EFFECTIVE DATE This Standard shall come into effect from 1st October, 2018.
This Standard is issued by the Council of the Institute of Company Secretaries of India and may be called the Secretarial Standard-4 (SS-4) on “Report of the Board of Directors”.
The Secretarial Standards integrate, harmonise and standardize the diverse Secretarial practices followed by the corporate so as to promote uniformity and consistency
The Companies Act, 2013, requires the Board of Directors of every company to attach its report to the financial statements to be laid before the members at the annual general meeting.
The Board’s Report is an important means of communication by the Board of Directors of a company with its stakeholders. The Board’s Report provides the stakeholders with both financial and non-financial information, including the performance and prospects of the company, relevant changes in the management and capital structure, recommendations as to the distribution of profits, future and on-going programmes of expansion, modernisation and diversification, capitalisation of reserves, further issue of capital and other relevant information.
The Board’s Report of a One Person Company (OPC) and Small Company shall be prepared in the abridged form as prescribed by the Central Government.
SECRETARIAL STANDARD PART I:
DISCLOSURES - The Report shall, inter alia, include the following:
COMPANY SPECIFIC INFORMATION
1.1 Financial summary and highlights/Financial Results
1.2 Amount, if any, which the Board proposes to carry to any reserves
The amount proposed to be transferred to any reserves of the company. If no amount is proposed to be transferred to reserves, a statement to that effect shall be included.
The amount of dividend per share and the percentage thereof which the Board recommends for the year and the dividend distribution tax thereon.
The total amount of dividend for the year.
1.4 Major events occurred during the year
a) State of the company’s affairs/Business Overview
b) Change in the nature of business In case the company has commenced any new business or discontinued/sold or disposed off any of its existing businesses during the year, the Report shall disclose the details of the same highlighting the key focus areas.
c) Material changes and commitments, if any, affecting the financial position of the company,
1.5 Details of revision of financial statement or the Report
In case the company has revised its financial statement or the Report in respect of any of the three preceding financial years either voluntarily or pursuant to the order of a judicial authority, the detailed reasons for such revision shall be disclosed in the Report of the year.
Overview of the industry and important changes in the industry during the last year;
CAPITAL AND DEBT STRUCTURE
Any changes in the capital structure of the company during the year.
3.1 Issue of shares or other convertible securities
3.2 Issue of equity shares with differential rights
3.3 Issue of Sweat Equity Shares
3.4 Details of Employee Stock Options
3.5 Shares held in trust for the benefit of employees where the voting rights are not exercised directly by the employees
3.6 Issue of debentures, bonds or any non-convertible securities
3.7 Issue of warrants
CREDIT RATING OF SECURITIES
The disclosure shall be made regarding all basic details of whole process.
INVESTOR EDUCATION AND PROTECTION FUND (IEPF)
The disclosure shall include the following:
(a) details of the transfer/s to the IEPF made during the year
(b) details of the resultant benefits arising out of shares already transferred to the IEPF;
(c) year wise amount of unpaid/unclaimed dividend lying in the unpaid account upto the Year and the corresponding shares, which are liable to be transferred to the IEPF, and the due dates for such transfer;
6.1 Directors and Key Managerial Personnel
The disclosure shall be made regarding names of the persons who have been appointed / ceased to be Directors and/or Key Managerial Personnel of the company during the year or after the end of the year and up to the date of the Report and mode of such appointment/cessation.
6.2 Independent Directors
The disclosure shall include the following: (a) in case of appointment of Independent Directors, the justification for choosing the proposed appointees for appointment as Independent Directors; and (b) in case of re-appointment after completion of the first term, the rationale for such re-appointment.
6.3 Declaration by Independent Directors and statement on compliance of code of conduct
6.4 Board Meetings
The number and dates of meetings of the Board held during the year shall be disclosed in the Report.
The Report shall disclose: (a) Composition of Committees constituted by the Board under the Act and the Listing Regulations as well as changes in their composition, if any, during the year; (b) The number and dates of meetings of such committees held during the year.
6.6 Recommendations of Audit Committee
Where the Board has not accepted any recommendation of the Audit Committee, a statement to that effect shall be disclosed in the Report along with the reasons for such non-acceptance.
6.7 Company’s Policy on Directors’ appointment and remuneration
The Report of every listed public company and other prescribed class of companies shall disclose company’s policy on directors’ appointment and remuneration and the criteria for determining qualifications, positive attributes and independence of a Director.
6.8 Board Evaluation
The Report of every listed company and other prescribed class of public companies shall include a statement indicating the manner in which formal annual evaluation of the performance of the Board, its Committees and of individual Directors has been made.
6.9 Remuneration of Directors and Employees of Listed Companies
The following disclosures shall be made, either in the Report or by way of an annexure thereto:
(a) the number of permanent employees on the rolls of the company;
(b) the ratio of remuneration of each Director to the median remuneration of the employees of the company for the year;
(c) the percentage increase in remuneration of each Director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the year;
(d) average percentile increase already made in the salaries of employees other than managerial personnel in the last year.
(e) In addition to the above, the Report shall include a statement indicating: (a) names of top ten employees of the company in terms of remuneration drawn. Employees who have resigned / retired during the year shall also be considered for this purpose.
In case of companies having less than ten employees, such statement shall include details of all employees (i) whether any such employee is a relative of any Director or Manager of the company and if so, the name of such Director or Manager.
Particulars of employees posted and working in a country outside India, not being Directors or their relatives, drawing more than sixty lakh rupees per year or five lakh rupees per month, as the case may be, as may be decided by the Board, need not be circulated to the members in the Report, but such particulars shall be filed with the Registrar of Companies while filing the financial statement and the Report.
6.10 Remuneration received by Managing/Whole time Director from holding or subsidiary company
In case the Managing/Whole time Director of the company is in receipt of any commission from the company, and also receives any remuneration or commission from its holding company or subsidiary company, details of such remuneration or commission shall be disclosed in the Report.
6.11 Directors’ Responsibility Statement
The Report shall include brief Directors’ Responsibility
6.12 Internal Financial Controls
Details in respect of adequacy of internal financial controls with reference to the financial statement.
6.13 Frauds reported by the Auditor
Details in respect of frauds reported by the Auditor (Statutory Auditor, Secretarial Auditor or Cost Auditor) to the Audit Committee/ Board, as the case may be, and the frauds reported to the Central Government shall be disclosed in the Report.
DISCLOSURES RELATING TO SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES
7.1 Report on performance and financial position of the subsidiaries, associates and joint ventures
In case of companies having subsidiaries, associates and joint ventures, the Report shall include a separate section highlighting the performance of each of the subsidiaries, associates and joint venture companies and their contribution to the overall performance of the company.
7.2 Companies which have become or ceased to be subsidiaries, associates and joint ventures
During the year or at any time after the closure of the year and till the date of the Report, if the company has acquired or formed any new subsidiary, associate or joint venture, details of such companies shall be disclosed.
DETAILS OF DEPOSITS
The disclosure shall include the following:
(a) details of deposits accepted during the year;
(b) deposits remaining unpaid or unclaimed as at the end of the year;
(c) whether there has been any default in repayment of deposits or payment of interest thereon during the year
(d) details of deposits which are not in compliance with the requirements of the Act;
(e) any other relevant issues to be noted.
PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS
Particulars of the loans given, investments made, guarantees given or securities provided during the year and the purpose for which the loans / guarantees / securities are proposed to be utilised by the recipient of such loan / guarantee / security.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
The disclosure shall include contracts / arrangements / transactions with related parties which are not at arm’s length basis; (b) material contracts / arrangements / transactions with related parties which are at arm’s length basis; (c) contracts / arrangements with related parties which are not in the ordinary course of business and justification for entering into such contract. Such disclosure in the prescribed form shall be annexed to the Report.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Report shall disclose about the CSR policy of the company and the CSR initiatives taken during the year.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
The disclosure shall include the following:
(a) Conservation of energy
(b) Technology absorption
(c) Foreign exchange earnings and Outgo.
In cases where such disclosures are not applicable, the Report shall include a statement to that effect
A statement indicating the development and implementation of a risk management policy for the company.
DETAILS OF ESTABLISHMENT OF VIGIL MECHANISM
Every listed company and other prescribed class of companies shall disclose in its Board’s Report, details of establishment of a vigil mechanism.
MATERIAL ORDERS OF JUDICIAL BODIES /REGULATORS
Details of significant and material orders passed by any Regulator, Court, Tribunal, Statutory and quasi-judicial body, impacting the going concern status of the company and its future operations shall be disclosed.
Names of the Statutory Auditor, Cost Auditor and Secretarial Auditor and details of any change in such Auditors, during the year and up to the date of the Report due to resignation / casual vacancy / removal / completion of term shall be disclosed in the Report.
SECRETARIAL AUDIT REPORT
The Secretarial Audit Report shall be annexed to the Report.
EXPLANATIONS IN RESPONSE TO AUDITORS’ QUALIFICATIONS
The Report shall include explanations or comments on every qualification, reservation or adverse remark or disclaimer made in the Auditor’s Report and the Secretarial Auditor’s Report.
COMPLIANCE WITH SECRETARIAL STANDARDS
The Report shall include a statement on compliance of applicable Secretarial Standards and other Secretarial Standards voluntarily adopted by the company.
CORPORATE INSOLVENCY RESOLUTION PROCESS INITIATED UNDER THE INSOLVENCY AND BANKRUPTCY CODE, 2016 (IBC)
The disclosure shall include the details of any application filed for corporate insolvency resolution process, by a financial or operational creditor or by the company itself under the IBC before the NCLT
FAILURE TO IMPLEMENT ANY CORPORATE ACTION
In case the company has failed to complete or implement any corporate action within the specified time limit, the Report shall disclose the same and the reasons for such failure.
A copy of the annual return shall be placed on the website of the company, if any, and the web-link of such annual return shall be disclosed in the Report.
Other disclosures shall include the following: (a) a statement, wherever applicable, that the consolidated financial statement is also being presented in addition to the standalone financial statement of the company. (b) key initiatives with respect to Stakeholder relationship, Customer relationship, Environment, Sustainability, Health and Safety. (c) reasons for delay, if any, in holding the annual general meeting; (d) a statement as to whether cost records is required to be maintained by the company pursuant to an order of the Central Government and accordingly such records and accounts are maintained.
ADDITIONAL DISCLOSURES UNDER LISTING REGULATIONS
24.1 Statement of deviation or variation
Companies which have listed their specified securities shall furnish in the Report an explanation for any deviation or variation in connection with certain terms of a public issue, rights issue, preferential issue etc.
24.2 Management Discussion and Analysis Report (MDAR)
In case of companies which have listed their specified securities, the Report shall include an MDAR, either as a part of the Report or as an annexure to the Report.
24.3 Certificate on Compliance of conditions of CorporateGovernance
Companies which have listed their specified securities, shall annex with the Report a certificate obtained from either the Statutory Auditor or a practicing Company Secretary regarding compliance of the conditions of corporate governance.
24.4 Suspension of Trading
In case the securities of the company are suspended from trading, the Report shall explain the reasons thereof.
DISCLOSURES PERTAINING TO THE SEXUAL HARASSMENT OF WOMEN AT THE WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013
The disclosure shall include the following:
(a) a statement that the company has complied with the provision relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013.
PART II: OTHER REQUIREMENTS
APPROVAL OF THE REPORT
The Report shall be considered and approved by means of a resolution passed at a duly convened meeting of the Board.
SIGNING OF THE REPORT
The Report shall be signed by the Chairman of the company, if authorised in that behalf by the Board or by two Directors one of whom shall be the Managing Director or in the case of a One Person Company, by one Director. The financial statement, including consolidated financial statement, if any, shall be approved by the Board before they are signed on behalf of the Board. The statements so approved are required to be signed on behalf of the Board by the Chairman of the company if authorised in that behalf by the Board or by two Directors one of whom shall be the Managing Director and the Chief Executive Officer, the Chief Financial Officer and the Company Secretary of the company, wherever they are appointed or in the case of a One Person Company, by one Director. The financial statement so approved and signed on behalf of the Board are required to be submitted to the auditor(s) for their report thereon. The financial statement is thus signed by the auditor(s) and the audit report thereon is submitted to the Board after such approval.
The annexures to the Report shall be signed in the similar manner as the Report, except the Report on CSR activities of the company, which is required to be signed by the Chief Executive Officer or the Managing Director or any other Director of the company and by the Chairman of the CSR Committee of the company.
28.1 Right of Members to have Copies of the Report
A copy of the Report along with the financial statement and the Auditor’s Report shall be sent, either physically or in electronic form, to every member at least twentyone clear days in advance of the annual general meeting. The copies of the above documents can be sent less than twenty-one clear days in advance of the annual general meeting, if it is so agreed by members: (a) holding, if the company has a share capital, majority in number of members entitled to vote and who represent not less than ninety-five per cent of such part of the paid-up share capital of the company as gives a right to vote at the meeting; or (b) having, if the company has no share capital, not less than ninety-five per cent of the total voting power exercisable at the meeting. In case of section 8 companies, the said documents shall be sent to the members not less than fourteen clear days before the date of the annual general meeting.
28.2 Placing of the Report on the Website
The Report shall be placed on the website of the company, if any.
FILING AND SUBMISSION OF THE REPORT
29.1 The Report along with the audited financial statement of the company shall be filed with the Registrar of Companies. The resolution passed by the Board approving such Report shall also be filed with the Registrar of Companies. However private companies are not required to file such resolution with the Registrar of Companies.
29.2 Every listed company shall submit to the stock exchanges on which its securities are listed, its financial statement together with a copy of the Report within twenty one working days of it being approved and adopted in the annual general meeting.
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