Complete Guide to board Report

Before we move ahead here is a quick summary of few adjudication orders:-

Adjudication order for violation of Section 134 (3) (m) of the Companies Act, 2013 read with Rule 8(3)(b)(i) to (ii) of the Companies (Accounts) Rules 2014 in the matter of M/s Sacs Infotech Private Limited:

Penalty:-A penalty of Rs 8,00,000 in total imposed

Cause:-The Companies had not furnished the details as prescribed in Rule 8(3)(B)(i) to (ii) of the Companies (Accounts) Rules 2014 read with Section 134(3)(m) of the Companies Act,2013

Adjudication Order for Violation of Section 134 of the Companies Act. 2013 in the matter of Vattikutti Technologies Private Limited:

Penalty:

In the above mentioned matter a penalty of :

Rs 3,0,0000 was imposed on the company

Rs 50,000 each on directors and company secretary

Reason: for failure to provide the explanations on Auditor's comments in board report.

Adjudication order for violation of Section 134(3)(h) of the Companies Act, 2013 in the matter of Shri. Vazhappully Padmanabhan Nandakumar Director of M/s. Lions Co-Ordination Committee of India Association,

Penalty: a penalty of Rs 1,00,000 was imposed on the directors.

Reason: Because the company missed to the number of board meeting in Board report.

Keeping the orders passed by ROC under various jurisdictions below:

Here is a quick guide on inclusions to be made in Board report and common lines that can be included in your report.

1. Rule 8(5)(i): the financial summary or highlights:

*The financial summary and highlights should be accompanied by the macroeconomic, 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.

2.Rule 8(5 (ii) the change in the nature of business, if any;

(Note; you can explain the objects of your company and if no changes are there then add ‘There is no change in the nature of business during the financial year.’)

3. Section 134(3)(k): the amount, if any, which it recommends should be paid by way of dividend:

Common line: Your Company’s policy on Dividend Distribution is available at (POLICY WEB LINK)

In accordance with the said policy, your Directors declared an interim dividend of ? /- per equity share in the Board meeting held on XXX, and are pleased to recommend a final dividend of ? /-?? per equity share for the financial year ended March 31, 2024, i.e., the total dividend for the current financial year under review being ` ? /-? per equity share (previous financial year - ? /- per equity share). If the above recommendation is accepted by the Members of the Company at the ensuing Annual General Meeting, the total outflow on this account will be ? __/- lakhs.

4.?Section 134(3)(j): The amounts, if any, which it proposes to carry to any reserves;

“Your Directors do not propose to transfer any amounts to the general reserves of the Company, instead have recommended to retain the entire profits for the financial year ended March 31, 2023, in the profit and loss account.”

5. Section 134(3)(i): State of the company’s affairs

i. segment-wise position of business and its operations;

ii. change in status of the company;

iii. key business developments;

iv. change in the financial year;

v. capital expenditure programmes;

vi. details and status of acquisition, merger, expansion, modernization and diversification;

vii. developments, acquisition and assignment of material Intellectual Property Rights;

viii. any other material event having an impact on the affairs of the company.

6.?Subsidiary/Associate/Joint Venture Companies

a. Rule 8(2): Report on the highlights of performance of subsidiaries, associates and joint venture companies and their contribution to the overall performance of the company during the period under report-(AOC 1 attachment)

b. Rule 8(5)(iv) The names of companies which have become or ceased to be its Subsidiaries, joint ventures or associate companies during the year

7. Share Capital and Debentures (Any changes in the capital structure of the company during the year, SS 4 and guidance note)

8. Directors and Key Managerial Personnel

a. Rule 8(5) (iii): the details of directors or key managerial personnel who were appointed or have resigned during the year;

b.? Rule 8(5) (iiia): a statement regarding opinion of the Board with regard to integrity, expertise and experience (including the proficiency) of the independent directors appointed during the year.

c. Section 134(3)(d): statement on declaration given by independent Directors under sub-section (6) of section 149;

9. Board Evaluation:

a. annual evaluation of the performance of the Board, its Committees and of individual Directors has been made.: section 134(3)(p)

b.? Guidance Note on Board Evaluation issued by the Securities and Exchange Board of India on January 5, 2017,

10. Familiarization Program for Independent Directors

11. Credit Rating of Securities (SS 4 and guidance note)

12. Policy on Nomination and Remuneration of Directors

a.?in case of a company covered under sub-section (1) of section 178, company’s policy on Directors’ appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under sub-section (3) of section 178.

13.Committees of the Board: The details of the powers, functions, composition, and meetings of the Committees of the Board held during the year are given in the Report on Corporate Governance section forming part of the Annual Report.

14.?Board Meetings: section 134(3)(b)

15. Corporate Governance

Your Company has taken adequate steps to adhere to all the stipulations laid down in the Listing Regulations. A report on Corporate Governance is disclosed separately in the Annual Report.

16. Investor Education and Protection Fund (IEPF).

17. Vigil Mechanism

18. Annual Return (Section 134(3)(a)web address, if any, where annual return referred to in sub-section (3) of section 92 has been placed)though sometimes companies attach MGT-7 as attachment.

19.? Deposits:

a)? The details relating to deposits, covered under Chapter V of the?Act [Rule8(5)(v)]

b)? The details of deposits which are not in compliance with the requirements of Chapter V of the Act [Rule8(5)vi)]

c) General Common Lines: Your Company has not accepted any deposits during the year under review and as such, no amount of principal or interest was outstanding on the date of the Balance Sheet.

20.Loans, Guarantees and Investments:

?a) particulars of loans, guarantees or investments under section 186:Section 134(3)(g)

b) Common line:-‘Pursuant to Section 186 of the Companies Act, 2013 and Schedule V of the Listing Regulations, disclosure on particulars relating to Loans, Advances, Guarantees, and Investments are provided as part of the financial statements.’

21.?Related Party Transactions:

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

22. Corporate Sustainability: the details about the policy developed and implemented by the company on corporate social responsibility initiatives taken during the year.[section 134(3)(o)]

23.?Risk Management:

?a)a statement indicating development and implementation of a risk management policy for the company including identification therein of elements of risk, if any, which in the opinion of the Board may threaten the existence of the company.[Section 13493)(n)].

?b) A common hot topic among Corporates to give an detailed explanation is “Cyber Security”.

24.Internal Control Systems And Adequacy Of Internal Financial Controls:

a) Rule (8)(5) (viii): the details in respect of adequacy of internal financial controls with reference to the Financial Statements.

25. Auditors & Auditors’ Report: explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made [Section 134(3)(f)]

A.????? Statutory Auditor

B.????? Secretarial Auditor

26.?Cost Records and Audit: Rule 8(5)(ix)

a) Common line: Maintenance of cost records and requirement of cost audit as prescribed under Section 148 of the Act are not applicable to the business activities carried out by the Company.

b) 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.

27.? Section 134(3ca):

a) Details in respect of frauds reported by auditors under sub-section (12) of section 143 other than those which are reportable to the Central Government

b) Common line: During the year under review, the Statutory Auditors and Secretarial Auditors have not reported any instances of frauds committed in the Company by its officers or employees, to the Audit Committee under Section 143(12) of the Companies Act, 2013, details of which needs to be mentioned in this Report.

28. Employees’ Remuneration

Common Line: Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (‘Rules’) are annexed to this report (Annexure).

In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Rules, a statement showing the names and other particulars of employees drawing remuneration in excess of the limits set out in the said Rules forms part of this report. Further, the report and the annual accounts are being sent to the Members excluding the aforesaid statement. In terms of Section 136 of the Act, the said statement will be open for inspection upon request by the Members. Any Member interested in obtaining such particulars may write to the Company Secretary at Corpsec email address.

29.?Directors’ Responsibility Statement: Section 134(5)

The Directors’ Responsibility Statement referred to in clause (c) of sub-section (3) shall state that—

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) the Directors had 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;

(c) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d) the Directors had prepared the annual accounts on a going concern basis; and

(e) the Directors, in the case of a listed company, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

Explanation.—For the purposes of this clause, the term “internal financial controls” means the policies and procedures adopted by the company for ensuring the orderly and efficient conduct of its business, including adherence to company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information;

(f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

30.?? Rule 8(3): Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo:

(A) Conservation of energy-

(i) the steps taken or impact on conservation of energy;

(ii) the steps taken by the company for utilising alternate sources of energy;

(iii) the capital investment on energy conservation equipment;

(B) Technology absorption-

(i) the efforts made towards technology absorption;

(ii) the benefits derived like product improvement, cost reduction, product development or import substitution;

(iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year)-

(a) the details of technology imported;

(b) the year of import;

(c) whether the technology been fully absorbed;

(d) if not fully absorbed, areas where absorption has not taken place, and the reasons thereof; and

(iv) the expenditure incurred on Research and Development.

(C) Foreign exchange earnings and Outgo-

The Foreign Exchange earned in terms of actual inflows during the year and the Foreign Exchange outgo during the year in terms of actual outflows.

31.??Secretarial Standards

Common Line: -During the year under review, your Company has duly complied with all applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

32. Rule 8(5)(x): Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

a statement that the company has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 [14 of 2013].

33.Insolvency and Bankruptcy Code

a) Rule 8(5)(xi): the details of application made or any proceeding pending under the ?Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year along with their status as at the end of the financial year.

??b) Common line: During the year, there was no application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016), hence the requirement to disclose the details of application made or proceeding pending at the end of financial year is not applicable

34.Disclosure under Rule 8(5)(xii) of the Companies (Accounts) Rules,2014:

a) Rule 8(5)(xii: the details of difference between amount of the valuation done at the time of one time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof.]

b)Common Line: During the year, there were no instances where your Company required the valuation for one time settlement or while taking the loan from the Banks or Financial institutions.

35.Significant and Material Orders passed by the Regulators or Courts

a) Rule 8(5)(vii): the details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future.

b) Common line: There has been no significant and material order passed by the regulators or courts or tribunals impacting the going concern status and the Company’s future operations. However, Members’ attention is drawn to the statement on contingent liabilities, commitments in the notes forming part of the Financial Statements.

36 Material changes and commitments affecting the financial position of the company, between the end of the financial year and the date of this report :

a) Section 134(3)(l): material changes and commitments, if any, affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the report.

b) Common lines: There are no material changes and commitments affecting the financial position of the Company between the end of the financial year and date of this Report.

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Notes:-

1.Sometimes the No changes points are combined and given under a common heading of ‘Other disclosures” as seen in Board report of Tata Steel for FY 2022-23.

2. where disclosures referred to in sub-sections have been included in the financial statements, such disclosures shall be referred to instead of being repeated in the Board's report.

3. Where the company’s policy on Directors’ appointment and?remuneration and CSR policy is made available on company's website, if any, it shall be sufficient compliance of the requirements under such clauses if the salient features of the policy and any change therein are specified in brief in the Board's report and the web-address is indicated therein at which the complete policy is available.

4. The Board's Report shall be prepared based on the standalone financial statements of the company.

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Keep Smiling,

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Footnotes & credits

1.Annual reports of various companies including but not limited to Tata steel,tata communications, L&T infrastructure, Happiest Minds, Hindalco, etc.

2.https://www.mca.gov.in/content/mca/global

3.https://www.mca.gov.in/content/mca/global/en/acts-rules/ebooks.html

4.https://sebi.gov.in/

5.https://www.icsi.edu/

6 My mentor Juhi

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