The Directors’ Report is
a document produced by board of directors under the requirements of Companies
Act, 2013 and Rules, which details the state of the company and its compliance
with a set of financial, accounting and corporate social responsibility
standards.
The Directors’ Report arose out of a
general move for greater transparency in corporate governance. It is useful for
shareholders to find out issues such as whether the company has good finances,
whether the market has potential, and whether the business has the structural
capacity to expand into new opportunities. In order for shareholders to make
informed decisions when casting their votes at annual or other meetings, the
Directors’ Report provides part of that essential minimum standard of
information. It is complemented by Company Accounts.
The Article discusses on how to
Prepare Directors’ Report as Per Companies Act, 2013 and is as follows :-
I. ADDRESS TO MEMBERS:
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Language:
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How To Check The Financial Year
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Your Directors have pleasure in presenting the (No. of Financial
Years) Annual Report together with the Audited Statement of Accounts of your
Company for the financial year ended March 31, 2015
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i. Check from the Annual Return/Directors’ Report of previous financial
year.
ii. Check the incorporation date and calculate to verify.
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II. FINANCIAL HIGHLIGHTS:
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Language:
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How To Fill the Figures
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The Company’s financial performance for the year ended March 31, 2015:
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Check the Statement of Profit & Loss Account for the year ended
March 31, 2015. You will find required figures on the FACE of Statement of
Profit & Loss Account.
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Particulars
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Year ended
31st March 2015
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Year ended
31st March 2014
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Turnover: Section- 2(91)- Aggregate
value of the realization of amount made from the sale, supply or distribution
of goods or on account of services rendered, or both, by the company during a
financial year
Deferred tax: As per
Accounting Standard (AS) 22, deferred tax is the tax effect of timing
differences.
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Turnover
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Profit Before Tax
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Less: Current Tax
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Deferred Tax
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Income Tax earlier years
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Profit For The Year
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Add: Balance in Profit and Loss Account
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Sub Total
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Less: Appropriation
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Closing Balance
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III. STATE OF AFFAIRS: Section 134(3)(i)
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Purpose
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Language:
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How to Check the Affairs of the Company
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134(3)(I)
The State of The
Company’s Affairs;
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The Company is engaged in the business of ____________________. There
has been no change in the business of the Company during the financial year
ended 31st March, 2015. Or there is ______________________ Changes in the
business of the Company during the financial year ended 31st March, 2015.
The highlights of the Company’s performance are as under:-
o Revenue from operations increased by ______% from Rs. _______ lacs
to Rs. _____ lacs.
o Net Profit for the year increased by _______% from Rs. _________
lacs to Rs. _____ lacs.
o Earnings per share have increased by _______% from Rs. ______ to Rs.
_______.
The increase in revenue, net profit and EPS as mentioned above is
accredited to increase in turnover in comparison to the last financial year.
OR
The decrease in revenue, net loss and EPS as mentioned above is
debited to decrease in turnover in comparison to the last financial year.
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Company can find the Affairs of the Company from the Notes to Accounts
(attached as part of Balance Sheet).
Company can find if there is any Change in the affairs of the Company
by comparing the Notes to Account of Last financial year TO current financial
year.
How to analyze the Companies Performance:
Check the Statement of Profit & Loss Account for the year ended March
31, 2015. All the adjacent required figures are available on the FACE of
Statement of Profit & Loss Account. Compare the figures of Last financial
year TO current financial year and calculate the increase/Decrease in Revenue
from Operation/ Net Profit/ Earning per share.
Formula for calculating Percentage Change:
(Turnover of Current Financial Year- Turnover of Last Financial Year/
Turnover of Last Financial Year)*100
If value comes in Positive (+) that will be result of___________%
increase in Revenue
If value comes in Negative (-) that will be result of___________%
decrease in Revenue
SAME FORMULA FOR NET PROFIT AND EPS.
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IV. DIVIDEND: Section 134(3)(k)
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Purpose
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Language:
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From where to
Check
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The amount, if any, which it recommends should be paid by way of
dividend;
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In view of the sustained working results during the year under review,
the Board of Directors are pleased to recommend a dividend of Rs ___/- per
equity share
OR
In view of the planned business growth, your Directors deem it proper
to preserve the resources of the Company for its activities and therefore, do
not propose any dividend for the Financial Year ended March 31, 2015.
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First:
Check the Face of Statement of Profit and Loss Account; Amount of
Dividend will be mention there.
Second:
Check the Copy of General Meeting resolution in case of final Dividend
and check the Board Meeting resolution in case of interim Dividend.
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V. DETAILS OF SUBSIDIARY, JOINT VENTURE AND ASSOCIATE COMPANIES:
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Purpose
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Language:
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How to find out
Subsidiary, JV and Associates
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Rule 8(5)(iv)
The name of companies which have become or ceased to be its
Subsidiaries, joint ventures or associate companies
during the year;
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The Company does not have any Subsidiary, Joint Venture or Associate
Company.
OR
The names of companies which have become or ceased to be the Company’s
subsidiaries, joint ventures or associate companies during the year under
review is provided below:
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First Check:
Check the Investment of the Company from Non Current Investment in the
Balance Sheet, check the relevant Note and analyze about Subsidiary,
Associate and Joint Venture as per definition given u/s 2(87) and 2(6) of the
Companies Act, 2013.
Second:
Check from the AS-18.
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S.N
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Name of the
Company
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Subsidiary /JV
/Associate
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Become/
Ceased
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Effective Date
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VI. INTERNAL FINANCIAL CONTROL:
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Language:
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How to Check?
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Rule 8(5)(vii)
ICAI guidance note on adequacy of internal financial controls with
reference to financial statements can be referred for this Purpose.
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The Company has in place adequate internal financial controls with
reference to financial statements. During the year, such controls were tested
and no reportable material weakness in the design or operation was observed
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Most listed companies are reading requirements related to IFC as those
referring to IFC for financial reporting along with limited focus on the
operational controls aspect.
Auditors are required to certify that the IFC are designed and
operate effectively.
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VII. PARTICULAR OF LOAN AND INVESTMENT:
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Purpose
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Language:
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How to Check?
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Section 134(3)(g)
particulars of loans, guarantees or investments under section
186;
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Particular of Loans given, investments made, guarantee given and
securities provided along with the purpose for which the loan or
guarantee or security is proposed to be utilized by the recipient are
provided in the financial statement (please refer Note _______ to the
standalone balance sheet).
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Check the Loan and Investment from the Assets side of Balance sheet
and relevant Notes.
Check the Guarantee from the Contingent Liabilities and schedule. Also
check from the Notes to Financial Accounts.
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VIII. CHANGE IN NATURE OF BUSINESS, IF ANY:
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Purpose
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Language:
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How to check?
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Rules 8(5)(i)
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There is no change in the business of Company and its Subsidiary
Company.
The Board may provide details relating to change in the business
carried on by the company or its subsidiaries. This shall also contain
details pertaining to classes of business in which the company has an
interest.
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Check the Followings:
– Main object of the Company
– Notes of the Financial Statement
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IX. AMOUNTS TRANSFERRED TO RESERVES, IF ANY:
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Provision
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Language:
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How to check?
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Section- 134(3)(J)
The Board of the company has decided/ proposed to carry Rs____
to its reserves
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No amount was transferred to the reserves during the financial year
ended 31st March, 2015.
The Board of the company has decided/proposed to carry Rs____ to its
reserves.
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Check the Assets side of Balance sheet, if there is increase in
reserve other than the balance of profit and loss account.
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X. CHANGES IN SHARE CAPITAL, IF ANY:
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Language:
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How to check?
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During the Financial Year 2014-15, the share capital of the Company
has been increased from ____ to ____, pursuant to allotment of____ equity
shares of Rs ____ each under Private Placement/Preferential allotment/Rights
issue /Employee Stock Option Scheme of the Company
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Check the Followings:
– Whether any PAS-3 filed
– Check from the Minutes of the Meeting
– Difference b/w amount of Capital in the Balance sheet (2015-2014).
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XI. EXTRACT OF ANNUAL RETURN:
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Provisions:
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Language:
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How to check?
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Section 134(3)(a)
the extract of
the annual return as provided under sub-section (3) of section 92;
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The extract of
Annual Return, in format MGT -9, for the Financial Year 2014-15 has been
enclosed with this report
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Format of MGT-9
given in Companies Act, 2013. For preparation of MGT-9 first prepare the
MGT-7.
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XII. NUMBER OF BOARD MEETING:
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Purpose
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Language:
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How to check?
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Section 134(3)(a)
number of meetings of the Board; held during the financial year
2014-15
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During the Financial Year 2014-15, [**] meetings of the Board of
Directors of the company were held. [Preferable to state the dates of
meetings]
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Check the Minutes of the Board Meeting.
Get the Index of Board Meetings from the Company.
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XIII. PARTICULARS OF CONTRACT AND ARRANGEMENT WITH RELATED PARTIES:
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Provision:
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Language:
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How to check?
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Section- 134(3)(h)
The Particulars of contracts or arrangement s with related party
referred to in Section 188(1) of the Companies Act, 2013 for the Financial Year
2014-15 in the prescribed format AOC-2, has been enclosed with the report.
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All related party transactions that were entered into during the
financial year ended 31st March, 2015 were on an arm’s length basis and were
in the ordinary course of business. Therefore, the provisions of Section 188
of the Companies Act, 2013 were not attracted. Further, there are no
materially significant related party transactions during the year under
review made by the Company with Promoters, Directors, or other designated
persons which may have a potential conflict with the interest of the Company
at large. Details of the transactions are given in AOC-2
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Check the following :
– AS-18
– Minutes of Board Meeting & General Meeting (If any Resolution
passed)
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XIV. EXPLANATION TO AUDITOR’S REMARKS:
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Provision:
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Language:
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How to check?
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Section 134(3)(f)
Explanation or comment by the Board on every qualification,
reservation, adverse remark or disclaimer made by the statutory auditor in
his report and/or by the secretarial auditor in the secretarial Audit Report.
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The observations of the Statutory Auditors, when read together with
the relevant notes to the accounts and accounting policies are self
explanatory and does not call for any further comment.
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Check the Auditor Report
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XV. MATERIAL CHANGES AFFECTING THE FINANCIAL POSITION
OF THE COMPANY:
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Provision:
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Language:
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How to check?
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134(3)(L)
Details regarding any material changes / events, if any, occurring
after balance sheet date till the date of the report to be stated
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No material changes and commitments affecting the financial position
of the Company occurred between the end of the financial year to which this
financial statement relates and the date of this report.
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Check the following
– Trial Balance
– Financial Position
– Market Condition
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XVI. CONSERVATION OF ENERGY, TECHNOLOGY, ABSORPTION, FOREIGN EXCHANGE EARNINGS
AND OUTGO:
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Provision:
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Language:
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How to check?
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134(3)(M)
The details of Energy, Technology, Absorption, Foreign Exchange
Earnings and Outgo are as under:
a) Conservation of Energy:
b) Technology Absorption:
c) Foreign Exchange Earnings/ Outgo:
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The particulars as required under the provisions of Section 134(3) (m)
of the Companies Act, 2013 in respect of conservation of energy and
technology absorption have been furnished considering the nature of
activities undertaken by the company during the year under review.
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Check the following
– Financial of the Company.
– Check with directors.
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XVII. RISK MANAGEMENT POLICY:
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Provision:
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Language:
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How to check?
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134(3)(N)
Statement indicating the development and implementation of the risk
management policy of the company Moreover, in case the Company has
constituted a risk management committee, then the constitution and the terms
of reference of the same to be disclosed.
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The Company has in place a mechanism to identify, assess, monitor and
mitigate various risks to key business objectives. Major risks identified by
the businesses and functions are systematically addressed through mitigating
actions on a continuing basis.
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Check the policy prepared by the Company.
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XVIII. DETAILS OF DIRECTORS AND KEY MANAGERIAL PERSONNEL:
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Provision:
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Language:
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How to check?
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Rule 8(5)(iii)
Details of Directors and KMP appointed or resigned during the year.
Details of directors retiring by rotation in the ensuing Annual
General Meeting
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There has been no change in the constitution of Board during the year
under review i.e. the structure of the Board remains the same
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Check the
Following:
– DIR-12
– MCA
– Comparison from
last annual return
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XIX. DETAILS OF SIGNIFICANT & MATERIAL ORDERS PASSED
BY THE REGULATORS OR COURTS OR TRIBUNAL:
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Provision:
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Language:
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How to check?
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Details of the order passed by the authorities which impacts the going
concern status and company’s operations in future
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No significant or material orders were passed by the Regulators or
Courts or Tribunals which impact the going concern status and Company’s
operations in future
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Get the information from the Management of the Company.
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XX. VOLUNTARY REVISION OF FINANCIAL STATEMENTS OR BOARD’S
REPORT:
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Provision:
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Language:
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How to check?
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This section is
not yet enforced
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XXI. DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION,
PROHIBITION & REDRESSAL) ACT, 2013
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Provision:
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Language:
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How to check?
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Section 22 of Sexual Harassment of Women at Workplace.
The employer shall include in its report the number of cases filed, if
any, and their disposal under this Act in the annual report of his
organization or where no such report is required to be prepared, intimate
such number of cases, if any, to the District Officer.
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The Company is committed to provide a safe and conducive work
environment to its employees. During the year under review.
Your Directors further state that during the year under review, there
were no cases filed pursuant to the Sexual Harassment of Women at Workplace
(Prevention, Prohibition and Redressal) Act, 2013
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Get the information from the Management of the Company.
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XXII. CONSOLIDATED FINANCIAL STATEMENTS:
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Provision:
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Language:
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How to check?
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The Board’s Report shall contain a Separate section wherein a report
on the performance and financial position of each:
• Subsidiary
• Associate
• Joint venture companies, including in the consolidated financial
statement is presented
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Company doesn’t have any subsidiaries so there is no need to prepare
consolidated financial statement for the F. Y. 2014-15. OR
Consolidated financial statement is prepared and attached with
financials.
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Check the followings:
– Financial Statement
– Whether company have subsidiary or not
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