Quick Bites- Directors Report
2023.
Section 134 of Companies Act, 2013
(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.
The Companies Act, 2013, mandates certain disclosures to
be made in the Board’s Report, additionally, a listed company is required to
comply with disclosures requirement stated under the Securities and Exchange
Board of India (Listing Obligations and Disclosure Requirements) Regulations,
2015.
Further, a company which is regulated under other laws,
may also be required to make additional disclosures in its Board’s Report as stated
in the respective applicable laws.
Que 1:
If a Company is preparing Consolidated Financial statements, Whether the
directors report shall be prepared on the basis of a consolidated financial
statement or a standalone financial statement? (DG)
Ans 1:
As mentioned in the ICSI Guidance Note, The Board’s Report should be based on
the company’s standalone financial statement and not on the consolidated
financial statement (DG)
Que 2:
If any information is already mentioned in the financial statement, does the
company need to mention the same in the Directors report?? (DG)
Ans
2: As mentioned in the ICSI Guidance Note, The Board’s
Report should avoid repetition of information. If any information is mentioned
elsewhere in the financial statement, a reference thereof should be given in
Board’s Report instead of repeating the same (DG)
For
example, under
Section 134, the company is required to include information about the loan,
guarantee, and investment made by the company under Section 186. However, the
same has been mentioned in the financial statement. Therefore, instead of
repeating the same, if the company gives reference to note no. of the financial
statement in the director's report, that is enough to complete the compliance.
Que 3:
Are only disclosures mentioned in Section 134 required to be mentioned in the
Directors' Report? (DG)
Ans 3:
The Directors Report can’t be finalized only by following the disclosures
mentioned in u/s. 134. Companies need to comply with other sections and act for
the same. (DG)
For example,
disclosure of Sections 135, 188, etc. Disclosure of Secretarial Standards,
Disclosure of Posh Act, etc.
Que
4: If the Company have not declared any Dividend, not
transferred any amount in reserves. Whether Companies should give disclosure of
the same in Directors Report.? (DG)
Ans 4:
As per ICSI Guidance Note, even if no amount is proposed to be transferred to
reserves, or if no dividend has been recommended by the Board, a statement to
that effect should be included in the Board’s Report. The purpose of this requirement
is to ensure the inclusion of certain important information that should be
presented to the stakeholders in a single document. (DG)
Que
5: Whether disclosure requirement (Format) of
Directors Report of One Person Company & Small Company are same as other
Company? (DG)
Ans 5:
The Board’s Report of a One Person Company (OPC) and Small Company shall be
prepared in the abridged form as prescribed
by the Central Government. Therefore, the Directors Report disclosures of OPC
and Small Company are lessor than other Companies. (DG)
Que
6: Which sector-specific Regulations should companies
check while drafting the Directors report? (DG)
Ans 6:
Specific Sectors regulations, such as Public Sector Undertakings (PSUs),
Insurance Companies, Non- Banking Financial Companies, Housing Finance
Companies etc. Hence, such companies should make requisite disclosures in
accordance with applicable sector specific Regulations/Guidelines in its
Board’s Report/Annual Report. (DG)
Que 7: Whether disclosure of compliance
of Secretarial Standards are mandatory to mention in Directors Report? (DG)
Ans
7:
Paragraph 9 of Secretarial Standard on Meetings of the Board of Directors (SS-1),
provides that the Report of the Board of Directors shall include a statement on
compliance of applicable Secretarial Standards.
In case a certain portion of
applicable Secretarial Standards is not adhered, the same should be highlighted
in the Report alongwith the reasons for not complying with the same.
Compliance with Secretarial
Standards voluntarily adopted by the company should also be stated in the
Report. In case the voluntary adoption is partial the same need to be stated in
the Report.
Que
8: Whether MGT-9 is required to attach along with the directors’
report for the FY ended March 31, 2023? (DG)
Ans 8:
MGT-9 has been omitted from the Companies Act. Therefore, Whatever the type of
Company and whatever the status of the website, the Companies are not required
to prepare MGT-9.
Que
9: If any Company is having website. Whether such
Company needs to publish Annual Return i.e. MGT-7 of FY 2022-23 on its website?
(DG)
Ans 9:
A copy of the annual return shall be placed on the website of the company, if any,
and the web-link of such annual return shall be disclosed in the Report.
This requirement is applicable on
all the Company, whether Small Company, OPC, Non small Company, Public Company
etc.
Que
10: Whether every Company required to give disclosure
of POSH Act in their Directors Report.? (DG)
Ans 10:
As per the POSH Act every company should give disclosure of POSH act in its
Directors Report.
The disclosure shall
include the following:
(a) a statement that the company
has complied with the provision relating to the constitution of Internal
Complaints Committee under the Sexual Harassment of Women at the Workplace
(Prevention, Prohibition and Redressal) Act, 2013.
(b) the details of number of cases
filed and disposed as required under the Sexual Harassment of Women
Que
11: Whether Directors report can be approved by passing
of Circular Resolution by Board of Directors? (DG)
Ans
11: Sub-section (3) of section 179 of the Act provides
that the Board of Directors of a company shall approve the financial statement
and the Report on behalf of the company by means of resolutions passed at
meetings of the Board.
Therefore, Directors Report can’t
be approved by passing of Circular Resolution.
Que
12: Whether Directors reports can be approved by
passing a Resolution by the board of Directors in a board meeting held through
videoconferencing? (DG)
Ans
12: After the amendment to Section 173, there is no
restriction on passing any resolution through a video conference board meeting.
Therefore, the Directors report can
be approved in the Board Meeting held through videoconferencing.
Que
13: Who can sign the Directors Report? (DG)
Ans
13: The Directors Report can be sign in following
manner:
i.
Solely by Chairman of the company, if authorized
in that behalf by the Board
ii.
If Chairman not authorized, by two
Directors one of whom shall be the Managing Director (if any)
iii.
In the case of a One Person Company, by
one Director
Que
14: Who can sign the Annexures of Directors Report?
(DG)
Ans
14: The annexures to the Report shall be signed in the
similar manner as the Report.
Except the Report on CSR activities
of the company, which is required to be signed by the Chief Executive Officer
or the Managing Director or any other Director of the company and by the
Chairman of the CSR Committee of the Company.
Que
15: Who can sign the Directors Report if Company is
under Insolvency Laws? (DG)
Ans
15: As per clause (b) of sub-section (1) of section 17
of Insolvency and Bankruptcy Code (IBC), a company of which Interim Resolution
Professional (IRP) is appointed, the powers of the Board of Directors stands
suspended and shall be exercised by IRP.
Since the ultimate responsibility
and powers of the Board lies with IRP/RP, in the aforesaid context, it appears
that IRP/RP should approve and sign the Report.
Que
16: How
many days before the AGM should the directors report be circulated to Members
of the company?? (DG)
Ans
16:
A copy of the Report along with the
financial statement and the Auditor’s Report shall be sent, either physically
or in electronic form, to every member at least
twenty-one clear days in advance of the annual general meeting.
Note: However, in 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
Que
17: Whether the chairman of the Board Meeting can be
considered the Chairman of the Company? (DG)
Ans
17: A Chairman of the board meeting can’t be considered
the Chairman of the Company until unless:
i.
Their name mentioned in AOA as chairman
of the Company
ii.
Board has designated them Chairman of
the Company by passing of Board Resolution.
Que
18: Whether Board Resolution passed by Board of
Directors required to be file with ROC in MGT-14? (DG)
Ans
18: The resolution passed by the Board approving such
Report shall also be filed with the Registrar of Companies in case of Public
Limited Companies.
However Private
Companies are not required to file such resolution with the Registrar of
Companies.
Que
19: What are the annexures of Directors Report? (DG)
Ans
19: On the basis of the transactions and applicability,
the Directors Report can have the following annexures.
|
S.
No.
|
Annexure
No.
|
Purpose
of Annexure
|
|
i.
|
AOC-1
|
Statement
containing salient features of the financial statement of
Subsidiaries/associate companies/joint ventures
|
|
ii.
|
AOC-2
|
Details
of contracts or arrangements or transactions with Related Party
|
|
iii.
|
CSR Annexure
|
Annual
Report on CSR
|
|
iv.
|
MR-3
|
Secretarial
Audit Report
|
Que
20: Whether Directors Report can be signed by using
Digital Signature Certificates? (DG)
Ans 20:
There is no such restriction in the Law. Therefore, Director’s report can be
sign physically as well as Digitally by the Directors of the Company.
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
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