Understanding The Report of Board of Directors
The Companies Act states that:
There shall be attached to every balance sheet laid before a company in the general meeting, a report by its Board of directors, with respect to—
(a) the state of the company’s affairs;(b) the amounts, if any, which it proposes to carry to any reserves in such balance sheet;(c) the amount, if any, which it recommends should be paid by way of dividend;(d) any material changes and commitments affecting the financial position of the company;(e) the conservation of energy, technology absorption, foreign exchange earnings and outgo, & in such manner as may be prescribed.
The Board’s report shall deal with any changes which have occurred during the financial year—
(a) in the nature of the company’s business;(b) in the company’s subsidiaries or in the nature of the business carried on by them; and(c) generally in the classes of business in which the company has an interest.
Further, the Board’s report shall also include a statement showing the name of every employee of the company who— (i) if employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than such sum as may be prescribed. (ii) if employed for a part of the financial year, was in receipt of remuneration for any part of that year, at a rate which, in the aggregate, was not less than such sum per month as may be prescribed. OR (iii) if employed throughout the financial year or part thereof, was in receipt of remuneration in that year which, in the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the managing director or whole-time director or the manager and holds by himself or along with his spouse and dependent children, not less than two per cent, of the equity shares of the company. Also, The statement shall also indicate, — (i) whether any such employee is a relative of any director or manager of the company and if so, the name of such director, and (ii) such other particulars as may be prescribed.
The Directors Responsibility Statement
The Board’s report shall also include a Directors’ Responsibility Statement, indicating (i) that in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; (ii) that the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company. (iii) that the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; (iv) that the directors had prepared the annual accounts on a going concern basis.
Disclosures in the Board’s Report
The Board’s report and any addendum thereto shall be signed by its chairman if he is authorized in that behalf by the Board; and where he is not so authorized, shall be signed by such number of directors as are required to sign the balance sheet and the profit and loss account of the company.
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