[Opinion] Consequences of non-disclosure of “Energy Conservation, Technology Absorption and Forex Earnings & Outgo” in Board’s Report

[2022] 145 taxmann.com 259 (Article)

1. Board report

Board’s report is an important document prepared by the company every year and attached along with the financial statements and discloses the details of the company’s affairs as to what all happened during the financial year that has ended, to its stakeholders.

2. Provisions governing the board report

Section 134 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, are the governing regulations which spells out the various requirements of the board report

3. Contents to be disclosed in the board report

Sub-section (3)(m) of section 134 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, lists the requirements of various disclosures such as financial highlights of the company relating to transfer to reserve, dividend etc., details of subsidiary if any, number of the board meeting held, key managerial personnel and directors details, directors responsibility statement, the composition of the audit committee and adequacy of internal financials controls, particulars relating to a loan, investment, guarantee and securities and contracts or arrangements with related parties, auditor and auditors report (statutory auditor, cost auditor and secretarial auditor), significant events and material orders passed by the regulators or courts, corporate social responsibilities related matters if applicable and such other matters.

4. Attachments/enclosures to the board report

Besides the above, the following attachments/enclosures are also would form part of the board report as per the provisions of section 134 (3) (m) which is applicable to all types of companies:-

(a) Extract of the Annual Return.
(b) Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo (this could be in the board report itself or by way of an annexure)
(c) Particulars of Employees and Related Disclosures pertaining to remuneration and other details and the Statement containing particulars of employees as required under Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rule, 2014.
(d) Annual Report on Corporate Social Responsibility(where applicable)

5. Required disclosure under energy conservation

Under the caption of “Energy Conservation”, the company is required to disclose the (a) steps taken by the company on conservation of energy, (b) steps taken by the company for utilizing alternate sources of energy and (c) capital investment on every conservation equipment incurred by the company. In its board report.

6. Required disclosure under Technology Absorption

Under the caption of “Technology Absorption” – the company is required to disclose specific areas of R & D activities carried out, ongoing development project, scientific support on continuous basis, benefits derived as a result of above research and technology developments, future plans, major achievements during the year, expenditure on R & D, details of technology absorption, adoption and innovation and other related details.

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