 Cr or such higher amount as may be prescribed which shall not be more than 100 crore rupees.
After the Finance Budget 2021, there are certain changesin the definition of a small company which is proposed by Finance Minister Ms. Nirmala Sitharaman which will come into effect from 1st April2021.
The new definition is "small company" means a company, other than a public company-
- Paid-up share capital should not exceed Rs. 2 Crore or such higher amount as may be prescribed which shall not be more than 10 croresrupees: and
- Turnover does not exceed Rs. 20 Crore or such higher amount as may be prescribed which shall not be more than 100 crore rupees
Section 2(85) does not apply to the following mentioned companies:
- a holding company or subsidiary company
- company registered undersection 8 of Act or
- a company or body corporate governed by any of the special Act.
Section 2(62) of the Companies Act, 2013 defines One Person Company as a company that can have only 1 person as a member of the company.
Section 134(3) of the Companies Act, 2013 mandates that the report by the Board of Directors shall be attached with Financial Statements of every Company.
Rule 8A of Companies (Accounts) Amendment Rules, 2018 prescribes matters to be included in Board’s Report for One Person Company and Small Company. The Rule was inserted by The Companies (Accounts) Amendment Rules,2018. The said Rule has prescribed the following matters:
The Board’s Report of OPC and Small Company shall be prepared based on the standalone financial statement of the company, which shall be in abridged form as prescribed by the act and contain the following: -
- the web address, if any, where the annual return referred to in Section 92(3) has been placed.
- several meetings of the Board.
- Directors Responsibility Statement as referred to in section 134 (5).
- details in respect of frauds reported by the auditor under subsection (12) of section 143 other than those which are reportable to the CG.
- explanations or comments by the Board on every qualification, reservation, or adverse remark or disclaimer made by the auditor in his audit report.
- the state of the company’s affairs.
- the financial summary or highlights.
- material changes from the date of closure of the FY in the nature of business and their effect on the financial position of the company.
- the details of directors who were appointed or have resigned during the period under review.
- the details or significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and companies’ operations in future.
Thus, Rule 8A acts as a relief for small companies & OPC who are not required to give detailed disclosures in Board Report as stipulated under Rule 8. Such Companies can only specify the above-mentioned details in the Board Report.
This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.
Posted by: CA Neetu Saini