Notes of Transparency and Disclosures Company Law CS Executive Chapter 9

Transparency and Disclosures

CS Executive Module 1 Notes

Under Companies Act, 2013, following shall be disclosed in the Board’s Report

  • Disclosures under Section 134(3)
  • Issue of Equity Shares with differential rights [Rule 4(4) of the Companies (Share Capital and Debentures) Rules, 2014] [Already discussed in the Chapter ‘Capital Structure’]
  • Issue of Sweat Equity Shares [Rule 8(13) of Companies (Share Capital and Debentures) Rules, 2014]
  • Details of Employees Stock Option Scheme [Section 62(1)(b)]
  • Restrictions on purchase by company or giving of loans by it for purchase of its shares [Section 67]
  • Voluntary revision of Financial Statements or Board’s Report [Section 131(1)] [Already discussed in the Chapter ‘Accounts’]
  • Disclosures pertaining to Consolidated Financial Statements [Already discussed in the Chapter ‘Accounts’]
  • Disclosures under Section 134(3) [Already discussed in the Chapter ‘Accounts’]
  • Corporate Social Responsibility [Section 135]
  • Re-Appointments of an Independent Director [Section 149(10)] [Already discussed in the Chapter ‘Independent Director’]
  • Resignation of Director [Section 168(1)]
  • Composition of Audit Committee [Section 177(8)]
  • Details of Vigil Mechanism [Section 177(10)]
  • Policy relating to the remuneration for the directors, key managerial personnel and other employees [Section 178(4)]
  • Related party transactions [Section 188(2)]
  • Disclosures pertaining to remuneration of directors and employees [Section 197(12)]
  • Remuneration received by MD and WTD from holding or subsidiary companies [Section 197(14)]
  • Secretarial Audit Report [Section 204(1)]

Disclosure under Section 134(3)

According to Section 134(3), the Board’s Report shall include:

  1. the web address, if any, where annual return referred to in sub-section (3) of section 92 has been placed
  2. The extract of the annual return as provided under Section 92(3) in Form MGT-9.
  3. Number of meetings of the Board held in respective financial year.
  4. Directors’ Responsibility Statement
  5. Details in respect of frauds reported by auditors to the Audit Committee or the Board involving an amount lesser than Rupees One Crore [Section 143 (12)]
  6. A statement on declaration given by independent directors under section 149(6) about any change in the circumstances which may affect his status as an independent director.
  7. If company is covered under Section 178(1), company’s policy on directors’ appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and recommend to the Board a policy relating to the remuneration of directors, Key Managerial Personnel and other employees as specified under Section 178(3) [Section 178 deals with Nomination and Remuneration Committee and Stakeholders Relationship Committee] [Not applicable in case of Government Companies]
  8. Explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made—
    • by the auditor in his report under section 143; and
    • by the Secretarial Auditor in his secretarial audit report under Section 204(3);
    • Cost Audit Report under section 148 and
  9. Particulars of loans, guarantees, security and acquisition under section 186 (Loan & Investment by Company)
  10. Particulars of contracts or arrangements with related parties referred to in section 188(1) [Related Party Transactions] in the Form AOC 2 pursuant to Rule 8(2) of Companies [Accounts] Rules, 2014.
  11. The state of company’s affairs
  12. The amounts, if any, which it proposes to carry to any reserves as specified under Section 123(1) [Section related to Dividend]
  13. The amount, if any, which it recommends should be paid by way of dividend
  14. Material changes and commitments, if any, affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the report
  15. The conservation of energy, technology absorption, foreign exchange earnings and outgo, in such manner as prescribed in Rule 8(3) of the Companies (Accounts) Rules, 2014
  16. A statement indicating development and implementation of a risk management policy for the company including identification therein of elements of risk, if any, which in the opinion of the Board may threaten the existence of the company
  17. Details about the policy developed and implemented by the company on Corporate Social Responsibility initiatives taken during the year
  18. 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 (Rule 8(4) of the Companies (Accounts) Rules, 2014 – Applicable in case of listed company and every other public company having a paid up share capital of 25 crore rupees or more calculated at the end of the preceding financial year)
  19. Such other matters as may be prescribed [Rule 8(5) of the Companies (Accounts) Rules, 2014]

Rule 8 of Companies (Accounts) Rules, 2014 Matters to be Included in Board’s Report

1. The Board’s Report shall be prepared based on the stand alone financial statements of the company and shall report on the highlights of performance of subsidiaries, associates and joint venture companies and their contribution to the overall performance of the company during the period under Board’s report.
2 The Report of the Board shall contain the particulars of contracts or arrangements with related parties referred to in section 188(1) in the Form AOC-2.
3 The report of the Board shall contain the following information and details, namely:-
(A) Conservation of energy
  (i) the steps taken or impact on conservation of energy;
  (ii) the steps taken by the company for utilizing alternate sources of energy;
  (iii) the capital investment on energy conservation equipment;
(B) Technology absorption-
  (i)     the efforts made towards technology absorption;
  (ii)     the benefits derived like product improvement, cost reduction, product development or import substitution;
  (iii)    in case of imported technology (imported during the last three years reckoned from the beginning of the financial year)- (a)    the details of technology imported; (b)   the year of import; (c)    whether the technology been fully absorbed; (d)   if not fully absorbed, areas where absorption has not taken place, and the reasons thereof; and
  (iv)              the expenditure incurred on Research and Development.
(C) Foreign exchange earnings and Outgo- The Foreign Exchange earned in terms of actual inflows during the year and the Foreign Exchange outgo during the year in terms of actual outflows. Provided that the requirement of furnishing information and details under this sub-rule shall not apply to a government company engaged in producing defence equipment.
4 Every listed company and every other public company having a paid up share capital of 25 crore rupees or more calculated at the end of the preceding financial year shall include, in the report by its Board of directors, a statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its committees and individual directors.
5 In addition to the information and details specified in sub-rule (4), the report of the Board shall also contain-
  i) the financial summary or highlights;
   ii) the change in the nature of business, if any;
  iii) the details of directors or key managerial personnel who were appointed or have resigned during the year;
  iii)a a statement regarding opinion of the Board with regard to integrity, expertise and experience (including the proficiency) of the independent directors appointed during the year.
  (iv) the names of companies which have become or ceased to be its Subsidiaries, joint ventures or associate companies during the year;
  (v) the details relating to deposits, covered under Chapter V of the Act,-
  a. accepted during the year;
b. remained 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 and if so, number of such cases and the total amount involved-
  i at the beginning of the year;
ii maximum during the year;
iii at the end of the year;
iv the details of deposits which are not in compliance with the requirements of Chapter V of the Act;
v the details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operations in future;
vi the details in respect of adequacy of internal financial controls with reference to the Financial Statements.
vii a disclosure, as to whether maintenance of cost records as specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013, is required by the Company and accordingly such accounts and records are made and maintained,
viii a statement that the company has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 [14 of 2013]
ix the details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year along with their status as at the end of the financial year.
x the details of difference between amount of the valuation done at the time of one time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof.
This rule shall not apply to One Person Company or Small Company.
According to Section 134(3A), the Central Government may prescribe an abridged Board’s report, for the purpose of compliance with this section by One Person Company or small company

Rule 8A of Companies (Accounts) Rules, 2014 Matters to be included in Board’s Report for One Person Company and Small Company

  1. The Board’s Report of One Person Company and Small Company shall be prepared based on the stand alone financial statement of the company, which shall be in abridged form and contain the following:-
  • the web address, if any, where annual return referred to in sub-section (3) of section 92 has been placed;
  • number of meetings of the Board;
  • Directors’ Responsibility Statement as referred to in section 134(5);
  • details in respect of frauds reported by auditors under section 143(12) other than those which are reportable to the Central Government;
  • explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report;
  • the state of the company’s affairs;
  • the financial summary or highlights;
  • material changes from the date of closure of the financial year in the nature of business and their effect on the financial position of the company;
  • the details of directors who were appointed or have resigned during the year;
  • the details or significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operations in future.

2. The Report of the Board shall contain the particulars of contracts or arrangements with related parties referred to in section 188(1) in the Form AOC-2.

Disclosures related to Issue of Sweat Equity Shares

[Rule 8(13) of Companies (Share Capital and Debentures) Rules, 2014]

The Board of Directors shall, inter alia, disclose in the Directors’ Report for the year in which such shares are issued, the following details of issue of sweat equity shares namely:-

  • the class of director or employee to whom sweat equity shares were issued;
  • the class of shares issued as Sweat Equity Shares;
  • the number of sweat equity shares issued to the directors, key managerial personnel or other employees showing separately the number of such shares issued to them , if any, for consideration other than cash and the individual names of allottees holding one percent or more of the issued share capital;
  • the reasons or justification for the issue;
  • the principal terms and conditions for issue of sweat equity shares, including pricing formula;
  • the total number of shares arising as a result of issue of sweat equity shares;
  • the percentage of the sweat equity shares of the total post issued and paid up share capital;
  • the consideration (including consideration other than cash) received or benefit accrued to the company from the issue of sweat equity shares;
  • the diluted Earnings Per Share (EPS) pursuant to issuance of sweat equity shares.

Disclosures related to Issue of Employees Stock Option Scheme

[Rule 12(9) of Companies (Share Capital and Debentures) Rules, 2014]

The Board of directors, shall, inter alia, disclose in the Directors’ Report for the year, the following details of the Employees Stock Option Scheme:

  • options granted;
  • options vested;
  • options exercised;
  • the total number of shares arising as a result of exercise of option;
  • options lapsed;
  • the exercise price;
  • variation of terms of options;
  • money realized by exercise of options;
  • total number of options in force;
  • employee wise details of options granted to;-
  1. key managerial personnel;
  2. any other employee who receives a grant of options in any one year of option amounting to five percent or more of options granted during that year.
  3. identified employees who were granted option, during any one year, equal to or exceeding one percent of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant;

Restrictions on purchase by company or giving of loans by it for purchase of its shares [Section 67]

According to Section 67(2), no public company shall give any financial assistance for the purpose of, or in connection with, a purchase or subscription made or to be made, by any person of or for any shares in the company or in its holding company.

But according to Section 67(2), a company may make provision for money

  • in accordance with any scheme approved by company through special resolution (SR) and
  • in accordance with such requirements as may be prescribed,

for the purchase of, or subscription for, fully paid-up shares in the company or its holding company,

  • if the purchase of, or the subscription for, the shares
    • held by trustees for the benefit of the employees or
    • held by the employee of the company;

Rule 16(4) of Companies (Share Capital and Debentures) Rules, 2014 provides that where the voting rights are not exercised directly by the employees in respect of shares to which the scheme for provision of money for purchase of or subscription for shares by employees or by trustees for the benefit of employees relates, the Board of Directors shall, inter alia, disclose in the Board’s report for the relevant financial year the following details, namely:-

  • the names of the employees who have not exercised the voting rights directly;
  • the reasons for not voting directly;
  • the name of the person who is exercising such voting rights;
  • the number of shares held by or in favour of, such employees and the percentage of such shares to the total paid up share capital of the company;
  • the date of the general meeting in which such voting power was exercised;
  • the resolutions on which votes have been cast by persons holding such voting power;
  • the percentage of such voting power to the total voting power on each resolution;
  • whether the votes were cast in favour of or against the resolution.

Directors’ Responsibility Statement [Section 134(5)]

Directors’ Responsibility Statement shall set out the following affirmations:

  • in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;
  • 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 at the end of the financial year and of the profit and loss of the company for that period;
  • 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;
  • the directors had prepared the annual accounts on a going concern basis; and
  • the directors, in the case of a listed company, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and
  • the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Re-Appointment of an Independent Director - Section 149(10)

Subject to the provisions of Section 152, an independent director shall hold office for a term up to five consecutive years on the Board of a company, but shall be eligible for reappointment on passing of a special resolution by the company and disclosure of such appointment in the Board’s report.

Thus, if an independent director is appointed by passing a special resolution after completing a term of five years, the Board’s report should contain a disclosure of such appointment.

Resignation of Director - Section 168(1)

A director may resign from his office by giving notice in writing to the company and the Board. Section 168(1) requires the Board to place the fact of resignation of a director in report of directors laid in the immediately following general meeting by the Company.

Composition of Audit Committee - Section 177(8)

The Board’s report shall disclose the following –

  • Composition of an Audit Committee
  • Where the Board had not accepted any recommendation of the Audit Committee, the same shall be disclosed in the report along with the reasons therefor.

Details of Vigil Mechanism - Section 177(10)

The details of establishment of Vigil mechanism shall be disclosed by the company on its website, if any, and in the Board’s report.

Policy relating to the remuneration for the directors, KMP and other employees – Section 178(4)

Section 178(3) and (4) provides that the Nomination and Remuneration Committee shall formulate and recommend to the Board a policy, relating to the remuneration for the directors, key managerial personnel and other employees. Such policy shall ensure that—

  • the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate directors of the quality required to run the company successfully;
  • relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and
  • remuneration to directors, key managerial personnel and senior management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the company and its goals.

Such policy shall be placed on the website of the company, if any, and the salient features of the policy and changes therein, if any, along with the web address of the policy, if any, shall be disclosed in the Board’s report.

Related party transactions – Section 188(2)

Every contract or arrangement entered into under Section 188(1) shall be referred to in the Board’s report along with the justification for entering into such contract or arrangement.

Disclosures pertaining to remuneration of directors and employees –Section 197(12)

Section 197(12) read with Rule 5 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 provides that Board’s Report of every listed company shall include:-

  • the ratio of the remuneration of each director to the median remuneration of the employees of the company for the financial year;
  • the percentage increase in remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year;
  • the percentage increase in the median remuneration of employees in the financial year;
  • the number of permanent employees on the rolls of company;
  • affirmation that the remuneration is as per the remuneration policy of the company.

The Board’s report shall include a statement showing the names of the top ten employees in terms of remuneration drawn and the name of every employee, who, –

  1. if employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than one crore and two lakh rupees;
  2. 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 eight lakh and fifty thousand rupees per month;
  3. 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 manager and holds by himself or along with his spouse and dependent children, not less than two percent of the equity shares of the company.

The statement referred to above shall include the following as under:

  1. designation of the employee;
  2. remuneration received;
  3. nature of employment, whether contractual or otherwise;
  4. qualifications and experience of the employee;
  5. date of commencement of employment;
  6. the age of such employee;
  7. the last employment held by such employee before joining the company;
  8. whether any such employee is a relative of any director or manager of the company and if so, name of such director or manager.

But the particulars of employees posted and working in a country outside India, not being directors or their relatives, drawing more than 60 lakh rupees per financial year or 5 lakh rupees per month, as the case may be, as may be decided by the Board, shall not be circulated to the members in the Board’s report, but such particulars shall be filed with the Registrar of Companies while filing the financial statements and Board’s Report.

These particulars shall be made available to any shareholder on a specific request made by him in writing before the date of such Annual General Meeting wherein financial statements for the relevant financial year are proposed to be adopted by shareholders and such particulars shall be made available by the company within 3 days from the date of receipt of such request from shareholders.

Disclosures in BOD’s Report under SEBI (Share Based Employee Benefits) Regulations, 2014

Regulation 14 of the Regulations provides that in addition to the information that a company is required to disclose, in relation to employee benefits under the Companies Act, 2013, the Board of directors of such a company shall also disclose the details of the scheme(s) being implemented, as specified by SEBI in this regard.

As per SS-4, the following disclosure are to be made in the Board’s Report.

  • The Board of directors in their report shall disclose any material change in the scheme(s) and whether the scheme(s) is / are in compliance with the SEBI (Share Based Employee Benefits) Regulations, 2014;
  • web-link of disclosures made on the website of the company, as required under SEBI (Share Based Employee Benefits) Regulations, 2014.

Disclosure Requirements under the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013

It is mandatory for the companies having more than 10 women employees.

Rule 14 of Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Rules, 2013 provides that the annual report which the Complaints Committee shall prepare shall contain following information-

  • Number of complaints of sexual harassment received in the year;
  • Number of complaints disposed off during the year;
  • Number of cases pending for more than 90 days;
  • Number of workshops or awareness programme against sexual harassment carried out;
  • Nature of action taken by the employer or District Officer.

Secretarial Audit Report

Section 204(1) read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 requires to annex the Secretarial Audit Report in the Form – MR 3 with the Board’s Report of the listed company and the following specified public companies:

  1. Every public company having a paid-up share capital of 50 crore rupees or more; or
  2. Every public company having a turnover of two hundred 50 crore rupees or more; or
  3. Every company having outstanding loans or borrowings from banks or public financial institutions of 100 crore rupees or more.

Such secretarial audit report under section 134, is required to be given by a Company Secretary in practice.

Approval of the Board’s Report

Originally, according to Rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014), Board’s Report should be considered, approved and signed at a meeting of the Board, convened in accordance with the provisions of the Act and shall not be dealt with in any meeting held through video conferencing or other audio visual means.

But, this rule is omitted by the Companies (Meetings of Board and its Powers) Amendment Rules, 2021.

It means now Board’s Report may be considered and approved

  • at a meeting of the Board held physically or
  • in any meeting held through video conferencing or other audio visual means

Signing of Board’s Report [Section 134(6)]

If authorised by the Board

  • Chairperson of the Company

If not authorised by the Board

  • at least two directors, one of whom shall be a Managing Director

 The Annual Report on CSR may be signed by the Chairman of the CSR Committee.

Circulation of the Board’s Report [Section 134(7)]

Along with a signed copy of every financial statement, including consolidated financial statement if any, the Board’s Report shall be issued, circulated or published.

 

Penalty for non-compliance of Section 134

The company shall be liable to a penalty of 3 lakh rupees and every officer of the company who is in default shall be liable to a penalty of 50,000 rupees.

Right of members to receive copies of financial statements, board’s report, etc. [Section 136]

  1. A copy of the financial statements, including consolidated financial statements, if any, auditor’s report and every other document required by law to be annexed or attached to the financial statements, which are to be laid before a company in its general meeting, shall be sent to
  • every member of the company,
  • every trustee for the debenture holder of any debentures issued by the company, and
  • all persons other than such member or trustee, being the person so entitled,

not less than 21 clear days (14 days in case of Section 8 Companies) before the date of the meeting.

If the copies of the documents are sent less than twenty-one days before the date of the meeting, they shall, notwithstanding that fact, be deemed to have been duly sent if it is so agreed by members—

  • holding, if the company has a share capital, majority in number entitled to vote and who represent not less than 95% of such part of the paid-up share capital of the company as gives a right to vote at the meeting; or
  • having, if the company has no share capital, not less than 95% of the total voting power exercisable at the meeting

In the case of a listed company, the provisions of this sub-section shall be deemed to be complied with,

  • if the copies of the documents are made available for inspection at its registered office during working hours for a period of 21 days before the date of the meeting and
  • a statement containing the salient features of such documents is sent to every member of the company and to every trustee for the holders of any debentures issued by the company not less than 21 days before the date of the meeting unless the shareholders ask for full financial statements.

Provided also that a listed company shall also place its financial statements including consolidated financial statements, if any, and all other documents required to be attached thereto, on its website, which is maintained by or on behalf of the company.

Provided also that every listed company having a subsidiary or subsidiaries shall place separate audited accounts in respect of each of subsidiary on its website, if any:

Provided also that a listed company which has a subsidiary incorporated outside India (herein referred to as “foreign subsidiary”)—

  • where such foreign subsidiary is statutorily required to prepare consolidated financial statement under any law of the country of its incorporation, the requirement of this proviso shall be met if consolidated financial statement of such foreign subsidiary is placed on the website of the listed company;
  • where such foreign subsidiary is not required to get its financial statement audited under any law of the country of its incorporation and which does not get such financial statement audited, the holding Indian listed company may place such unaudited financial statement on its website and where such financial statement is in a language other than English, a translated copy of the financial statement in English shall also be placed on the website.

2. A company shall allow every member or trustee of the holder of any debentures issued by the company to inspect the documents stated under sub-section (1) at its registered office during business hours.

Provided that every company having a subsidiary or subsidiaries shall provide a copy of separate audited or unaudited financial statements, as the case may be, as prepared in respect of each of its subsidiary to any member of the company who asks for it.

3. If any default is made in complying with the provisions of this section, the company shall be liable to a penalty of twenty-five thousand rupees and every officer of the company who is in default shall be liable to a penalty of five thousand rupees.

Filing of The Board’s Report [Section 137]

  1. A copy of the financial statements, including consolidated financial statement, if any, along with all the documents which are required to be or attached to such financial statements under this Act, duly adopted at the annual general meeting of the company, shall be filed with the Registrar within 30 days of the date of AGM.

    Provided that where the financial statements are not adopted at annual general meeting or adjourned annual general meeting, such unadopted financial statements along with the required documents shall be filed with the Registrar within 30 days of the date of annual general meeting and the Registrar shall take them in his records as provisional till the financial statements are filed with him after their adoption in the adjourned annual general meeting for that purpose:

    Provided further that financial statements adopted in the adjourned annual general meeting shall be filed with the Registrar within 30 days of the date of such adjourned AGM.

    Provided also that a OPC shall file a copy of the financial statements duly adopted by its member, along with all the documents which are required to be attached to such financial statements, within 180 days from the closure of the financial year:

    Provided also that a company shall, along with its financial statements to be filed with the Registrar, attach the accounts of its subsidiary or subsidiaries which have been incorporated outside India and which have not established their place of business in India.

    Provided also that in the case of a subsidiary which has been incorporated outside India (herein referred to as “foreign subsidiary”), which is not required to get its financial statement audited under any law of the country of its incorporation and which does not get such financial statement audited, the requirements of the fourth proviso shall be met if the holding Indian company files such unaudited financial statement along with a declaration to this effect and where such financial statement is in a language other than English, along with a translated copy of the financial statement in English.
  2. Where the annual general meeting of a company for any year has not been held, the financial statements along with the documents required to be attached under sub-section (1), duly signed along with the statement of facts and reasons for not holding the annual general meeting shall be filed with the Registrar within 30 days of the last date before which the annual general meeting should have been held.
  3. If a company fails to file the copy of the financial statements under sub-section (1) or sub-section (2), as the case may be, before the expiry of the period specified therein,
  • the company shall be liable
    • to a penalty of 10,000 rupees and
    • in case of continuing failure, with a further penalty of Rs. 100 for each day during which such failure continues, subject to a maximum of Rs. 2 lakh, and
  • the managing director and the Chief Financial Officer of the company, if any, and, in the absence of the managing director and the Chief Financial Officer, any other director who is charged by the Board with the responsibility of complying with the provisions of this section, and, in the absence of any such director, all the directors of the company, shall be shall be liable
    • to a penalty of Rs. 10,000 and
    • in case of continuing failure, with further penalty of Rs. 100 for each day after the first during which such failure continues, subject to a maximum of Rs. 50,000.

ANNUAL RETURN

While the Financial Statements give information on the financial performance of a company, Annual Return gives extensive disclosure and greater insight into the non-financial matters of the company and the people behind management of the company.

Section 92 of Companies Act, 2013 deals with the provisions of Annual Return. According to Section 92(1), every company shall prepare annual return. According to Rule 11 of Companies (Management and Administration) Rules 2014, every company shall file its annual return in Form No.MGT-7 except One Person Company (OPC) and Small Company. One Person Company and Small Company shall file annual return from the financial year 2020-2021 onwards in Form No.MGT-7A. [Susbstituted by the Companies (Management and Administration) Amendment Rules, 2021]

Content of Annual Return [Section 92(1)]

Annual Return shall contain following particulars as they stood on the close of the financial year regarding—

  • its registered office, principal business activities, particulars of its holding, subsidiary and associate companies;
  • its shares, debentures and other securities and shareholding pattern;
  • its indebtedness [Omitted by Companies (Amendment) Act, 2017 – Notified]
  • its members and debenture-holders along with changes therein since the close of the previous financial year;
  • its promoters, directors, key managerial personnel along with changes therein since the close of the previous financial year;
  • meetings of members or a class thereof, Board and its various committees along with attendance details;
  • remuneration of directors and key managerial personnel (in case of private companies this clause shall be read as “aggregate amount of remuneration drawn by directors”;
  • penalty or punishment imposed on the company, its directors or officers and details of compounding of offences and appeals made against such penalty or punishment;
  • matters relating to certification of compliances, disclosures as may be prescribed;
  • details, as may be prescribed, in respect of shares held by or on behalf of the Foreign Institutional Investors indicating their names, addresses, countries of incorporation, registration and percentage of shareholding held by them [Omitted by Companies (Amendment) Act, 2017 – Notified]; and such other matters as may be prescribed

Central Government may prescribe abridged form of annual return for “One Person Company, small company and such other class or classes of companies as may be prescribed.

According to Secretarial Standards on Board Meetings (SS-1)

  • annual return shall disclose the number and dates of meetings of the board and committees held during the financial year indicating the number of meetings attended by each director.

According to Secretarial Standard on General Meetings (SS-2)

  • annual return shall disclose the date of Annual General Meeting (AGM) held during the financial year.

Certification of Annual Return [Section 92(2) and Rule 11 of Companies (Management and Administration) Rules 2014]

In case of

  • listed company or
  • a company having
    • paid-up share capital of Rs. 10 crore or more or
    • turnover of Rs. 50 crore or more,

annual return shall be certified by a Company Secretary in practice stating that the annual return discloses the facts correctly and adequately and that the company has complied with all the provisions of this Act. The certificate shall be in Form No. MGT.8.

According to Section 92(6), if a company secretary in practice certifies the annual return otherwise than in conformity with the requirements of this section or the rules made thereunder, he shall be liable to a penalty of two lakh rupees. [Substituted by the Companies (Amendment) Act, 2020]

Signing of Annual Return [Section 91(1)]

Annual Return shall be signed by

  • a director and the company secretary, or
  • where there is no company secretary, by a company secretary in practice.

In relation to One Person Company, small company and and private company (if such private company is a start-up)

  • the annual return shall be signed by
    • the company secretary, or
    • where there is no company secretary, by the director of the company.

Annual return on the website of the company [Section 92(3)]
Every company shall place a copy of the annual return on the website of the company, if any, and the web-link of such annual return shall be disclosed in the Board’s report.

Filling of Annual Return with ROC [Section 92(4)]
Every company shall file with the Registrar a copy of the annual return,

  • within 60 days from the date on which the annual general meeting is held or
  • where no AGM is held in any year within 60 days from the date on which the AGM should have been held together with the statement specifying the reasons for not holding the AGM.

Annual Return shall be filed in MGT-7/MGT 7A (in case of foreign company the filing is to be done in FC-4)
Preservation of Annual Return [Rule 15(3) of the Companies (Management and Administration) Rules, 2014]
Copies of all annual returns prepared under section 92 and copies of all certificates and documents required to be annexed thereto shall be preserved for a period of 8 years from the date of filing with the Registrar.

Penalty in case of contravention [Section 92(5)]
If any company fails to file its annual return, such company and its every officer who is in default shall be liable to a penalty of Rs. 10,000 and in case of continuing failure, with further penalty of Rs. 100 for each day during which such failure continues, subject to a maximum of Rs. 2 lakh in case of a company and Rs. 50,000 in case of an officer who is in default. [Substituted by the Companies (Amendment) Act, 2020]

ANNUAL REPORT

[Regulation 34 of SEBI (LODR) 2015]

1. The listed entity shall submit to the stock exchange and publish on its website-
  a. a  copy  of  the  annual  report  sent  to  the  shareholders  along  with the  notice  of  the annual  general  meeting  not  later  than  the  day  of  commencement  of  dispatch  to  its shareholders;
      b. in  the  event  of  any  changes  to  the  annual  report,  the  revised  copy  along  with  the details  of  and  explanation  for  the  changes  shall  be  sent  not  later  than  48  hours  after  the annual general meeting.
2 The annual report shall contain the following:
  a. audited financial statements i.e. balance sheets, profit and loss accounts etc. ,and Statement  on  Impact  of  Audit  Qualifications, if applicable;
b. consolidated financial statements audited by its statutory auditors;
c cash  flow  statement  presented  only  under  the  indirect  method
d. directors report;
e management discussion and analysis report -either as a part of directors report or addition thereto;
f for   the top 1000 listed   entities   based   on   market   capitalization (calculated as on March 31 of every financial year), business responsibility report describing  the  initiatives  taken  by  them  from  an  environmental,  social  and governance  perspective,  in  the  format  as  specified  by  the  Board  from  time  to time
The  annual  report  shall  contain other  disclosures  specified  in  Companies  Act,  2013 along with other requirements as specified in Schedule V of these regulations.

Other disclosure as per Schedule V of SEBI (LODR) 2015

A.  Related Party Disclosure (applicable to all listed entities except for listed banks):

  1. The listed entity shall make disclosures in compliance with the Accounting Standard on “Related Party Disclosures”.
  2. The disclosure requirements shall be as follows:

In the accounts of

Disclosures of amounts at the year end and the maximum amount of loans/ advances/ Investments outstanding during the year.

Holding Company

Loans and advances in the nature of

  • loans to subsidiaries by name and amount.
  • loans to associates by name and amount.
  • loans to firms/companies in which directors are interested by name and amount.

Subsidiary

Same disclosures as applicable to the parent company in the accounts of subsidiary company.

Holding Company

Investments by the loanee (borrower) in the shares of parent company and subsidiary company, when the company has made a loan or advance in the nature of loan.

2A.         Disclosures  of  transactions  of  the  listed  entity  with  any  person  or  entity  belonging   to   the promoter/promoter   group   which   hold(s)   10%   or   more  shareholding   in   the   listed   entity.

B. Management Discussion and Analysis

This section shall include discussion on the following matters within the limits set by the listed entity’s competitive position:

  • Industry structure and developments.
  • Opportunities and Threats.
  • Segment–wise or product-wise performance.
  • Outlook
  • Risks and concerns.
  • Internal control systems and their adequacy.
  • Discussion on financial performance with respect to operational performance.
  • Material developments in Human Resources / Industrial Relations front, including number of people employed.
  • details of  significant  changes  (i.e.  change  of  25%  or  more  as  compared  to the  immediately  previous  financial  year)  in key  financial  ratios,  along  with detailed explanations therefor, including:

    (i)    Debtors Turnover
    (ii)   Inventory Turnover
    (iii)  Interest Coverage Ratio
    (iv) Current Ratio
    (v)  Debt Equity Ratio
    (vi) Operating Profit Margin (%)
    (vii) Net Profit Margin (%) or sector-specific equivalent ratios, as applicable.

    • details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof.


      Disclosure of Accounting Treatment
      Where, in the preparation of financial statements, a treatment different from that prescribed in an Accounting Standard has been followed, the fact shall be disclosed in the financial statements, together with the management’s explanation as to why it believes such alternative treatment is more representative of the true and fair view of the underlying business transaction.

       

     

C. Corporate Governance Report

The following disclosures shall be made in the section on the corporate governance of the annual report.
1A brief statement on listed entity’s philosophy on code of governance.
2Board of directors:
 a.composition and category of directors (e.g. promoter, executive, non-executive, independent nonexecutive, nominee director – institution represented and whether as lender or as equity investor);
 b.attendance of each director at the meeting of the board of directors and the last annual general meeting;
 c.number of other board of directors or committees in which a directors is a member or chairperson, and with effect from the Annual Report for the year  ended  31st  March  2019,  including  separately  the  names  of  the  listed entities where the person is a director and the category of directorship;
 d.number of meetings of the board of directors held and dates on which held;
 edisclosure of relationships between directors inter-se;
 fnumber of shares and convertible instruments held by non- executive directors;
 gWeb link where details of familiarisation programmes imparted to independent directors is disclosed.
 hA  charter  a  matrix  setting  out  the  skills/expertise/competence  of  the board of directors specifying the following:
  i

With effect from the financial year ending March 31, 2019, the list  of  core  skills/expertise/competencies  identified  by  the  board  of directors as required in the context of its business(es) and sector(s) for it  to  function  effectively  and  those  actually  available  with  the  board; and

 

  iiWith  effect  from  the  financial  year  ended  March  31,  2020,  the names of directors who have such skills / expertise / competence.
 iconfirmation  that  in  the  opinion  of  the  board,  the  independent  directors fulfil  the  conditions  specified  in  these  regulations  and  are  independent  of  the management.
 jdetailed  reasons  for  the  resignation  of  an  independent  directors who  resigns before the  expiry of his tenure  along with a confirmation by  such director that there are no other material reasons other than those provided.
3Audit committee:
 a.brief description of terms of reference;
 b.composition, name of members and chairperson;
 c.Meetings and attendance during the year.
4Nomination and Remuneration Committee:
 a.brief description of terms of reference;
 b.composition, name of members and chairperson;
 c.meeting and attendance during the year;
 d.Performance evaluation criteria for independent directors.
5Remuneration of Directors:
 a.all pecuniary relationship or transactions of the non-executive directors vis-à-vis the listed entity shall be disclosed in the annual report;
 b.Criteria of making payments to non-executive directors. Alternatively, this may be disseminated on the listed entity’s website and reference drawn thereto in the annual report;
 c.disclosures with respect to remuneration: In addition to disclosures required under the Companies Act, 2013, the following disclosures shall be made:
  i.all elements of remuneration package of individual directors summarized under major groups, such as salary, benefits, bonuses, stock options, pension etc.;
  iidetails of fixed component and performance linked incentives, along with the performance criteria;
  iiiservice contracts, notice period, severance fees;
  ivStock option details, if any and whether issued at a discount as well as the period over which accrued and over which exercisable.
6Stakeholders’ grievance committee:
 a.name of non-executive director heading the committee;
 b.name and designation of compliance officer;
 c.number of shareholders’ complaints received so far;
 dnumber not solved to the satisfaction of shareholders;
 enumber of pending complaints.
7General body meetings:
 a.location and time, where last three annual general meetings held;
 bwhether any special resolutions passed in the previous three annual general meetings;
 cwhether any special resolution passed last year through postal ballot – details of voting pattern;
 dperson who conducted the postal ballot exercise;
 ewhether any special resolution is proposed to be conducted through postal ballot;
 fProcedure for postal ballot.
8.Means of communication:
  

(a)    quarterly results;

(b)   whether it also displays official news releases; and

(c)    presentations made to institutional investors or to the analysts.

 bnewspapers wherein results normally published;
 cany website, where displayed;
 dwhether it also displays official news releases; and
 epresentations made to institutional investors or to the analysts.
9General shareholder information:
 aannual general meeting – date, time and venue;
 bfinancial year;
 cdividend payment date;
 dthe name and address of each stock exchange(s) at which the listed entity’s securities are listed and a confirmation about payment of annual listing fee to each of such stock exchange(s);
 estock code;
 fmarket price data- high, low during each month in last financial year;
 gperformance in comparison to broad-based indices such as BSE Sensex, CRISIL Index etc.;
 hin case the securities are suspended from trading, the directors report shall explain the reason thereof;
 iregistrar to an issue and share transfer agents;
 jshare transfer system;
 kdistribution of shareholding;
 ldematerialization of shares and liquidity;
 moutstanding global depository receipts or American depository receipts or warrants or any convertible instruments, conversion date and likely impact on equity;
 ncommodity price risk or foreign exchange risk and hedging activities;
 oplant locations;
 paddress for correspondence
 qlist  of  all  credit  ratings  obtained  by  the  entity  along  with  any  revisions thereto during the relevant financial year, for all debt instruments of such entity or any  fixed deposit programme or any scheme  or proposal of the listed  entity involving mobilization of funds, whether in India or abroad.
10.Other Disclosures:
 adisclosures on materially significant related party transactions that may have potential conflict with the interests of listed entity at large;
 bdetails of non-compliance by the listed entity, penalties, strictures imposed on the listed entity by stock exchange(s) or the board or any statutory authority, on any matter related to capital markets, during the last three years;
 cdetails of establishment of vigil mechanism, whistle blower policy, and affirmation that no personnel has been denied access to the audit committee;
 ddetails of compliance with mandatory requirements and adoption of the non-mandatory requirements;
 eweb link where policy for determining ‘material’ subsidiaries is disclosed;
 fweb link where policy on dealing with related party transactions;
 gdisclosure of commodity price risks and commodity hedging activities.
 hDetails  of  utilization  of  funds  raised  through  preferential  allotment  or qualified institutions placement
 ia certificate from a company secretary in practice that none of the directors on  the  board  of  the  company  have been  debarred  or  disqualified  from  being appointed  or  continuing  as  directors  of  companies  by  the  Board/Ministry  of Corporate Affairs or any such statutory authority.
 jWhere the board had not accepted any recommendation of any committee of the board which is mandatorily required, in the relevant financial year, the same to be disclosed along with reasons thereof.
 ktotal  fees  for  all  services  paid  by  the  listed  entity  and  its  subsidiaries,  on  a consolidated  basis,  to the  statutory  auditor  and  all  entities  in  the  network firm/network entity of which the statutory auditor is a part
 ldisclosures in relation to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013:
  anumber of complaints filed during the financial year
  bnumber of complaints disposed of during the financial year
  cnumber of complaints pending as on end of the financial year.
11Non-compliance of any requirement of corporate governance report of sub-paras (2) to (10) above, with reasons thereof shall be disclosed.

D. Declaration signed by the chief executive officer stating that the members of board of directors and senior management personnel have affirmed compliance with the code of conduct of board of directors and senior management.

E. Compliance certificate from either the auditors or practicing company secretaries regarding compliance of conditions of corporate governance shall be annexed with the directors’ report.

F. Disclosures with respect to demat suspense account/ unclaimed suspense account

The listed entity shall disclose the following details in its annual report, as long as there are shares in the demat suspense account or unclaimed suspense account, as applicable:

  • aggregate number of shareholders and the outstanding shares in the suspense account lying at the beginning of the year;
  • number of shareholders who approached listed entity for transfer of shares from suspense account during the year;
  • number of shareholders to whom shares were transferred from suspense account during the year;
  • aggregate number of shareholders and the outstanding shares in the suspense account lying at the end of the year;
  • that the voting rights on these shares shall remain frozen till the rightful owner of such shares claims the shares.

 

 

Dissemination of Annual Report to the shareholders [Regulation 36 of SEBI (LODR) 2015]
The listed entity shall send the annual report in the following manner to the shareholders:

  • Soft copies of full annual report to all those shareholder(s) who have registered their email address(es) either with the   listed   entity   or   with   any depository;
  • Hard copy of statement containing the salient features of all the documents, as prescribed in Section 136 of Companies Act, 2013 (Right of Member to Copies of Audited Financial Statement) or rules made thereunder to those shareholder(s) who have not so registered;
  • Hard copies of full annual reports to those shareholders, who request for the same.

The listed entity shall send annual report to the holders of securities, not less than 21 days before the annual general meeting.

WEBSITE DISCLOSURES

Under Companies Act, 2013, companies are not required to maintain business website. But under SEBI (LODR), 2015, a listed entity shall maintain a functional website and shall disclose following details on the website:
As per Regulation 46 of the SEBI (LODR) Regulation, 2015

  1. details of its business;
  2. terms and conditions of appointment of independent directors;
  3. composition of various committees of board of directors;
  4. code of conduct of board of directors and senior management personnel;
  5. details of establishment of vigil mechanism/ Whistle Blower policy;
  6. criteria of making payments to non-executive directors , if the same has not been disclosed in annual report;
  7. policy on dealing with related party transactions;
  8. policy for determining ‘material’ subsidiaries;
  9.  details of familiarization programmes imparted to independent directors including the following details: number of programmes attended by independent directors (during the year and on a cumulative basis till date), number of hours spent by independent directors in such programmes (during the year and on cumulative basis till date), and other relevant details
  10. the email address for grievance Redressal and other relevant details;
  11. contact information of the designated officials of the listed entity who are responsible for assisting and handling investor grievances;
  12. financial information including: notice of meeting of the board of directors where financial results shall be discussed; financial results, on conclusion of the meeting of the board of directors where the financial results were approved; complete copy of the annual report including balance sheet, profit and loss account, directors report, corporate governance report etc;
  13. shareholding pattern;
  14. details of agreements entered into with the media companies and/or their associates, etc;
  15. schedule of analyst or institutional investor meet and presentations made by the listed entity to analysts or institutional investors simultaneously with submission to stock exchange;
  16. new name and the old name of the listed entity for a continuous period of one year, from the date of the last name change;
  17. With effect from October 1, 2018, all credit ratings obtained by the entity for all its outstanding instruments, updated immediately as and when there is any revision in any of the ratings.
  18. separate audited financial statements of each subsidiary of the listed entity in respect of a relevant financial year, uploaded at least 21 days prior to the date of the annual general meeting which has been called to inter alia consider accounts of that financial year.


The listed entity shall ensure that the contents of the website are correct and shall update any change in the content of its website within 2 working days from the date of such change in content.

Items required to be hosted on website as per Regulation 62 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

  1. name of the debenture trustees with full contact details;
  2. the information, report, notices, call letters, circulars, proceedings, etc. concerning non-convertible redeemable preference shares or non-convertible debt securities;
  3. all information and reports including compliance reports filed by the listed entity;
  4. information with respect to the following events:
    • default by issuer to pay interest on or redemption amount;
    • failure to create a charge on the assets;
    • revision of rating assigned to the non- convertible debt securities:

As stated above, under Companies Act, 2013, companies are not required to maintain business website. But if any company maintains its website, it shall comply with following provisions under Companies Act, 2013:

  1. Information Pertaining to Registered Office [Section 12(3)(c)]
    Every Company must get its e-mail id and website address, if any, printed on its letterheads, business letters, billheads, letter papers and in all its notices and other official publications.
  2. Change of Object for raising money through Prospectus [Section 13(8)(i)]
    A company which has raised money by issuing prospectus and has still some unutilized amount of the money so raised shall not change its objects for which it raised money through the prospectus unless a special resolution is passed by the company. The details of such a resolution as may be prescribed shall be published on the Website of the company, if any, indicating there in the justification for such change.
  3. Annual Return [Section 92(3)]
    Every company shall place a copy of the annual return on the website of the company, if any, and the web link of such annual return shall be disclosed in the Board’s report.
  4. Unpaid Dividends [Section 124(2)]
    A company after transferring the amount of unpaid dividends to a separate bank account of “Unpaid Dividend Account” will have to prepare a statement containing the shareholder’s names, their last known addresses, and the unpaid dividend to be paid to them on the company’s Website, if any.
  5. Corporate Social Responsibility [Section 135(4)(a)]
    Company shall disclose its Corporate Social Responsibility Policy on the company’s website, if any.
  6.  Placing of financial statements of a listed company on the website [Section 136(1)(a)]
    A listed company shall place its financial statements including consolidated financial statements, if any, auditor’s report and all other documents required by law to be attached thereto, on its website, which is maintained by or on behalf of the company.
    Further, every company having a subsidiary or subsidiaries shall publish separate audited accounts in respect of each of its subsidiary on its website, if any.
  7. Vigil Mechanism in Audit Committee for Listed Companies and other Prescribed Companies [Proviso to Section 177(10)]
    Company shall disclose the details of establishment of Vigil Mechanism on its website, if any, and in the Board’s report.
  8.  Nomination and Remuneration Policy [Section 178(4)(c)]
    The Nomination and Remuneration Policy shall be placed on the website of the company, if any, and the salient features of the policy and changes therein, if any, along with the web address of the policy, if any, shall be disclosed in the Board’s report.
  9. Compromises, Arrangements and Amalgamation [Proviso to Section 230(3)]
    A notice of meeting ordered by the Tribunal for the purpose of Compromise and Arrangements should be published on the Website of the Company, if any.
  10. Code for Independent Directors [Schedule IV(IV)(6)]
    The terms and conditions of appointment of independent directors shall be posted on the company’s website.
  11. Notice of candidature of a person for directorship [Rule 13(2) of the companies (Appointment and Qualification of Directors) Rules, 2014]
    The company shall, at least 7 days before the general meeting, inform its members of the candidature of a person for the office of a director or the intention of a member to propose such person as a candidate for that office by placing notice of such candidature or intention on the website of the company, if any.
  12. Notice of resignation of director [Rule 15 of the Companies (Appointment and Qualification of Directors) Rules, 2014]
    The Company shall within 30 days from the date of receipt of notice of resignation from a director, intimate the Registrar in Form DIR‐12 and post the information on its website, if any.
  13. .Form and particulars of advertisement or circulars [Rule 4(3) of the Companies (Acceptance of Deposits) Rules, 2014]
    Every company inviting deposits from the public shall upload a copy of the circular on its website, if any.
  14. Variation of terms of contracts referred to in the prospectus or objects for which prospectus was issued [Rule 7(3) of the Companies (Prospectus and Allotment of Securities) Rules, 2014]
    The notice shall also be placed on the website of the company, if any.
  15. .Other compliances for conversion of section 8 companies to any other kind [Rule 22(1)(b) of the Companies (Incorporation) Rules, 2014]
    The Company shall, within a week from the date of submitting the application to the Regional Director, publish a notice at its own expense, and a copy of the notice in Form No. INC. 19, shall be sent forthwith to the Regional Director and the said notice shall be published on the website of the company, if any
  16.  Change of objects for which money is raised through prospectus [Rule 32(3) of the Companies (Incorporation) Rules, 2014]
    Where there is change of objects for which money is raised through prospectus, a notice shall also be placed on the website of the company, if any pertaining to the same.
  17. Notice of closure of register of members or debenture holders or other security holders [Rule 10(1) of the Companies (Management and Administration) Rules, 2014]
  18. The notice of the general meeting of the company shall be placed on the website of the Company, if any. [Rule 18(3)(ix) of the Companies (Management and Administration) Rules, 2014]
  19. Notice of voting through electronic means shall be placed on the website of the company, if any [Rule 20(3)(ii) of the Companies (Management and Administration) Rules, 2014
  20. Voting through Electronic Means [Rule 20(3)(xiv) of the Companies (Management and Administration) Rules, 2014]
    The results declared along with the scrutinizer’s report shall be placed on the website of the company and on the website of the agency within 2 days of passing of the resolution at the relevant general meeting of members;
  21. The notice of the postal ballot shall also be placed on the website of the company [Rule 22(4) of the Companies (Management and Administration) Rules, 2014]
  22. The results of the poll shall be declared by placing it, along with the scrutinizer’s report, on the website of the company. [Rule 22(13) of the Companies (Management and Administration) Rules, 2014]
  23. Special notice by Company [Rule 23(3) of the Companies (Management and Administration) Rules, 2014]
    Where it is not practicable to give the notice in the same manner as the company gives it gives notice of any general meetings, the notice shall be published in English language in English newspaper and in vernacular language in a vernacular newspaper, both having wide circulation in the State where the registered office of the Company is situated and such notice shall also be posted on the website, if any, of the Company.

Policies to be framed under Company Laws

Corporate Social Responsibility (CSR)Policy
Every company having-

  • net worth of Rs.500 crore or more or
  • turnover of Rs. 1,000 crore or more or
  • a net profit of Rs. 5 crore or more

during any financial year, shall frame Corporate Social Responsibility (CSR) Policy.

Responsibility
Board shall constitute CSR Committee of the Board which shall formulate & recommend to the Board, CSR Policy which shall

  • indicate the activities to be undertaken by the company as per Schedule VII of the CA, 2013,
  • recommend the amount of expenditure to be incurred on the activities to be undertaken by the company and
  • monitor CSR Policy of the company from time to time.

Disclosure of Policy

  • In the Board Report
  • On the website of Company

2. Whistle Blower Policy (Vigil mechanism)
Every listed company and all companies which:

    • accept deposits from the public; or
    • have borrowed money from banks and public financial institutions in excess of Rs. 50 Crores

shall frame a Whistle Blower Policy.

Responsibility
Audit Committee shall be responsible to review the functioning of the Whistle Blower mechanism

Disclosure of Policy

  • In the Board Report
  • On the website of Company

3 . Policy for formal annual evaluation by the Board of its own performance, that of its committees and individual directors

Every

  • Listed companies and
  • all Public companies having
    • paid up share capital of Rs.10 crores or more; or
    • turnover of Rs.100 crores or more or
    • which have, in aggregate, outstanding loans, debentures and deposits exceeding Rs. 50 crores.

shall formulate this policy.

Responsibility
The evaluation criteria shall be laid down by the Nomination and Remuneration Committee.

Disclosure
In Annual Report only by listed companies

4.  Policy on directors’ appointment and remuneration of the directors, KMP and other employees including criteria for determining qualifications, positive attributes, independence of a director and other matters

Every

  • Listed companies and
  • all Public companies having
    • paid up share capital of Rs.10 crores or more; or
    • turnover of Rs.100 crores or more or
    • which have, in aggregate, outstanding loans, debentures and deposits exceeding Rs. 50 crores.

shall formulate this policy.

Responsibility
Nomination & Remuneration Committee shall formulate a policy and recommend to the Board.

Disclosure

  • In the Board Report
  •  On the website of Company

Policies to be framed under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015)

As per the Listing Regulations, all listed entities are required to frame various policies which are detailed below:

  1. Policy for preservation of documents
  2. Policy for determining material subsidiary
  3. Policy on materiality of related party transactions
  4. Policy for determination of materiality
  5. Archival Policy
  6. Vigil Mechanism/ Whistle Blower policy
  7. Policy on diversity of board of directors
  8. Dividend Distribution Policy

Policy for preservation of documents [Regulation 9]
Objective: To classify the documents, records and registers of the Listed Company at least under two categories:

(i) to be preserved permanently
(ii) to be preserved for period of not less than 8 (eight) years.
The listed entity may preserve the above said documents in electronic mode.
This policy may determine:

  • Who is responsible for the maintenance of which document?
  • How documents shall be preserved and how they shall be destroyed?
  • For how much time a document shall be preserved?
  • Discloser and availability of documents on website

Policy for determining material subsidiary [Regulation 16(1)(c]
Objective: To determine the material subsidiaries of a Listed Company and to provide the governance framework for such subsidiaries.
“Material Subsidiary” shall mean a subsidiary, whose income or net worth exceeds 20% of the consolidated income or net worth respectively, of the listed entity and its subsidiaries in the immediately preceding accounting year.

It may determine policies related to:

  • Presence of director/s of Holding Company on the BODs of Material Subsidiary
  • Review of investments made by Material Subsidiary
  • Review of minutes of meetings of Material Subsidiary
  • Review significant transactions or arrangements entered into by Material Subsidiary
  • Disposal of shareholding in Material Subsidiary

Policy on materiality of related party transactions and on dealing with related party transactions [Regulation 23]
Objective: This Policy provides the criteria for determining the materiality of Related Party Transactions. The objective of this Policy is to ensure proper approvals & reporting of the transactions between Company and its Related Parties in compliance of provisions of the Companies Act, 2013, DPE Guidelines, SEBI (LODR) Regulations, 2015 and any other applicable statutory provisions for the time being in force, in this regard.

What is material related party transaction?
A transaction with a related party shall be considered material if the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceeds 10% of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity.
All related party transactions have to be previously approved by the audit committee and require approval of the shareholders.
It may determine policies related to:

  • Role and Responsibilities of Audit Committee w.r.t related party transactions
  • Omnibus approval of related party transactions by Audit Committee
  • Details of the transactions to be presented to the Audit Committee
  • Approval of transactions from BOD and Shareholders in the General Meeting

Policy for determination of materiality [Regulation 30(4)(ii)]
Objective:

  • To ensure that the Company complies with the disclosure obligations to which it is subject to according to Securities Laws and Company Laws
  • To ensure that the information disclosed by the company shall be timely and transparent
  • To ensure that corporate documents and public statements are accurate and do not contain any misrepresentation
  • To protect the confidentiality of material and price sensitive information

It may determine policies related to:

  • Persons responsible for the disclosure of the information
  • Guidelines for assessing materiality of the information
  • Obligations of Internal Stakeholders and KMP w.r.t disclosure of the information

Archival Policy [Regulation 30(8)]
Objective: To ensure that all the information which, has been disclosed to stock exchange(s) under this regulation and such information which in the opinion of the board of directors of a listed company, is material has to be made available on the Company’s website for public/members.

The material information of a listed company shall be hosted on its website for a minimum period of 5 (five) years and thereafter will be archived for a further period as specified in its Archival Policy.

Vigil Mechanism/ Whistle Blower Policy [Regulation 22]
Objective: The Vigil Mechanism/Whistle Blower Policy is implemented to safeguard the unethical practices and to provide mechanism for reporting genuine concerns or grievances.
Every listed entity has to formulate a vigil mechanism for directors and employees to report genuine concerns.

The vigil mechanism has to provide for adequate safeguards against victimization of director(s) or employee(s) or any other person who avail the mechanism and also provide for direct access to the chairperson of the audit committee in appropriate or exceptional cases.

Policy on diversity of board of directors
Objective: To enhance the effectiveness of the Board by diversifying its composition and to obtain the benefit out of such diversity in better and improved decision making.

In order to ensure that the Company’s boardroom has appropriate balance of skills, experience and diversity of perspectives that are imperative for the execution of its business strategy, the Company shall consider a number of factors, including but not limited to skills, industry experience, background, race and gender.

Dividend Distribution Policy (Regulation 43A)
The top five hundred listed entities based on market capitalization (calculated as on March 31 of every financial year) shall formulate a dividend distribution policy which shall be disclosed in their annual reports and on their websites.
The Policy broadly specifies the external and internal factors including parameters that may be considered while declaring dividend and the circumstances under which the shareholders of the Company may or may not expect dividend.

The dividend distribution policy shall include the following parameters:

  • the circumstances under which the shareholders of the listed entities may or may not expect dividend;
  • the financial parameters that shall be considered while declaring dividend;
  • internal and external factors that shall be considered for declaration of dividend;
  • policy as to how the retained earnings shall be utilized; and
  • parameters that shall be adopted with regard to various classes of shares.

The listed entities other than top five hundred listed entities based on market capitalization may disclose their dividend distribution policies on a voluntary basis in their annual reports and on their websites.

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