[Opinion] Consequences of Delayed Preparation of Board’s Report and Its Presentation at AGM

Prof R Balakrishnan – [2022] 145 taxmann.com 388 (Article)

1. Board Report

The board report is a communication by the company’s board of directors to its shareholders. By and large, the board of directors communicates about the company’s financial performance in the reporting period as per the timeline prescribed and the impact of economic policies on the company and industry. Generally, the directors, in the report, also share their perspectives and vision for the next financial year. Section 134 of the Companies Act, 2013 relates to “Financial Statements and Board’s report, etc.” The provisions lay down minimum disclosures by the companies in the Board’s report. Rules 8 and 8-A of the Companies (Accounts) Rules, 2014 also provide for certain disclosures in the board’s report.

The board report and other applicable annexures thereto are required to be prepared and presented to the board for its approval and the same shall have to be signed by its chairperson of the company if he is authorised by the board of directors. Where the chairperson is not so authorised, the same shall be signed by at least two directors one of whom shall be the managing director, or by the director where there is one director. For each financial year, these reports are to be approved by the board and thereafter laid before the annual general meeting of the company for the adoption of the same by the members of the company and the due date is 30^th September of the same year in which the year ended as at 31^st March. This due date can be extended by the Registrar of the Company by a period of three more months i.e. by the 31^st of December on the request made by the company for extension with valid and justifiable reasons.

2. Relevant provisions under the Companies Act 2013 on board report

Sub-section (1) and sub-section (3) of section 134 of the Companies Act 2013 which are relevant sections on this matter is given below:-

3. Penal provision for any default/violation under the Companies Act 2013

Sub-section (8) of section 134 of the Companies Act 2013, stipulated that if any default is made in complying with the provisions of this, the company shall be liable to a penalty of three lakhs rupees, and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.

4. Consequences of default/violation – action from the Regulator

To understand the consequences of any default while complying with the provisions of section 134 of the Companies Act 2013, relating to timely preparation of the board report and getting it approved from the board of directors followed by the adaption of the same at the annual general meeting of the company, let us go through the decided case law by the Registrar of Companies of West Bengal on this matter on 27^th April 2022.

5. The relevant case law on this matter

We shall go through the adjudication order passed by the Registrar of Companies and Adjudicating Officer, West Bengal, on 27^th April 2022 in the matter of M/s Kejriwal Castings Limited, Kolkata, West Bengal – the Adjudication order bearing no. No. ROC /ADJ /22 – order for a penalty for violation of section 134 of the Companies Act 2013

6. Details of the company

M/s. M/s Kejriwal Castings Limited is a company incorporated on 19^th May 2005 under the provisions of the Companies Act 1956 having its registered office at Chatterjee International Centre, 33A Chowringhee Road, 11^th Floor, Suit No. 11, Kolkata in the state of West Bengal. and the Registrar of the Company is situated in Kolkata. The company currently have eight directors on its board. (one of them is the managing director) The company is majorly in manufacturing metals and chemicals and products thereof.

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