Joint Programme of Pune Chapter / Branch of ICSI & ICAI New Disclosures in Annual Report under Companies Act, 2013 J Sridhar 16/05/2015 Joint prog ICSI/ ICAI- Pune1

New disclosures in annual report Joint prog ICSI/ ICAI- Pune2  Contents:  Requirements of Section 134 – Board Report  Requirements under other provisions in the Act about disclosures in Board Report  Requirements under the Companies (Accounts) Rules, 2014  Requirements under Section 129 – Financial Statements  What are not covered  Provisions where there are nil / no material changes to the 1956 Act  Provisions of Schedule III  Provisions of clause 49 of listing agreement on new disclosures

Matters to be included in Board Report Extract of Annual Return – as under S 92(3) – form MGT.9 Number of meetings of the Board Directors’ Responsibility Statement Statement on declaration given by IDs under S 149(6) For companies covered under S 178(1), policy on directors’ appointment and remuneration, including criteria and other matters as in S 178(3) Joint prog ICSI/ ICAI- Pune3

Board Report (contd.)  Explanations or Comments by Board on qualification/ reservation/ adverse comment by auditor / secretarial auditor  Particulars of loans, investments under S 186  Particulars of contracts or arrangements with Related Parties under S 188 – in Form AOC-2  State of company’s affairs  Amounts, if any, proposed to be carried to reserves Joint prog ICSI/ ICAI- Pune4

Board Report (contd.)  Material changes and commitments affecting financial position which have occurred after the end of the financial year upto the date of report  Conservation of energy, technology absorption, foreign exchange earnings and outgo  Statement on risk management policy, including identification of risk which may threaten the existence of the company  Details about the policy developed and implemented on CSR initiatives  For listed & specified public companies, formal annual evaluation of board performance Joint prog ICSI/ ICAI- Pune5

Board Report (contd.) Companies (Accounts) Rules, 2014 – Rule 8  Report to be based on standalone financial statements  A separate section on the performance & financial position of subsidiaries, associates and joint venture companies included in the consolidated financial statements  Particulars of contracts or arrangements with Related Parties under S 188(1) in AOC-2  Conservation of energy –  Steps taken for conservation / utilizing alternative sources of energy / capital investment on energy conservation equipments. Joint prog ICSI/ ICAI- Pune6

Board Report (contd.) Technology absorption  Efforts made towards technology absorption  Benefits derived like product improvement, cost reduction, product development or import substitution  In case of imported technology, details of technology imported, year of import, whether absorbed, reasons for non-absorption etc.  Expenditure on R&D Foreign Exchange earnings and outgo  Actual inflows and outflows Joint prog ICSI/ ICAI- Pune7

Board Report (contd.) Every listed company and public company with paid-up capital of Rs.25 cr. or more at the end of the preceding financial year to include a statement about the formal annual evaluation of Board, its committees and individual directors Report also to contain –  Financial summary or highlights  Change in nature of business  Details of directors or KMP who were appointed or have resigned during the year  Names of companies which have become or ceased to be subsidiaries, joint ventures or associate companies  Details of deposits – accepted, unpaid, defaults etc. Joint prog ICSI/ ICAI- Pune8

Board Report (contd.)  Deposits not in compliance  Significant and material orders passed by regulators or courts or tribunals impacting the going concern status and company’s operations in future  Details in respect of adequacy of internal financial controls with reference to financial statements Disclosures about CSR Policy As per annexure attached to Companies (CSR Policy) Rules, 2014, Joint prog ICSI/ ICAI- Pune9

Board Report (contd.) Extracts of Annual Return (MGT-9) – contents  Registration and other details  Principal business activities of the company  Particulars of holding, subsidiary and associate companies  Shareholding Pattern – change in promoters’ holdings, change in Top 10 shareholders’ holdings, shareholdings of directors & KMP  Indebtedness  Remuneration of directors & KMP  Penalties / punishment / compounding of offences Joint prog ICSI/ ICAI- Pune10

Board Report (contd.) Directors’ Responsibility Statement shall state the following:  In the preparation of annual accounts, applicable accounting standards have been followed, explanation on material departures;  Accounting policies selected and applied consistently  Proper care taken for maintenance of adequate accounting records for safeguarding the assets and preventing & detecting frauds;  Annual accounts prepared on a going concern basis;  In case of listed companies, have laid down internal financial controls which are adequate and operating effectively; Joint prog ICSI/ ICAI- Pune11

Board Report (contd.)  Proper systems devised to ensure compliance with the provisions of all applicable laws and such systems were adequate and operating effectively; CSR Policy Report – contents  Brief outline of policy, including overview of projects or programs to be undertaken  Composition of CSR committee  Average net profit for last three financial years  Prescribed CSR expenditure Joint prog ICSI/ ICAI- Pune12

Board Report (contd.)  Details of CSR spent  Total amount to be spent  Amount unspent  Manner in which spent  Project identified  Sector of Project  Location of Project  Amount outlay / spent / direct or through implementing agency  Responsibility statement of CSR committee Joint prog ICSI/ ICAI- Pune13

Board Report (contd.) Other disclosures (event-based) – a few major ones  Details of equity shares with differential rights – S 43  Details of sweat equity shares – S 54  Details of Employee Stock Option schemes – S 62  Reasons for revision of financial statement or report of Board – S 131  Composition of CSR committee – S 135(2)  Contents of CSR Policy & other details – S 135(5)  Disclosure where independent director is appointed for more than 5 years by special resolution – S 149(10) Joint prog ICSI/ ICAI- Pune14

Board Report (contd.)  Composition of audit committee; reasons for non-acceptance of recommendation by audit committee – S 177(8)  Details of establishment of vigil mechanism – S 177(10)  Remuneration Policy for directors, KMPs & others – S 178(3)  Managing Director in receipt of commission from holding or subsidiary company – S 197(14)  Secretarial Audit Report for every listed company and public company with paid-up capital of Rs.50 cr. or more – S 204(1)  Qualification by PCS in Secretarial Audit Report – S 204(3) Joint prog ICSI/ ICAI- Pune15

Financial Statement Financial Statements shall  give a true and fair view of the state of affairs of the company  Comply with accounting standards under S 133  Shall be in form as provided in Schedule III Items therein shall be in accordance with accounting standards Where a company has one or more subsidiaries – it shall in addition –  Prepare a consolidated financial statement of the company and of all subsidiaries in the same form and manner  Company shall attach a separate statement containing salient features of financial statements of its subsidiaries in Form AOC-1 Joint prog ICSI/ ICAI- Pune16

Financial Statements (contd.)  The term “subsidiary” shall include associate company and joint venture  Provisions applicable to preparation, adoption and audit of financial statements of a holding company to apply mutatis mutandis to consolidated financial statements  Manner of consolidation shall be in accordance with Schedule III and applicable accounting standards  Transitional provisions – accounting standards specified in 1956 Act shall be deemed to be AS under the Act, until notification.  Currently notified Joint prog ICSI/ ICAI- Pune17

New Disclosures in Annual Report  THANK YOU Joint prog ICSI/ ICAI- Pune18