Simplification of the Board’s Report – Removal of Form MGT 9

Simplification of the Board’s Report – Removal of Form MGT 9

 Simplification of the Board’s Report – Removal of Form MGT 9

The Companies Act, 2013 (‘Act’) and the rules made thereunder requires the Board of Directors of every company to attach its report (‘Board’s Report’) to the financial statements to be laid before the Members at the Annual General Meeting (‘AGM’). The Board’s Report is an important means of communication by the Board of Directors of a company with its stakeholders. The Board’s Report provides the stakeholders with both financial and non-financial information, including the performance and prospects of the company, relevant changes in the management and capital structure, recommendations as to the distribution of profits, future and on-going programmes of expansion, modernisation and diversification, capitalisation of reserves, further issue of capital and other relevant information. Sections 92(3) and 134(3)(a) of the Act read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014 (‘Rules’) originally provided that every company should attach the extract of the annual return in Form No. MGT 9 to the Board’s Report.

The Ministry of Corporate Affairs (‘MCA’) vide the Companies (Amendment) Act, 2017 substituted Sections 92(3) and 134(3)(a) of the Act to carry out the changes in the format of the Board’s Report and deleted the requirement of attaching the extract of the annual return in Form No. MGT 9 to the Board’s Report. The substituted Sections 92(3) and 134(3)(a) of the Act, which came into effect on August 28, 2020, read as follows:

(a)    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.

(b)   Section 134(3)(a) – “There shall be attached to statements laid before a company in general meeting, a report by its Board of Directors, which shall include the web address, if any, where annual return referred to in sub-section (3) of section 92 has been placed.”

However, Rule 12(1) of the Rules continued with the requirement of attaching the extract of the annual return in Form No. MGT 9 to the Board’s Report with a new proviso which was inserted by the MCA vide the Companies (Management and Administration) Amendment Rules, 2020 dated August 28, 2020. The new proviso in Rule 12(1) read as follows:

A company shall not be required to attach the extract of the annual return with the Board’s report in Form No. MGT 9, in case the web link of such annual return has been disclosed in the Board’s report in accordance with sub-section (3) of Section 92 of the Companies Act, 2013”.

The conjoined effect of the aforesaid amendments (effective August 28, 2020) led to the following:

(a)    A company having a website mandatorily needs to place the copy of the annual return on its website and the web-link of such annual return is required to be disclosed in the Board’s Report. Section 92(1) of the Act read with Rule 11 of the Rules provide that every company shall prepare its annual return in e-Form No. MGT 7/e-Form No. MGT 7A (as the case may be). Thus, a company having a website should prepare the copy of the annual return in e-Form No. MGT 7/e-Form No. MGT 7A (as the case may be) before the Board’s Report is prepared and place it on its website and disclose the web-link of such annual return in its Board’s Report.

(b)   A company not having a website was required to attach the extract of the annual return in Form No. MGT 9 with its Board’s Report.

The MCA vide the Companies (Management and Administration) Amendment Rules, 2021 dated March 05, 2021 substituted Rule 12 of the Rules to provide “A copy of the annual return shall be filed with the Registrar with such fees as may be specified for this purpose ”.  With the said amendment, the MCA has done away with the requirement of attaching the extract of the annual return in Form No. MGT 9 with the Board’s Report even for those companies which do not have websites, thereby simplifying the format of the Board’s Report.

Now, only those companies which are having websites are required to place the copy of their annual return in e-Form No. MGT 7/e-Form No. MGT 7A (as the case may be) before the Board’s Report is prepared and place it on their websites and disclose the weblink of such annual return in the Board’s Report.

 

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