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Latest Amendment in Directors Report

by CS Divesh Goyal
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Short Summary:

The Ministry of Corporate Affairs, Government of India, issued notifications dated 24th March, 2021 to amend Companies (Accounts) Rules, 2014  to enhance the disclosures required to be made by the Company in Board Report;

Purpose of Amendment:

By these amendments MCA increasing stringency in compliances and adding numerous additional disclosures in Financial Statement, Directors Report and Audit Report. The main purpose behind these amendments is more transparency.

Ministry has issues Notifications:

S. No. Date of Notification Particular Purpose (Amendment in)
24.03.2021 [1]Companies (Account) Amendment Rules, 2021 Directors Report

APPLICABILITY:

Above mentioned amendments shall come into force w.e.f. 01st day of April 2021.

Que: Financial year end on 31st March 2021. Directors Report signed on 25th August 2021. Whether Company have to give effect of amendment in Directors Report?

Ans: Above mentioned amendment shall be applicable on Companies for financial year start on or after 01st April 2021. Therefore, this amendment shall effect the financial statement as on 31st March 2022 i.e. (f.y. 2021-22).

Therefore, one can opine that Directors Report for financial year ending 31.03.2021 shall be same as per earlier disclosures.

Amendment in Rule 8 i.e. Matters to be Included in Board’s Report. In rule 8, sub rule 5 after clause x, two new clauses added.

New Clauses:

(xi) the details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 during the year along with their status as at the end of the financial year.

(xii) the details of difference between the 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.

Disclosure on above mentioned two clauses are required to give in Directors Report of Companies along with other disclosures.

Ques:2 Whether above mentioned amendment in Directors Report required to be covered in Directors Report prepared for f.y. ended 31.03.2021?

Ques:3 Whether this amendment applicable on Directors Report of every company or exemptions are given to some classes of companies?

Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com).

Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION

[1] http://www.mca.gov.in/Ministry/pdf/AccountsAmendmentRules_24032021.pdf

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