Board’s Report – 2

In continuation of our earlier post dealing with Financial Statements and Boards’ Report, we will read Boards’ report of companies other than One Person Companies here.

Particulars of Contracts or Arrangements [Rule 8(2) of Accounts Rules read with Section 134(3)(h)]:

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.

As discussed earlier here and here, Section 188 lists out certain transaction restricted to be entered into with related parties.

Conservation of Energy: [Rule 8(3)(A) of Accounts Rules read with Section 134(3)(m)]

The report of the Board shall contain the following information and details, namely:-

(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 equipments.

Technology Absorption: [Rule 8(3)(B) of Accounts Rules read with Section 134(3)(m)]

The report of the Board shall contain the following information and details, namely:-

(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.

Foreign exchange earnings and Outgo [Rule 8(3)(C) of Accounts Rules read with Section 134(3)(m)]:

The report of the Board shall contain information and details of 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.

Evaluation of Board Performance [Rule 8(4) of Accounts Rules read with Section 134(3)(p)]:

Every listed company and every other public company having a paid up share capital of twenty five crore rupees or more calculated at the end of the preceding financial year shall include, in the report by its Board of directors, a statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its committees and individual directors.

Additional Matters in Boards’ Report [Rule 8(5) of Accounts Rules read with Section 134(3)(q)]:

In addition to the information and details specified in sub-rule (4), the report of the Board shall also contain –

(i) the financial summary or highlights;

(ii) the change in the nature of business, if any;

(iii) the details of directors or key managerial personnel who were appointed or have resigned during the year;

(iv) the names of companies which have become or ceased to be its Subsidiaries, joint ventures or associate companies during the year;

(v) the details relating to deposits, covered under Chapter V of the Act,-

(a) accepted during the year;

(b) remained unpaid or unclaimed as at the end of the year;

(c) whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved-

(i) at the beginning of the year;

(ii) maximum during the year;

(iii) at the end of the year;

(vi) the details of deposits which are not in compliance with the requirements of Chapter V of the Act;

(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;

(viii) the details in respect of adequacy of internal financial controls with reference to the Financial Statements.

As Rule 8(5) contain phrase “in addition to the information and details specified in sub-rule (4)”, I understand that this sub – rule applicable only to the companies to which sub – rule (4) is applicable.  As mentioned above, sub – rule (4) is applicable to every listed company and every other public company having a paid up share capital of twenty five crore rupees or more calculated at the end of the preceding financial year.

Disclosures about CSR Policy [Rule 9 of Accounts Rules read with the Companies (Corporate Social Responsibility Policy) Rules, 2014]:

The disclosure of contents of Corporate Social Responsibility Policy in the Board’s report and on the company’s website, if any, shall be as per annexure attached to the Companies (Corporate Social Responsibility Policy) Rules, 2014.

We have discussed relevant rule from the Companies (Corporate Social Responsibility Policy) Rules, 2014 earlier here.

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