Annual Report - Concepts

According to Section 135 of the Companies Act, 2013, only the following companies are required to constitute a Corporate Social Responsibility Committee which in the immediately preceding financial year have:

(a)Net worth of ₹500 crore or more; or

(b)Turnover of ₹1000 crore or more; or

(c)Net profit of ₹5 crore or more

A small company is defined in section 2(85) of the Companies Act, 2013 to mean a company, other than a public company whose:

(a)Paid up share capital does not exceed ₹50 Lakh or such higher amount as may be prescribed which shall not be more than ₹10 crore and

(b)Turnover of which as per profit and loss account for the immediately preceding financial year does not exceed ₹2 crore or such higher amount as may be prescribed which shall not be more than ₹100 crore

As DEF Traders Ltd. is incorporated as small company, it does not meet the criteria specified in section 135 of the Companies Act, 2013 and would, therefore not be required to constitute a Corporate Social Responsibility Committee.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 2A(ii) (Syllabus 2017).

Filing of Annual Return with Registrar

Under Section 92(4) of the Companies Act, 2013, every company is required to file with the Registrar a copy of the annual return, within sixty days from the date on which the AGM is held or where no AGM is held in any year within sixty days from the date on which the AGM should have been held together with the statement specifying the reasons for not holding the AGM in Form MGT-7, with such fees or additional fees as may be prescribed. From the financial year 2020-21 onwards, One Person Company and Small Company shall file return in Form MGT-7A.

For foreign company the filing is to be done in E-Form FC-4.

Inspection of Annual Return - Section 94 r/w Rule 14 of the Companies (Management & Administration) Rules, 2014

•Copies of Annual returns prepared pursuant to Section 92, shall be open for inspection during business hours, of not less than two hours on every working day as the board may decide, by any member, debenture holder, other security holder or beneficial owner without payment of fee and by any other person on payment of such fee as may be specified in the articles of association of the company but not exceeding 50 rupees for each inspection.

•Any such member, debenture holder, security holder or beneficial owner or any other person may require a copy of return on payment of such fee as may be specified in the articles of association of the company but not exceeding 10 rupees for each page. Such copy of return shall be supplied within 7 days of deposit of such fee.

•The Central Government may also, by order, direct an immediate inspection of the document, or direct that the extract required shall forthwith be allowed to be taken by the person requiring it.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 6A(iii) (Syllabus 2022).

(i)Secretarial Standard 4 (SS-4) pertaining to Report of the board of directors indicates that as a good governance practice the disclosure on credit rating should also be included in the Board’s Report. The disclosure shall include the following:

(a)credit rating obtained in respect of various securities;

(b)name of the credit rating agency;

(c)date on which the credit rating was obtained;

(d)revision in the credit rating;

(e)reason provided by the rating agency for a downward revision, if any.

(ii)Under section 92(2) of the Companies Act, 2013 read with Rule 11(2) of the Companies (Management and Administration) Rules, 2014 the annual return of a listed company or of a company having a paid- up share capital of ₹10 crore or more or turnover of ₹50 crore or more shall be certified by a Company Secretary in practice in Form MGT-8. Accordingly, annual return of Bright Ltd., an unlisted company having a turnover of ₹60 crore shall be certified by none of the persons given in question but by a practicing Company Secretary.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 3(b) (Syllabus 2017).

Section 92 of the Act requires that every company shall prepare an annual return in the prescribed form containing the particulars as prescribed, as they stood on the close of the financial year and signed by a director and the company secretary, or where there is no company secretary, by a company secretary in practice.

Section 92(2) provides that the annual return, filed by a listed company or, by a company having such paid-up capital of rupees ten crore or more or turnover of rupees fifty crores or more or as may be prescribed, shall be certified by a company secretary in practice in the prescribed form (Form No. MGT-8), stating that the annual return discloses the facts correctly and adequately and that the company has complied with all the provisions of this Act.

In the given case, the company Sigma Ltd is an unlisted company with paid up capital of Rupees six crore and turnover of Rupees fifty-five crore. Here, even though, its paid up capital is less than the prescribed amount of Rs. 10 Crores under Section 92(2), but its Turnover of Rs. 55 Crores exceeds the prescribed limit of Rs. 50 Crores under the provisions of Section 92(2) and accordingly, the necessity of the annual return being certified by the Company Secretary in practice (in Form no. MGT-8) is required for Sigma Ltd., besides the general requirements of Section 92(1) of annual return being signed by a director and the company secretary, or where there is no company secretary, by a company secretary in practice are applicable.

When the company filed its annual return with the ROC within sixty days from the date of AGM duly signed by the Director (Finance) is not in compliance with Section 92(1) as it needs to be additionally signed by the company secretary, or where there is no company secretary, by a company secretary in practice. Further, Sigma Ltd has also failed to get its Annual Return certified by a Company Secretary in Practice ensure Hence there definitely is a non-compliance with Section 92(1) as well as 92(2) of Companies Act, 2013.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 3(c) (Old syllabus).

Annual Return is a significant document in relation to the company

Annual Return is a significant document for the stakeholders of a company as it provides a very comprehensive information about various aspects of a company. It is perhaps the most important document required to be filed by every company with the Registrar of Companies. Apart from the Financial Statements, this is the only document to be compulsorily filed with the Registrar of Companies, every year irrespective of any events / happenings in the company. While the Financial Statements give information on the financial performance of a company, it is the Annual Return which gives extensive disclosure and greater insight into the non-financial matters of the company and the people entrusted with the management of the company.

Annual Return contains the following particulars in consonance with the Section 92(1) of the Companies Act, 2013:

(1)its registered office, principal business activities, particulars of its holding, subsidiary and associate companies;

(2)its shares, debentures and other securities and shareholding pattern;

(3)its indebtedness [omitted by the Companies (Amendment) Act, 2017) (Yet to be notified by CG)];

(4)its members and debenture-holders along with changes therein since the close of the previous financial year;

(5)its promoters, directors, key managerial personnel along with changes therein since the close of the previous financial year;

(6)meetings of members or a class thereof, Board and its various committees along with attendance details;

(7)remuneration of directors and key managerial personnel;

(8)penalty or punishment imposed on the company, its directors or officers and details of compounding of offences and appeals made against such penalty or punishment;

(9)matters relating to certification of compliances, disclosures as may be prescribed;

(10)details, as may be prescribed, in respect of shares held by or on behalf of the Foreign Institutional Investors [indicating their names, addresses, countries of incorporation, registration and percentage of shareholding held by them - omitted by the Companies (Amendment) Act, 2017) (yet to be notified by CG)] and

(11)such other matters as may be prescribed.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 1(b) (Syllabus 2017).

According to section 92(1) of the Companies Act, 2013, every company shall prepare an annual return in the prescribed form containing the particulars as they stood on the close of the financial year. According to Section 92(4) of the said Act, the annual return must be filed within 60 days from the date on which the annual general meeting is held or where the AGM is not so held within 60 days from the last day on which the AGM should have been held together with the statements, specifying the reason for not holding the AGM.

If a company fails to file the annual return as above, the company shall be punishable with the fine which shall not be less than Rs.50,000 but may extend to Rs.5 lakhs and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to 6 months or with fine which shall not be less than Rs.50,000 but which may extend to Rs.5 lakhs or with both.

The Company Secretary must, therefore, ensure that the annual return is filed by him within 60 days from the last day on which the AGM should have been held i.e 30th September 2018 to avoid legal action against himself and the company.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 2A(iv) (Old syllabus).

(a)Section 134(5) of the Companies Act, 2013, specifically provides that the Directors’ Responsibility Statement shall set out the following affirmations:

(i)in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(ii)the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

(iii)the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(iv)the directors had prepared the annual accounts on a going concern basis; and

(v)the directors, in the case of a listed company, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and

(vi)the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

As per section 134(6) of the Companies Act, 2013, the Board’s report and any annexures thereto, shall be signed by its chairperson of the company if he is authorised by the Board and where he is not so authorised, shall be signed by at least two directors, one of whom shall be a managing director, or by the director where there is one director.

(b)Under section 92(2) of the Companies Act, 2013 read with rule 11(2) of the Companies (Management and Administration) Rules, 2014 the annual return of a listed company or of a company having a paid-up share capital of Rs.10 crore or more or turnover of Rs. 50 crore or more shall be certified by a Company Secretary in practice in Form MGT-8. Accordingly, annual return of Faithful Ltd., an unlisted company having a turnover of Rs.75 crore shall be certified by a Practising Company Secretary under Form MGT- 8.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 6A(ii) (Syllabus 2022).

According to Sec 134(5) of the Companies Act, 2013, the Directors’ Responsibility Statement shall, state that-

a)in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b)the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

c)the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

d)he directors had prepared the annual accounts on a going concern basis; and

e)the directors, in the case of a listed company, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

f)the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

The Directors’ Responsibility Statement is an integral part of Board Report u/s 134 of the Act. The Board Report is approved by the Board of directors of the company and signed by the chairman of the company if so, authorized by the Board or by two directors one of whom shall be the Managing Director. Thus, after the Board’s report is approved and signed, the Directors Responsibility Statement stands authenticated by the Board and no separate authentication thereof is required.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 2A(iv) (Syllabus 2017).

Section 134(5) of the Companies Act, 2013 specifically provides that the Director's Responsibility Statement shall set out the following affirmations:

(i)in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(ii)the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

(iii)the directors had taken proper and sufficient care of the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(iv)the directors had prepared the annual accounts on a going concern basis;

(v)the directors, in the case of a listed company, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and

(vi)the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

In light of above, it is the responsibility of the Board of directors to prepare proper financial statement and maintain proper books of account in compliance with the statutory requirement. The Board cannot absolve from its responsibility on the ground that a Chartered Accountant has been appointed as CFO.

Therefore, Mr. Ritesh's representation to the statutory auditor is incorrect.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2022, Q. 1(c) (Syllabus 2017).

As per Section 134(6) of the Companies Act, 2013, the Board's report and any annexures thereto, shall be signed by the Chairperson of the company if he is authorised by the Board and where he is not so authorised, shall be signed by at least two directors, one of whom shall be a managing director, or by the director where there is one director.

Section 137(1) of the Companies Act, 2013 provides that a copy of financial statements, including consolidated financial statement, if any, along with all documents required to be attached to such financial statements under the Companies Act, 2013 duly adopted at the annual general meeting or adjourned annual general meeting of the company shall be filed with the Registrar of Companies within 30 days of annual general meeting or adjourned annual general meeting along with the prescribed fees. The Board's Report has to be attached to the financial statements.

However, where the financial statements are not adopted at annual general meeting or adjourned annual general meeting, such unadopted financial statements along with the required documents shall be filed with the Registrar within thirty days of the date of annual general meeting.

In case of a One Person Company a copy of the financial statements duly adopted by its member, along with all the documents which are required to be attached to such financial statements, shall be filed within one hundred eighty days from the closure of the financial year.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 1(d) (Syllabus 2017).

As per Section 134 read with Rule 8(5) (x) of the Companies (Accounts) Rules, 2014, every company except (Small Companies and One Person Companies) is required to include the following in its Director’s Report:

•Statement that the company has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 Disclosure Requirements under the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013

The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 is applicable to every workplace, establishment, company or organisation employing 10 or more employees irrespective of its location or nature of industry. The said Act provides for constitution of a Committee to be known as the "Internal Complaints Committee”.

Section 21 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 mandates that Internal Committee shall prepare an Annual Report and Section 22 of the said Act provides that the employer shall include in its report the number of cases filed, if any, and their disposal under this Act in the Annual Report.

Rule 14 of Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Rules,2013 provides that the annual report which the Complaints Committee is required to prepare under Section 21 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 shall contain the following details:

(a)Number of complaints of sexual harassment received in the year;

(b)Number of complaints disposed off during the year;

(c)Number of cases pending for more than 90 days;

(d)Number of workshops or awareness programme against sexual harassment carried out;

(e)Nature of action taken by the employer or District Officer.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 1(d) (Syllabus 2017).

Section 143(12) read with Rule 13(3) of the Companies (Audits and Auditor) Rules, 2014 provides that in case of a fraud involving lesser than Rupees One Crore, the auditor shall report the matter to Audit Committee constituted under section 177 of the Companies Act, 2013 or to the Board immediately but not later than two days of his knowledge of the fraud and he shall report the matter specifying the following:-

(a)Nature of Fraud with description;

(b)Approximate amount involved; and

(c)Parties involved.

In respect of the fraud reported by the auditors, the Board's report should make following disclosure-

(i)Nature of fraud with description;

(ii)Approximate amount involved;

(iii)Parties involved, if remedial action not taken; and

(iv)Remedial action taken.

In respect of the remark by Secretarial Auditor about non-filing of satisfaction of charges with ROC, Section 204 (3) of the Companies Act, 2013 provides that the Board of Directors, in their report made in terms of sub-section (3) of Section 134, shall explain in full any qualification or observation or other remarks made by the company secretary in practice in his report under sub-section (1).

Accordingly, the Board's report should state detailed explanation for the remark, together with reasons for such lapse, and the reasons that led to the lapse.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 4(b) (Old syllabus).

(a)Composition of CSR Committee {Section 135(1) read with Rule 5 of CSR Rules, 2014}: A private company shall have the CSR Committee of two or more directors as it is not required to appoint independent directors. Where the amount to be spent by a company under sub-section (5) does not exceed fifty lakh rupees, the requirement under sub-section (1) for constitution of the Corporate Social Responsibility Committee shall not be applicable and the functions of such Committee provided under this section shall, in such cases, be discharged by the Board of Directors of such company.

(b)Quorum for the CSR Committee: Law is also silent with regard to quorum for the committee meeting.

But as per Secretarial Standard 1: The presence of all the members of any Committee (applicable to CSR Committee also) constituted by the Board is necessary to form the Quorum for Meetings of such Committee unless otherwise stipulated in the Act or any other law or the Articles or by the Board.

(c)Functions of the CSR Committee [Section 135(3)]:

•To formulate and recommend to the Board, a CSR Policy which would indicate the activities to be undertaken by the company in areas or subject, specified in Schedule VII of the Act.

•To recommend the amount of the expenditure to be incurred on the activities undertaken in pursuance of the CSR policy.

•To monitor the CSR policy of the company time to time.

(d)Number of CSR Committee Meetings:

Law is silent with regard to number of CSR Committee meetings to be held in a year. But as per No. 2.2 of Secretarial Standard 1, “Committees shall meet as often as necessary subject to the minimum number and frequency stipulated by the Board or as prescribed by any law or authority.

(e)Chairman of the CSR Committee:

A member of the Committee appointed by the Board or elected by the Committee as Chairman of the Committee, in accordance with the Act or any other law or the Articles, shall conduct the Meetings of the Committee. If no Chairman has been so elected or if the elected Chairman is unable to attend the Meeting, the Committee shall elect one of its members present to chair and conduct the Meeting of the Committee, unless otherwise provided in the Articles.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 6A(ii) (Syllabus 2022).

(a)According to Section 135(1) of the Companies Act, 2013 read with Companies (CSR Rules), 2014, every company with a turnover of Rs. 1000 crore or more or net worth of Rs. 500 crore or more or a net profit of Rs. 5 crore or more during the immediately previous financial year is required to constitute CSR Committee of the Board to formulate and monitor the CSR policy of the company. Here net profits of the company in all three years is above 5 crores, hence the company is required to constitute CSR Committee. For computing net worth of a company u/s 2(57) of the Act, revaluation reserve is ignored.

(b)The company was incorporated on 01st April 2020 and it satisfies at least one criterion which triggers the condition for CSR contribution for spending on CSR initiatives. For this, the company is required to constitute CSR committee for the FY 2021-22 itself and spend at least 2% of the adjusted average net profit for the past three years from the FY 2020-2021 onwards.

(c)With effect from 22nd January 2021, as per the amended Section 135(7) of the Act, in case of default in complying with the provisions of the Act, the company will be liable to a penalty of twice the amount that needs to be transferred to the Fund as per Schedule VII of the Act or Rs. 1 crore whichever is less.

With effect from 22nd January 2021, as per the amended Sec 135(7) of the Act, in case of default in complying with the provisions of the Act, each Officer-in-Default of the company will be liable to a penalty of one tenth the amount that needs to be transferred to the Fund as per Schedule VII of the Act or Rs. 2 lakhs whichever is less.

Rupees in Crores

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 6(a) (Syllabus 2022).

According to Section 135(1) of Companies Act, 2013 read with the Companies (CSR Rules), 2014, Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during the immediately preceding financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.

As per section 135(5) the Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.

The unlisted public company was incorporated in the year 2022-23. It satisfies all the conditions on net worth (minimum Rs. 500 crore), turnover (minimum Rs. 1000 crore) or net profit (minimum Rs. 5 crore) in a year. Hence, the company needs to spend at least 2% of its adjusted net profit calculated as per Section 198 of the Companies Act, 2013 from the year 2023-24.

According to Companies (CSR Policy) amendment Act, 2021 dated 22/01/2021, expenditure incurred on specific activities that are carried out in India only will qualify as CSR expenditure.

According to Rule 2(1) of CSR Rules, in computation of net profit, dividend income received from investments in another Indian company or profit made by the company from its overseas branches will be excluded.

According to Section 198(5) of the Act, in computing adjusted net profit, inter alia, income tax and supertax payable by the company under Income Tax Act,1961 shall not be deducted from the net profits. That means the profits before tax should be a starting point for calculation of adjusted net profits.

As other information required u/s 198 of the Act for computing adjusted net profit is not given, the adjusted net profit before tax and after deducting dividend received from Indian companies and profit from overseas branches is given below:

Rupees in crore

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 3(a) (Syllabus 2017).

As per Rule 5(2) of the Corporate Social Responsibility Policy Rules, 2014 the CSR Committee shall formulate and recommend to the Board, an annual action plan in pursuance of its CSR policy, which shall include the following, namely: -

(a)the list of CSR projects or programmes that are approved to be undertaken in areas or subjects specified in Schedule VII of the Act;

(b)the manner of execution of such projects or programmes as specified in sub-rule (1) of rule 4;

(c)the modalities of utilisation of funds and implementation schedules for the projects or programmes;

(d)monitoring and reporting mechanism for the projects or programmes; and

(e)details of need and impact assessment, if any, for the projects undertaken by the company.

However, the Board may alter such plan at any time during the financial year, as per the recommendation of its CSR Committee, based on the reasonable justification to that effect.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 4(d) (Syllabus 2017).

(i)Sample Board Resolution to approve and adopt a new CSR Policy

“RESOLVED THAT pursuant to section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014 as amended from time to time and such other provisions as may be applicable and based on the recommendation of the CSR Committee, the Board of Directors of the company do and hereby approve a new CSR Policy in supersession of the existing CSR Policy dated ................ in compliance with the requirements under Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.

RESOLVED FURTHER THAT the new CSR Policy be and is hereby approved and signed by Mr./ Ms.______Director.

RESOLVED FURTHER THAT the Directors of the company be and are hereby authorized severally to take necessary steps to give effect to the above resolutions and do all such acts, deeds and things as may be required to ensure compliance of the CSR Policy including disseminating the contents of revised policy on the website of the company.”

(ii)Specimen Board Resolution for approval of the Board’s Report

“RESOLVED THAT the Boards’ Report to be sent to the Shareholders of the company for the year ended 31st March.............. prepared in accordance with the provisions of Section 134 of the Companies Act, 2013 together with all the Annexures thereto ( as per draft placed before the Board and initialed by the Chairman for identification purposes) be and is hereby approved and the same be signed by Shri.................... Chairman of the company, or in his absence, by Shri………………. Managing Director and Shri ......................... Director for and on behalf of the Board of Directors of the company.”

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 6(c) (Syllabus 2022).

i.According to Section 135(1) of the Companies Act, 2013, the CSR provision is applicable to companies which fulfill any of the following criteria during the immediately preceding financial year:

a.Companies having a net worth of rupees 500 crore or more; or

b.Companies havening turnover of rupees 1000 crore or more; or

c.Companies having a net profit of rupees 5 crore or more.

According to Section 2(57), net worth means the aggregate value of the paid-up share capital and all reserves created out of profits and securities premium account after deducting the aggregate value of accumulated losses, deferred revenue expenditure and miscellaneous expenditure not written off (but does not include reserves created out of revaluation of assets, write back of depreciation and amalgamation).

Computation of net worth and information of turnover and net profit is tabulated as below:

(Rupees in crore)

As more than one condition viz., net worth or turnover or net profit is getting satisfied from FY 2019-20 onwards, the Board is required to constitute the CSR Committee from FY 2020-21 and onwards to formulate CSR Policy for approval by the Board and for recommending CSR projects.

ii.The minimum CSR spend for FY 2022-23 is two percent of average adjusted net profit for the last three financial years = (2 % of (14+24+4)/3) = Rupees 28 lakhs in FY 2022-2023.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 3(b) (Syllabus 2017).

“RESOLVED THAT pursuant to section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014 as amended from time to time and such other provisions as may be applicable and based on the recommendation of the CSR Committee, the Board of Directors of Himachal Chemicals Limited (the Company) do and hereby approve a new CSR Policy in suppression of the existing CSR Policy dated ................ (May 15, 2021 or any other date) in compliance with the requirements under Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.”

“RESOLVED FURTHER THAT the new CSR Policy of the Company be and is hereby approved and adopted by the Board of Directors of the Company and the same be signed by Mr. / Ms. ............, Director for identification purpose.”

“RESOLVED FURTHER THAT all the Directors of the Company and /or the Company Secretary of the Company and /or the CFO of the Company, be and are hereby authorized severally to take necessary steps to give effect to the above resolutions and do all such acts, deeds and things as may be required to ensure compliance of the CSR Policy including disseminating the contents of revised policy on the website of the Company.”

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 6(d) (Syllabus 2022).

“CSR Policy” means a statement containing the approach and direction given by the board of a company, taking into account the recommendations of its CSR Committee, and includes guiding principles for selection, implementation and monitoring of activities as well as formulation of the annual action plan.

CSR Policy elaborates the activities to be undertaken by the Company in areas or subject, specified in Schedule VII to the Act.

The Board of every eligible company referred u/s 135(1) after taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy in its report and also place it on the company's website, if any, for public access and ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company.

The Board's Report of a company covered under these rules pertaining to any financial year shall include an annual report on CSR containing particulars specified in Annexure I or Annexure II of CSR Rules, as applicable.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 3A(i) (Old syllabus).

Section 135 of the Companies Act, 2013 pertaining to Corporate Social Responsibility stipulates that:

(i)every company having net worth of Rs.500 crore or more; or

(ii)every company having turnover of Rs.1000 crore or more; or

(iii)every company having net profit of Rs.5 crore or more.

during the immediately preceding financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of 3 or more directors, out of which at least 1 director shall be an independent director.

However, where a company is not required to appoint an independent director under Section 149(4) of the Companies Act, 2013, it shall have in its Corporate Social Responsibility Committee 2 or more directors.

Further, as per Rule 5 of the Companies (Corporate Social Responsibility Policy) Rules, 2014, a private company having only 2 directors on its Board shall constitute its CSR Committee with 2 such directors.

With respect to a foreign company covered under these rules, the CSR Committee shall comprise of at least 2 persons of which 1 person shall be as specified under clause

(d)of section 380(1) of the Companies Act, 2013 and another person shall be nominated by the foreign company.

The role of the Corporate Social Responsibility Committee is—

(a)to formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company in areas or subject, specified in Schedule VII of the Companies Act, 2013;

(b)to recommend the amount of expenditure to be incurred on the activities referred to in clause (a) above; and

(c)to monitor the Corporate Social Responsibility Policy of the company from time to time.

After taking into account the recommendations of the CSR Committee, the Board shall approve the CSR Policy for the company.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 4(c) (Syllabus 2017).

Section 135(1) of the Companies Act, 2013 provides that every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during the immediately preceding financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.

However, proviso to Section 135(1) read with rules made thereunder provides that in case where a company is not required to appoint an independent director under sub-section (4) of section 149, such company shall have in its Corporate Social Responsibility Committee two or more directors.

In case where a private company has only two directors on the Board, the CSR Committee can be constituted with these two directors. The CSR Committee of a foreign company shall comprise of at least two persons wherein one or more persons should be resident in India and the other person nominated by the foreign company.

Accordingly, it is not mandatory to have at least three directors on the CSR Committee of every company.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 1(d) (Old syllabus).

As per section 135 of the Companies Act 2013, the CSR provision is applicable to companies which fulfills any of the following criteria during the immediately preceding financial year:

•Companies having net worth of rupees five hundred Crore or more, or

•Companies having turnover of rupees one thousand Crore or more or

•Companies having a net profit of rupees five Crore or more

Explanation to section 135 provides that for the purposes of this section "net profit" shall not include such sums as may be prescribed, and shall be calculated in accordance with the provisions of section 198.

The Section 198 of the Companies Act, 2013 read with CSR Rules have clarified the manner in which a company's net profit will be computed to determine if it fits into the 'spending' norm. In order to determine the 'net profit', dividend income received from another Indian company (which are duly covered under and complying with the provisions of Section 135 of the Companies Act, 2013) or profits made by the company from its overseas branches have been excluded. Moreover, the 2% CSR is computed as 2% of the average net profits made by the company during the preceding three financial years.

Here, assuming that WB Ltd is duly covered under Section 135 of Companies Act, 2013 and is also complying with the said provisions, the dividend received by Warner Ltd from WB Ltd shall be deducted from the Net Profit of Warner Ltd so as to compute “net profit” & “average net profit” for the purpose of Section 135 of Companies Act, 2013.

Hence, based on above assumption, Warner Ltd’s net profit shall be considered as rupees 7 Crore minus 1 Crore (dividend from another Indian company) = rupees 6 Crore in the preceding financial year, thus making it liable to comply with Section 135. It will therefore be required to spend on CSR Activities

The CSR amount to be spent/created is 2% of Rupees 6 crores + 5 crores + 6 crores = 17/3 = rupees 5.67 Crore (average profit of the preceding three years) i.e. 2% of Rs. 5.67 Crore being Rs. 11.33 Lakhs.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 5A(ii) (Syllabus 2017).

Section 135 (3) of the Companies Act, 2013 read with Rules made thereunder provides that the following functions shall be carried out by a Corporate Social Responsibility

(CSR) Committee:

-To formulate and recommend to the Board, a CSR Policy which would indicate the activities to be undertaken ïn areas or subject, specified in Schedule VII of the Act.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 2A(iv) (Syllabus 2017).

Specimen Board Resolution for preparation of annual report in abridged form for mailing to the members-

“RESOLVED THAT pursuant to the provisions of Section 136 of the Companies Act, 2013, and Rule 11 of the Companies (Accounts) Rules, 2014, and any other applicable provisions, the consent of the Board be and is hereby accorded to prepare and circulate an abridged form of the Annual Report for the financial year ended March 31, 2025, to all the members of the Company, debenture holders, and all other persons entitled to receive the same.

RESOLVED FURTHER THAT the full Annual Report, including the audited financial statements, Board’s Report, Auditor’s Report, and all other annexures as required under the Companies Act, 2013, shall be made available for inspection at the Registered Office of the Company during business hours, and shall also be placed on the Company’s website at [Company Website URL,]. RESOLVED FURTHER THAT Mr. ……… Chief Manager (Secretarial & Legal), and the Assistant Company Secretary be and are hereby jointly and severally authorized to:

a.Finalize the contents, design, and layout of the abridged form of the Annual Report.

b.Ensure that the abridged Annual Report includes all information as required by the applicable provisions of the Companies Act, 2013, and rules made thereunder.

c.Take all necessary steps to print and dispatch the abridged Annual Report to the members and others entitled to receive it, within the statutory timelines.

d.Ensure that the full Annual Report is made available for inspection and placed on the Company’s website as stipulated by law.

e.Do all such other acts, deeds, and things as may be necessary, proper, or expedient to give effect to this resolution.”

A company secretary can be removed or dismissed like any other employees of the organization. Since, Rajen is appointed by Board, the Board of directors of a company have absolute discretion to remove a company secretary or to terminate his services at any time for any reason or without any reason. However, principles of natural justice like show cause notice, hearing, reasoned order, compliance with his terms of appointment, etc. must be followed. Hence, a resolution in general meeting - ordinary or special is not required for removal of a company secretary in employment.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 6(d) (Syllabus 2022).

According the Regulation 36 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 [SEBI (LODR) Regulations], the listed company shall send the annual report in the following manner to the shareholders:

a)Soft copies of full annual report to all those shareholders(s) who have registered their registered their email address(es) either with the listed company or with any depository;

b)Hard copy of the statement containing the silent features of all the documents, as prescribed in the Section 136 of Companies Act, 2013 or rules made thereunder to those shareholders(s) who have not so registered;

c)Hard copies of full annual reports to those shareholders, who request for the same.

The listed entity shall send annual report to the holders of securities, not less than twenty- one days before the annual general meeting.

Agro Food Ltd., sent annual report after annual general meeting concluded while it is required to be sent not less than 21 days before the annual general meeting i.e., on or before 24th August, 2023. Further, company did not send annual report to Sumit, while it is required to be sent to all shareholders whose email id is registered with the company or its depository.

Thus, in the given case, the contention of Agro Food Ltd., is not correct and it has not complied with the above Regulation 36 of SEBI (LODR) Regulations.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 2A(v) (Syllabus 2017).

(i)Under Regulation 29 (2) of SEBI (LODR) Regulations, 2015, every listed company has to give intimation to the stock exchange, at least five days before the date of the board meeting to be held for discussing annual financial results, (excluding the date of meeting and date of notice). Hence, ABCD Ltd. is required to comply with this requirement.

(ii)As per rule 11(a) of the Companies (Accounts) Rules, 2014, in case of all listed companies and such public companies which have a net worth of more than one crore rupees and turnover of more than ten crore rupees, the financial statements may be sent by electronic mode to such members whose shareholding is in dematerialised format and whose email Ids are registered with Depository for communication purposes. Hence, ABCD Ltd. is required to comply with this requirement.

Further, regulation 36 of SEBI (LODR) Regulations, 2015, states that the listed entity shall send annual report to the shareholders in soft copies to all those shareholder(s) who have registered their email address(es) either with the listed entity or with any depository. This Regulation also requires the listed entity to send annual reports to the holders of securities, not less than twenty one days before the annual general meeting.

Hence, ABCD Ltd. is required to comply with this requirement.

(iii)As per section 136 of the Companies Act, every listed company having a subsidiary or subsidiaries shall place separate audited accounts in respect of each of subsidiary on its website, if any.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2022, Q. 2(d) (Syllabus 2017).

The Board Resolution for preparation of Annual Report in abridged form

“RESOLVED THAT pursuant to the provisions of second proviso of Section 136(1) of the Companies Act, 2013 and Rule 10 of the Companies (Accounts) Rules 2014, the Annual Report comprising of the Balance Sheet, Profit and Loss Account and other relevant documents to be attached to the financial statements in abridged form for the financial year ended 31st March………. also, to be prepared, finalised and audited in the prescribed Form No. AOC – 3 for sending to the members of the company."

“RESOLVED FURTHER THAT the draft audited financial statement containing salient features of financial statements for the year ended 31st March,………. , prepared in the prescribed Form No. AOC-3 as submitted to the meeting, be and are hereby approved and the same be authenticated by the directors of the company as required under Section 136 of the Companies Act, 2013 and be sent to the statutory auditors of the company for their report thereon and thereafter be sent to the members of the company for adoption at the ensuing annual general meeting of the company."

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 3(a) (Syllabus 2017).

The Companies Act, 2013 does not mandate companies to have an active website, but the SEBI (LODR) Regulations, 2015 requires that all listed entities shall maintain a functional website containing the basic information about the listed entity:

As per the provisions of the SEBI (LODR) Regulation, 2015, the listed entity shall disseminate the prescribed informations under a separate section on its website, including:

(a)details of its business;

(b)terms and conditions of appointment of independent directors;

(c)composition of various committees of board of directors;

(d)code of conduct of board of directors and senior management personnel;

(e)details of establishment of vigil mechanism/ Whistle Blower policy;

(f)criteria of making payments to non-executive directors, if the same has not been disclosed in annual report;

(g)policy on dealing with related party transactions;

(h)policy for determining ‘material’ subsidiaries;

(i)details of familiarization programmes imparted to independent directors including the following details:-

(i)number of programmes attended by independent directors (during the year and on a cumulative basis till date),

(ii)number of hours spent by independent directors in such programmes (during the year and on cumulative basis till date), and

(iii)other relevant details.

(j)the email address for grievance redressal and other relevant details;

(k)contact information of the designated officials of the listed entity who are responsible for assisting and handling investor grievances;

(l)financial information including:

(i)notice of meeting of the board of directors where financial results shall be discussed;

(ii)financial results, on conclusion of the meeting of the board of directors where the financial results were approved;

(iii)complete copy of the annual report including balance sheet, profit and loss account, directors report, corporate governance report etc.

(m)shareholding pattern;

(n)details of agreements entered into with the media companies and/or their associates, etc.;

(o)the information, report, notices, call letters, circulars, proceedings, etc. concerning non- convertible redeemable preference shares or non-convertible debt securities;

(p)all information and reports including compliance reports filed by the listed entity;

(q)information with respect to the following events:

(i)default by issuer to pay interest on or redemption amount;

(ii)failure to create a charge on the assets;

(iii)revision of rating assigned to the non-convertible debt securities.

It is important that the listed entity ensures the contents of the website are correct and updated at any given point of time.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 2A(i) (Syllabus 2017).