The director’s report under Section 134 of the Companies Act, 2013 is the board’s account of the company’s performance and governance. The report must contain the disclosures prescribed by Section 134(3), and it must comply with the Secretarial Standard SS-4. For a listed company, the report must also contain the corporate governance report and the other disclosures required by the LODR.
The Core Disclosures
The core disclosures include the web link of the annual return, the number of board meetings, the directors’ responsibility statement, the details of related party transactions in Form AOC-2, the explanation for any auditor qualification, the state of the company’s affairs, the material changes, the details of loans and investments, the risk management policy, the CSR contribution, the conservation of energy and technology absorption, and the foreign exchange earnings and outgo.
The Related Party Transaction Disclosure
The related party transaction disclosure under Section 134(3)(h) is one of the most scrutinised. The company must disclose the transactions that are not at arm’s length and the transactions that are material. The disclosure must be in Form AOC-2, and it must be signed by the company secretary or a director.
The Listed Company Overlay
A listed company must include the corporate governance report, the CEO and CFO certification, and the business responsibility and sustainability report where applicable. The report must also disclose the compliance with the LODR and the secretarial standards.
The Checklist
A company should use a checklist to ensure that every disclosure is included. The checklist should be updated for the amendments to the Act and the rules, and it should be reviewed by the company secretary and the auditor before the report is adopted by the board.
Call to Action
Anuj Desai & Associates advises companies on the director’s report disclosures—from the Section 134(3) checklist and the Form AOC-2 to the corporate governance report and the LODR overlay. If your board’s report is due, we can help you ensure that it is complete and compliant.
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