Director’s Report has been an integral part of the financial statement of the Company. With the implementation of Companies Act, 2013, the Director’s Report has become synonymous to disclosing every activity that a Company indulges in thus providing mirror image of the Company’s actions during the financial year.
In Companies Act, 2013, lot of sections specify certain mandatory disclosures to be made in Director’s Report. This has resulted the Director’s Report to disclose not only financial position of the Company but also disclose legal and operational activities of the Company.
A Director’s Report is intended to explain its Stakeholders, overall financial position of the Company, its operations & business practices. In fact, Director’s Report also provides the performance and financial position of its group companies, like Subsidiary, Associates and Joint Venture Companies.
Responsibility of preparing Director’s Report:
Although, the Management of the Company is required to bind together Director’s Report in the financials, but the primary responsibility of preparing Directors Report rests with Secretarial Department of the Company. Based on the information collected from various departments and unit locations of the Company, the Compliance Officer prepares the draft Director’s Report, to be finalized by Directors for their signatures.
Signing of Director’s Report:
As per Section 134(6) of the Companies Act, 2013 and rules made thereunder, the Director’s Report shall be signed by Chairperson of the Company, provided the person is authorized by the Board. In case no Chairperson is appointed or available for signatures, then, Director’s Report shall be signed by atleast two Directors, one of whom shall be a Managing Director. In case of One Person Company having single Director, it shall be signed by such one Director only.
Mandatory Content of Director’s Report:
This is the most critical part of the Director’s Report, in addition to general disclosures, the following mandatory disclosures shall be required to be made in Director’s Report (below list is not exhaustive, the Company may add more details as per their requirement):
- Information related to Financials:
- Financial highlights of the Company
- Particulars of Loans, Investments and Guarantees given/ accepted by the Company
- Particulars of Contracts and Arrangement with Related Parties and transactions thereof in Form AOC-2
- Dividend recommendations and declarations, if any
- Amount transferred to Reserves and Surplus
- Details of Deposits accepted and repaid during the year
- Financial performance of Subsidiary, Joint Venture and Associate Company
- Information related to Legal Affairs:
- Director’s Responsibility Statement
- Extract of Annual Return in Form MGT-9
- Total Board Meetings held during the year
- Criteria for appointment, remuneration and evaluation of Board including Independent Directors
- Details about the change in Directors and Key Managerial Personnel during the year
- Disclosures about the Statutory/ Secretarial/ Cost Auditor appointment and changes thereof
- Explanations to each qualifications made by Auditors of the Company
- Issue of Equity Shares with differential voting rights, issue of Sweat Equity Shares, or Employees Stock Option Schemes
- Provisions made by the Company to buy back its own share capital from employees of the Company
- Disclosures about appointment and re-appointment of Independent Directors
- Disclosures about Managerial Remuneration
- Disclosures about implementation of adequate systems to ensure compliance of all applicable laws
- Changes made by the Directors in their Disclosures during the year
- Details regarding Extra Ordinary General Meeting of the Company
- Changes in the name of the Company during the year
- Changes in the Financial Year of the Company
- Disclosures about the steps taken by the company to mitigate fraud
- Fraud Reporting mechanism
- Disclosures about the various policies adopted by the Company, like CSR Policy, Risk Management Policy, Whisle Blower Policy, etc
- Disclosures regarding adoption and implementation of Policy on Prevention of Sexual Harassment of Women at Workplace
- Measures adopted for implementation of Risk Management Policy, for mitigating risks
- Implementation of CSR Policy and initiatives taken by the Company
- Disclosures about non-expenditure of desired amount on CSR activities
- Formal Evaluation Criteria for performance evaluation of Board, Committees and Individual Directors
- Disclosures regarding constitution of various committees of the Board
- Any orders passed by the Court
- Details of employees drawing salary above prescribed limits
- Secretarial Audit Report shall be annexed with Board Report
- Information related to Business Operations:
- Brief description about the working of the Company during the past year
- Disclosures about change in nature or objectives of the Business
- Material changes affecting financial position of the Company
- Disclosures about conservation of energy, technology absorption and foreign exchange earnings and outgo
- Director’s overall perception for future outlook of the Company
