GUIDANCE FOR PREPARATION OF
(04th August 2023)
SHORT SUMMARY:
The
Companies Act, 2013, requires the Board of Directors of every company to attach
its report to the financial statements to be laid before the members at the
annual general meeting.
Section
134 of the Companies Act, 2013 mandates certain disclosures to be made in the
Board’s Report; additionally, a listed company is required to comply with
disclosure requirements stated under the Securities and Exchange Board of India
(Listing Obligations and Disclosure Requirements) Regulations, 2015.
As
per the Act, it is the responsibility of the directors of the Company to
Prepare a director report and make it part of the e-form AOC-4 as an annexure.
However, the people who are certifying the e-form AOC-4 must check whether all
the information mentioned in the directors’ report is correct or not.
A
professional must check every piece of information mentioned in the Directors’
Report. Therefore, a question arises about how to check the information
mentioned in the directors’ report.
The
main thrust of this editorial is "How to Prepare a Director's
Report?" "What are the documents or information a person has to check
while preparing a Director Report?
I.
ADDRESS
TO MEMBERS:
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Language:
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How To Check the Financial Year
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Your
directors have pleasure in presenting the (No. of Financial Years) Annual
Report together with the Audited Statement of Accounts of your Company for
the financial year ended March 31, 2023
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i.
Check from
the Annual Return/ Directors’ Report of previous financial year.
ii.
Check the
incorporation date and calculate to verify.
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II. WEB LINK OF ANNUAL RETURN:
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Provisions:
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Language:
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How
to check?
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Section
134(3)(a) and Rule 8A(1)(a)
the
WEB link where annual return i.e. MGT-7 of FY 2022-23 of company shall be
published.
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The Company is
having website i.e.___________________________ and annual return of Company
has been published on such website. Link of the same is given below:
OR
The Company
doesn’t having any website. Therefore,
no need to of publication of Annual Return.
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·
First Check
whether Company having any website (on google, on letter head etc).
·
If Company
having website check whether given link is working or not.
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III.NUMBER OF BOARD MEETING:
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Provisions:
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Language:
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How
to check?
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Section
134(3)(a) and Rule 8A(1)(b)
Number
of Meetings of the Board; held during the financial year 2022-23
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During the Financial Year 2022-23, [**] meetings
of the Board of Directors of the company were held. [Preferable to state the
dates of meetings]
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·
Check the Minutes of the
Board Meeting.
·
Get the Index of Board
Meetings from the Company.
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IV.EXPLANATION TO AUDITOR’S REMARKS:
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Provisions:
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Language:
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How
to check?
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Section
134(3)(f) and Rule
8A(1)(e)
Explanation or
comment by the Board on every qualification, reservation, adverse remark or
disclaimer made by the statutory auditor in his report and/or by the
secretarial auditor in the secretarial Audit Report.
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The observations of the Statutory Auditors,
when read together with the relevant notes to the accounts and accounting
policies are self explanatory and do not call for any further comment.
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·
Check the copy of Auditor
Report for the same.
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V.
STATE
OF AFFAIRS:
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Provisions:
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Language:
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How
to check?
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134(3)(I)
and Rule 8A(1)(f)
The
State of The Company’s Affairs;
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The Company is
engaged in the business of _________________. There has been no change in the
business of the Company during the financial year ended 31st March, ________.
Or there is
_________________________ Changes in the business of the Company during the
financial year ended 31st March, ________.
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o
The company
can find the Affairs of the Company from the Notes to Accounts (attached as
part of Balance Sheet).
o
Company can
find if there is any Change in the affairs of the Company by comparing the Notes
to Account of Last financial year TO current financial year.
o
The
business should match with the Main Object of MOA.
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VI.FINANCIAL HIGHLIGHTS:
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Language:
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How To Fill the Figures
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The Company’s financial performance for the year
ended March 31, 2023:
Sec 134 (3)(q) r/w Rule 8(5) (i)&(ii)of and
Rule 8A(g)
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Check the
Statement of Profit & Loss Account for the year ended March 31, 2023. You
will find required figures on the FACE of Statement of Profit & Loss
Account.
Company can
mention round off or actual figure as per their convenience.
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Particulars
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Year ended
31st March 2023
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Year ended
31st March 2022
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Turnover
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Profit Before Tax
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Less:
Current Tax
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Deferred Tax
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Income Tax earlier years
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Profit For The Year
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Add:
Balance in Profit and Loss Account
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Sub Total
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Less: Appropriation
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Closing Balance
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Turnover: Section- 2(91)- "turnover" means the
gross amount of revenue recognized in the profit and loss account from the
sale, supply, or distribution of goods or on account of services rendered, or
both, by a company during a financial year.]
Deferred
tax: As per Accounting Standard (AS) 22,
deferred tax is the tax effect of timing differences.
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The
financial summary and highlights thereof 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
vis-à-vis the
company’s performance
VII. MATERIAL CHANGES AFFECTING THE FINANCIAL POSITION
OF THE COMPANY:
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Provisions:
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Language:
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How
to check?
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Sec 134 (3) (L) and Rule 8A (1)(h)
Details
regarding any material changes / events, if any, occurring after balance
sheet date till the date of the report to be stated
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No material
changes and commitments affecting the financial position of the Company
occurred between the end of the financial year to which this financial
statement relates and the date of this report.
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Check the
following
-
Trial
Balance
-
Financial
Position
-
Market
Condition
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VIII. DETAILS OF DIRECTORS AND KEY MANAGERIAL
PERSONNEL:
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Provisions:
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Language:
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How
to check?
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Sec 134
(3)(q) r/w Rule (8)(5)(iii) of Cos (Accounts) Rules, 2014 & Rule 8A(i)
Details of
Directors and KMP appointed or resigned during the year.
Details of
directors retiring by rotation in the ensuing Annual General Meeting
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There has been no change in the constitution of
Board during the year under review i.e. the structure of the Board remains
the same
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Check the Following:
-
DIR-12
-
MCA Data
-
Comparison
from last annual return
-
Register
of Director
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IX. DETAILS OF SIGNIFICANT & MATERIAL ORDERS
PASSED BY THE REGULATORSOR COURTS OR TRIBUNAL:
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Provisions:
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Language:
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How
to check?
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Sec 134 (3)(q) r/w Rule 8 (5) (vii) of Cos (Accounts) Rules and Rule
8A (1)(j)
Details of the
order passed by the authorities which impacts the going concern status and
company’s operations in future
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No significant or material orders were passed
by the Regulators or Courts or Tribunals which impact the going concern
status and Company’s operations in future
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Get the information from the Management of the
Company and take MR Letter also.
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X.
PARTICULARS
OF CONTRACT AND ARRANGMENT WITH RELATED PARTIES:
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Provisions:
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Language:
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How
to check?
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Section-
134(3)(h)
The
Particulars of contracts or arrangement s with related party referred to in
Section 188(1) of the Companies Act, 2013 for the Financial Year 2014-15 in
the prescribed format AOC-2, has been enclosed with the report.
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All related
party transactions that were entered into during the financial year ended
31st March, 2023 were on an arm’s length basis and were in the ordinary
course of business. Therefore, the provisions of Section 188 of the Companies
Act, 2013 were not attracted. Further, there are no materially significant
related party transactions during the year under review made by the Company
with Promoters, Directors, or other designated persons which may have a
potential conflict with the interest of the Company at large. Details of the
transactions are given in AOC-2
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Check the
following :
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AS-18
-
Minutes of
Board Meeting & General Meeting (If any Resolution passed)
-
RPT
Registers
-
Proof of
Arm Length price
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XI. COMPLIANCE OF SECRETARIAL STANDARD:
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Provisions:
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Language:
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How
to check?
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Secretarial
Standard - I
There is requirement to
disclose in Directors Report that Company has complied with the provisions of
Secretarial Standard.
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The Company has
complied with the provisions of Secretarial Standards.
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Check the
following :
·
Minutes
·
Meeting Documents.
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FOR COMPANIES OTHER THAN OPC AND SMALL:
XII. DECLARATION BY INDEPENDENT DIRECTOR:
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Provisions:
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Language:
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How
to check?
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Sec 134 (3)( d) r/w
Sec 149 (6)
A
statement of Declaration by Independent Director
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The Company has received the
declaration from the Independent Director.
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Check the Copy of Declaration given by Independent Director.
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XIII. PARTICULAR OF LOAN AND INVESTMENT:
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Provisions:
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Language:
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How
to check?
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Section
134(3)(g)
particulars
of loans, guarantees or investments under section 186;
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Particular of Loans given,
investments made, guarantee given and securities provided along with the
purpose for which the loan or guarantee or security is proposed to be
utilized by the recipient are provided in the financial statement (please
refer Note _______ to the standalone balance sheet).
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·
Check the Loan and
Investment from the Assets side of Balance sheet and relevant Notes.
·
Check the Guarantee from the
Contingent Liabilities and schedule. Also check from the Notes to Financial
Accounts.
·
Check whether proper
compliance of 186 made or not.
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XIV. AMOUNTS TRANSFERRED TO RESERVES, IF ANY:
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Provisions:
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Language:
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How
to check?
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Section- 134(3)(J)
The
Board of the company has decided/ proposed to carry Rs____
to
its reserves
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No amount was transferred to
the reserves during the financial year ended 31st March, 2023.
The Board of the company has
decided/proposed to carry Rs____ to its reserves.
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Check the Assets
side of Balance sheet, if there is increase in reserve other than the balance
of profit and loss account.
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XV. DIVIDEND:
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Provisions:
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Language:
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How
to check?
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Section- 134(3)(k)
The
amount, if any, which it recommends should be paid by way of dividend;
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In view of the sustained
working results during the year under review, the Board of Directors are
pleased to recommend a dividend of Rs ___/- per equity share
OR
In view of the planned
business growth, your Directors deem it proper to preserve the resources of
the Company for its activities and therefore, do not propose any dividend for
the Financial Year ended March 31, 2023.
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First:
Check the
Face of Statement of Profit and Loss Account; Amount of Dividend will be
mention there.
Second:
Check the
Copy of General Meeting resolution in case of final Dividend and check the
Board Meeting resolution in case of interim Dividend.
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XVI. CONSERVATION OF ENERGY, TECHNOLOGY, ABSORPTION,
FOREIGN EXCHANGE EARNINGS AND OUTGO:
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Provisions:
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Language:
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How
to check?
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134(3)(M)
The
details of Energy, Technology, Absorption, Foreign Exchange Earnings and
Outgo are as under:
a)
Conservation
of Energy:
b)
Technology
Absorption:
c)
Foreign
Exchange Earnings/ Outgo:
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The particulars
as required under the provisions of Section 134(3) (m) of the Companies Act,
2013 in respect of conservation of energy and technology absorption have been
furnished considering the nature of activities undertaken by the company
during the year under review.
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Check the
following
-
Financial
of the Company.
-
Check with
directors.
-
Take a MR
Letter.
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XVII.
RISK
MANAGEMENT POLICY:
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Provisions:
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Language:
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How
to check?
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134(3)(N)
Statement
indicating the development and implementation of the risk management policy
of the company Moreover, in case the Company has constituted a risk
management committee, then the constitution and the terms of reference of the
same to be disclosed.
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The Company has in place a mechanism to
identify, assess, monitor and mitigate various risks to key business
objectives. Major risks identified by the businesses and functions are
systematically addressed through mitigating actions on a continuing basis.
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Check the policy
prepared by the Company. If not prepare get it prepare.
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XVIII.
DISCLOSURES
UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION &
REDRESSAL) ACT, 2013
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Provisions:
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Language:
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How
to check?
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Section 22 of Sexual Harassment of Women at
Workplace.
The employer
shall include in its report the number of cases filed, if any, and their
disposal under this Act in the annual report of his organization or where no
such report is required to be prepared, intimate such number of cases, if
any, to the District Officer.
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The Company is committed to
provide a safe and conducive work environment to its employees. During the
year under review.
Your Directors further state that during the year
under review, there were no cases filed pursuant to the Sexual Harassment of
Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
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Get the
information from the Management of the Company and take one MR Letter.
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XIX.
DETAILS
OF SUBSIDIARY, JOINT VENTURE AND ASSOCIATE COMPANIES:
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Provisions:
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Language:
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How
to check?
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Rule 8(5)(iv)
The
name of companies which have become or ceased to be its Subsidiaries, joint
ventures or associate companies
during
the year;
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The Company does not have
any Subsidiary, Joint Venture or Associate Company.
OR
The names of companies which
have become or ceased to be the Company’s subsidiaries, joint ventures or
associate companies during the year under review is provided below:
 
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S.N
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Name of the Company
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Subsidiary /JV /Associate
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Become/Ceased
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Effective Date
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First Check:
Check the
Investment of the Company from Non Current Investment in the Balance Sheet,
check the relevant Note and analyze about Subsidiary, Associate and Joint
Venture as per definition given u/s 2(87) and 2(6) of the Companies Act,
2013.
Second:
Check from the (Accounting Standard)AS-18.
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XX.
INTERNAL
FINANCIAL CONTROL:
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Provisions:
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Language:
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How
to check?
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Rule 8(5)(viii)
ICAI
guidance note on adequacy of internal financial controls with reference to
financial statements can be referred for this Purpose.
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The Company has in place
adequate internal financial controls with reference to financial statements.
During the year, such controls were tested and no reportable material
weakness in the design or operation was observed
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Most listed
companies are reading requirements related to IFC as those referring to IFC
for financial reporting along with limited focus on the operational controls
aspect.
Auditors are required
to certify that the IFC in relation to financial statement are designed and
operate effectively.
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Author – CS Divesh Goyal,
GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can
be contacted at csdiveshgoyal@gmail.com).
Disclaimer: The entire contents of
this document have been prepared based on relevant provisions and as per the
information existing at the time of the preparation. Although care has been
taken to ensure the accuracy, completeness, and reliability of the information
provided, I assume no responsibility, therefore. Users of this information are
expected to refer to the relevant existing provisions of applicable Laws. The
user of the information agrees that the information is not professional advice
and is subject to change without notice. I assume no responsibility for the
consequences of the use of such information.
IN NO EVENT SHALL I SHALL BE
LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM,
ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION