Board report for OPC and Small Companies


This was a long-standing demand to have less compliance for one person and small companies. Rule 8A introduced with effect from 31st July 2018 by the Companies (Accounts) Amendment Rules 2018. Let us discuss.

Lost track of amendment by the government

As we pointed out earlier also, even the government sometimes losses track of amendments in the company laws. This year, there are two amendments to the Companies (Accounts) Rules, 2014. Firstly MCA amended these rules on 27th February 2018 and now on 31st July 2018 both named as the Companies (Accounts) Amendment Rules, 2018 (none is officially second, yet). 

Rule 8A deals with one person companies and small companies. Hence we reproduce their definition once again.

One Person Companies

According to clause (62) of section 2 of the Act, “One Person Company” means a company which has only one person as a member.

Small Companies

According to clause (85) of section 2 of the Act, “small company” means a company, other than a public company,—

  • paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than ten crore rupees; and
  • turnover of which as per profit and loss account for the immediately preceding financial year does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than one hundred crore rupees.

Following companies shall not be called small companies, even if they satisfy the above-mentioned conditions:

(A) a holding company or a subsidiary company;

(B) a company registered under section 8; or

(C) a company or body corporate governed by any special Act;

Board’s Report for One Person Company and Small Company (Rule 8A)

The Board’s Report of One Person Company and Small Company shall be prepared based on the standalone financial statement of the company. It seems a copied provision from Rule 8 without much relevance here.

Contents:

The Board’s Report of One Person Company and Small Company shall be in abridged form and as per Rule 8A(1) and (2) contain the following:-

(a) the web address, if any, where annual return referred to in sub-section (3) of section 92 has been placed;

(b) number of meetings of the Board;

(c) Directors’ Responsibility Statement as referred to in sub-section (5) of section 134;

(d) 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;

(e) explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report;

(f) the state of the company’s affairs;

(g) the financial summary or highlights;

(h) material changes from the date of closure of the financial year in the nature of the business and their effect on the financial position of the company;

(i) the details of directors who were appointed or have resigned during the year;

(j) the details of or significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operations in future; and

(k) the particulars of contracts or arrangements with related parties referred to in sub-section (1) of section 188 in the Form AOC-2. [this clause is in Rule 8A(2)].

The Practical presentation

The presentation of a director report is significantly a job better presentation to the consumer – the investors. In the present case, this report is more for consumption of regulators, internal management and rarely bankers and investors. However, it is advisable to maintain a long-term perspective for presentation. Hence my suggested sequence is hereunder:

  • Financial summary;
  • State of affairs of the company;
  • Web – address of Annual Report (need not be an own address of the company);
  • Number of Board meetings (advisable with dates);
  • Detail of director appointed and resigned (advisable with all directors details);
  • Fraud report by the auditor (advisable with an introduction of auditor);
  • Explanation or comments on auditor’s report by Board;
  • Related Party transactions;
  • Material orders passed by regulators, courts, or Tribunals;
  • Directors responsibility Statement; and
  • Material changes after the close of financial year.

This Rule does not restrict a company to disclose or place any other information in the Director’s report. In case, a company opt to present a detailed director report, the requirement of Rule 8A for the report in abridge form should also be fulfilled.

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