Transparency with self -reporting and disclosure is the foundation of new Companies Act, 2013.

Section 197 of the Companies Act, 2013 requires every listed company to disclose in the boards report, the ratio of the remuneration of each director to the median employees remuneration and such other details as may be prescribed with a view to bring differences between director remuneration and average employee remuneration to the public domain.

The NRC will formulate criteria for determining qualifications, positive attributes and independence of a director and recommend to the board a policy, relating to the remuneration for the directors, KMP and other employees. Such policy will be disclosed in the boards report

The Companies Act, 2013 requires that every independent director, at the first meeting of the board in which he participates as a director and thereafter at the first meeting of the board in every financial year or whenever there is any change in the circumstances, which may affect his status as an independent director, will have to give a declaration that he meets the criteria of independence. The listing agreement requires that an independent director, prior to the appointment, disclose their shareholding (both own or held by/for other persons on a beneficial basis) in the listed company in which they are proposed to be appointed.

The Companies Act, 2013 defines the term related party to control/regulate related party transactions and investor protection. AS 18 definition is relevant from disclosure in the financial statements perspective.

The Companies Act, 2013 requires that every contract or arrangements entered into with a related party will be referred to in the boards report to shareholders, along with justification for entering into such transactions. This disclosure is currently not required. The Companies Act, 2013 states that without prejudice to provisions relating to subsequent approval, it is open to a company to proceed against a director or any other employee who had entered into such contracts or arrangements in contravention of these requirements to recover any loss sustained by it as a result of such a contract or arrangement. No such provision exists under the Companies Act, 1956.

Even if a company has entered into related party transaction at arms length, it appears that the same will need to be referred to in the boards report, along with justification for entering into the transaction. The disclosure requirement is also likely to cover non-cash transactions involving directors (covered elsewhere), if they are entered into with a related party.

The Companies Act, 2013 contains new requirement that a company will disclose to the members in the financial statements the full particulars of loans given, investments made or guarantee given or security provided and the purpose for which the loan or guarantee or security is proposed to be utilized by the recipient of the loan or guarantee or security.

A company will make disclosure regarding full particulars of loan given, investment made or guarantee given along with purpose for which such amount is to be utilized by the recipient of the loan/guarantee/security in the financial statements. [Section 186(4)]Hence, the same will also be subjected to audit.

The CSR committee will consist of three or more directors, out of which at least one director will be an independent director. The boards report will disclose the composition of this CSR committee.The board will approve the CSR policy and disclose its contents in the board report and place it on the companys website.In terms of Section 92(2), the AR filed by a listed company, or by a company having such paid up capital and turnover as may be prescribed, shall be certified by a CS in practice in the prescribed form, stating that the AR discloses the facts correctly and adequately and that the company has complied with all provisions of this Act. An extract of the AR in such form as may be prescribed shall form part of the Boards Report.

A statement containing information such as share in profit/loss and net assets of each subsidiary, associate and joint ventures will be presented as additional information. Currently, the MCA circular requires information, such as, capital, reserves, total assets and liabilities, details of investment, turnover and profit before and after taxation, to be disclosed for subsidiaries only. (iv) A company will disclose the list of subsidiaries or associates or joint ventures, which have not been consolidated along with the reasons for non consolidation.A company may need to give all disclosures required by Schedule III to the Companies Act, 2013, including statutory information, in the CFS. It may be argued that AS 21 (explanation to paragraph 6) had given exemption from disclosure of statutory information because the existing Companies Act, 1956 did not mandate preparation of CFS. With the enactment of the Companies Act, 2013, this position is likely to change. Also, the exemption in AS 21 may not override Schedule III because there is no prohibition on disclosure of additional information and the two requirements can co-exist.5. No specif

Disclosure of interest by directors Overview of significant changes 1. Like the existing Companies Act, 1956 the Companies Act, 2013 also requires interested director to disclose his interest in a contract/arrangement at the board meeting at which such contract/arrangement is being discussed. It also prohibits interested director from participating in such meetings. In addition, the Companies Act, 2013 requires a director to disclose his interest in a contract/arrangement entered/proposed to be entered into with: (a) A body corporate in which such director or such director in association with any other director, holds more than 2% shareholding of that body corporate, or is a promoter, manager, Chief Executive Officer of that body corporate, or (b) A firm or other entity in which, such director is a partner, owner or member. 2. The 2. Companies Act, 2013 requires that every director, at the first meeting of the board in which he participates as a director and thereafter at the first meeting of the board in each financial year or whenever there is a change in the earlier disclosure, will disclose his interest in companies, bodies corporate, firms or other association of individuals. Similar requirement with regard to general disclosure of interest in companies, bodies corporate, firms or other association of individuals also exists in the Companies Act, 1956. 3. Any contract/arrangement entered into by the company in contravention of the above requirements will be voidable at the option of the company. 4. The Companies Act, 2013 provides for stricter penalty and imprisonment for contravention.

Disclosure of interest by Director -Section 184 of Companies Act, 2013General Disclosure [section 184(1)]1. Before the first board meeting in which he participates as director and thereafter at the first board meeting in every financial year2. Disclosure in form MBP1 by every director of his CONCERN, INTEREST1, SHAREHOLDING in any company, firm or association of individualsIn case if there is any change in above said disclosure then such change is required to be disclosed in the first board meeting after such change.Specific Disclosure [Section 184(2)]1. Before the board meeting disclosure of nature of concern or interest, by every director who is any way, directly or indirectly, concerned or interested in a contract or arrangement or proposed contract or arrangement: -a. With a body corporate in which such director individually or in association with any other director holds more than 2% shareholding of that body corporate; orb. With a body corporate in which such director is a promoter, manager, chief executive officer of that body corporate; orc. With a firm or other entity in which such director is a partner, owner or member, as the case may be2. Such director shall not participate in such board meetingIn case if any director is not so concerned or interested at the time when the contract or arrangement is entered into but becomes so afterword, such director shall disclose his concern or interest at the first meeting of the board after he becomes so concerned or interested.Such contract or arrangement shall be voidable at the option of the company if no such disclosure is made or such director participated in the meeting [Section 184(3)].Non compliance [Section 184(4)]Non compliance of General or Specific disclosure may attract imprisonment up to one year or with fine between Rs.50,000/- to Rs.1,00,000/- or with both imprisonment as well as fine.Contradiction within section / clarification requiredSub section (5) rules out applicability of the section in case if shareholding of interested director/(s) of one company in other company is not more than 2%, however, sub section (2) confirms the applicability of section even if interested director/(s) does not hold more than 2% shareholding in other company but is a promoter, manager or chief executive officer of the other company.Secretarial issues involved1. Filing with Registrar the board resolution in Form MGT 14 taking note of the disclosure of directors interest and shareholding within 30 days [Section 117, 179 read with Rule 8(5) of Companies (Meetings of Board and its Powers) Rules, 2014];2. Maintenance of Register of contracts or arrangements in which directors are interested in form MBP 4 [Rule 16(1) of Companies (Meetings of Board and its Powers) Rules, 2014];- See more at: http://taxguru.in/company-law/disclosure-requirement-directors-companies-act-2013.html#sthash.IObHaE2e.dpuf

Stringent Disclosures in the Boards Report, Companys Annual Return and Certification by the Company SecretaryApart from introducing many definition clauses relating to the Duties of the Directors and the additional disclosures of non-financial information envisaged in the Annual Return (AR) as compared to the existing format, the Act, 2013 also defines the duties of the Company Secretary (CS) with regard to compliance managementThe company shall disclose to members in the Financial Statement the full particulars of the loans given, investments made or guarantee given or security provided and the purpose for which the loan or guarantee or security is proposed to be utilised by the recipient of the loan or guarantee or security [Section 186(4)]Section 134 stipulates that it shall be the duty of the BOD of a company to prepare, for disclosure to shareholders, a Financial Statement, including consolidated financial statement, if any, and such a statement shall be approved by the BOD before they are signed on behalf of the Board by, at least by the Chairperson of the company where he is authorized by the Board or by two directors, out of which one shall be the MD and the CEO, if he is a director in the company; the CFO and the CS of the company for submission to the Auditor for his report thereon. The Auditors Report shall be attached to every financial statementIn terms of Section 92(2), the AR filed by a listed company, or by a company having such paid up capital and turnover as may be prescribed, shall be certified by a CS in practice in the prescribed form, stating that the AR discloses the facts correctly and adequately and that the company has complied with all provisions of this Act. An extract of the AR in such form as may be prescribed shall form part of the Boards Report.There is no provision for Individual Companies to seek exemption from disclosure of the required particulars in the Financial Statement as provided for in Section 211(4) of the Act of 1956, but the Central Govt. can grant such exemption to a class or classes of Companies on an application made by such class or classes or by itself suo motu.

The 2013 Act also introduces certain changes with respect to prospectus and public offers aimed at enhancing disclosure requirements as well as streamlining the process of issuance of securities. 1. Issue of prospectus Currently, the matters and reports to be included in the prospectus are specified in parts I and II of Schedule II of the 1956 Act. In the 2013 Act, the information to be included in the prospectus is specified in section 26 of 2013 Act. The 2013 Act mandates certain additional disclosures: Any litigation or legal action pending or taken by a government department or a statutory body during the last five years immediately preceding the year of the issue of prospectus against the promoter of the company

Sources of promoters contribution The 2013 Act has also relaxed the disclosure requirements in some areas. Examples of certain disclosures not included in the 2013 Act are as follows. Particulars regarding the company and other listed companies under the same management, which made any capital issues during the last three years Export possibilities and export obligations Details regarding collaboration

The 2013 Act states that the report by the auditors on the assets and liabilities of business shall not be earlier than 180 days before the issue of the prospectus [section 26 (1) (b)(iii) of 2013 Act]. The 1956 Act currently requires that the report will not be earlier than 120 days before the issue of the prospectus3. General meetingsAlso, the threshold of disclosure of share holding interest in the company to which the business relates of every promoter, director, manager and key managerial personnel has been reduced from 20% to 2% [section 102 (2) of 2013 Act].

Listed companies will be required to file a return with the ROC with respect to the change in the number of shares held by promoters and top ten shareholders within 15 days of such a change[section 93 of 2013 Act]. This requirement again demonstrates the effort made towards synchronising the requirements under the 2013 Act and the requirements under SEBI. Additionally, on an annual basis, companies are also currently required to make the disclosures with respect to top shareholders under the Revised Schedule VI the 1956 Act.The 2013 Act also intends to improve corporate governance by requiring disclosure of nature of concern or interest of every director, manager, any other key managerial personnel and relatives of such a director, manager or any other key managerial personnel and reduction in threshold of disclosure from 20% to 2%. The term key managerial personnel has now been defined in the 2013 Act and means the chief executive officer, managing director, manager, company secretary, whole-time director, chief financial officer and any such other officer as may be prescribed.4. Disclosure of interest by director The 2013 Act prescribes similar requirements with respect to the disclosure of interest by the director as contained in the existing section 299 of the 1956 Act. The only change that could be identified is where a contract or arrangement entered into by the company without disclosure of interest by director or with participation by a director who is concerned or interested in any way, directly or indirectly, in the contract or arrangement, shall be voidable at the option of the company [section 184 of 2013 Act].2. Overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits [section 197 of 2013 Act]. As against the existing requirement of section 198 of the 1956 Act, which specifically provides that the provisions of managerial remuneration would be applicable to both public companies and private companies which are subsidiaries of public companies; the 2013 Act states that such provisions would be applicable only to public limited companies. Listed companies have been mandated to disclose in their board report, the ratio of remuneration of each director to median employees remuneration and such other details which are quite extensive as proposed in the draft rules*.

The existing 1956 Act under section 309 provides that a managing director or a whole time director of a subsidiary company who is in receipt of commission from the holding company cannot receive any commission or remuneration from the subsidiary company. The said restriction Accounts The 2013 Act has introduced certain significant amendments in this chapter. It has also introduced several additional requirements such as preparation of consolidated financial statements, additional reporting requirements for the directors in their report such as the development and implementation of the risk management policy, disclosures in respect of voting rights not exercised directly by the employees in respect of shares to which the scheme relates, etc., in comparison with the requirements of the 1956 Act.

With regard to related party, while there is a substantial difference between the definition under the 2013 Act and AS 18, the difference does not impact the financial statements, since the disclosures in the financial statements will be continued to be made as per AS 18.To prevent misuse of these specific provisions, the section contains a proviso which states that such a revised financial statement or report shall not be prepared or filed more than once within a financial year and the detailed reasons for revision of such financial statement or report shall also be disclosed in the boards report in the relevant financial year in which such a revision is being made (section 131 of 2013 Act).

The provisions of the existing Schedule XIV of the 1956 Act has been acknowledged under Schedule II of the 2013 Act. Important highlights from the Schedule II are as follows: The useful life or residual value of an asset have been specified in Part C of the Schedule. Companies will be required to give disclosure for cases where the useful life or residual value is different from the useful life or residual value as specified in Part C of the Schedule.

There have been mixed reactions to the introduction of the spend or explain approach taken by the MCA with respect to CSR. It may take a while before all of Corporate India imbibes CSR as a culture. However, activities specified in the Schedule are not elaborate or detailed enough to indicate the kind of projects that could be undertaken, for example, environment sustainability or social business projects could encompass a wide range of activities. The committee will also need to recommend the amount of expenditure to be incurred and monitor the policy from a time-to-time. The board shall disclose the contents of the policy in its report, and place it on the website, if any, of the company. The 2013 Act mandates that these companies would be required to spend at least 2% of the average net-profits of the immediately preceding three years on CSR activities, and if not spent, explanation for the reasons thereof would need to be given in the directors report(section 135 of the 2013 Act).

The 2013 Act acknowledges the existing rights of small shareholders envisaged in section 252A of the 1956 Act under the following sections:

Specific disclosure under the scheme of mergers or amalgamation regarding the effect of merger on minority shareholders is to be provided.

Moreover, the Corporate Affairs Ministry - which is implementing the law - has brought in stringent disclosure norms especially for related party transactions and for beneficial investments made by companies both directly and indirectly.It will also be the endeavour of the government to remove all streamline disclosure norms to tighten corporate governance and introduce shareholders' democracy, they said.In the proposed company law, the Ministry of Corporate Affairs would introduce some disclosure schemes, they said.On matters such as investment and issue of share, companies may be required to take prior approval from their shareholders, sources said. This is to curtail powers of Board of Directors of a company.It would a major shift from the present Companies Act, 1956 as this 'approval regime' would bring greater transparency in the functioning of the corporates and make them more accountable towards their shareholders.As per present rules, corporates have to inform only regulators such as Registrar of Companies and SEBI on such issues.

With a view to provide greater transparency and disclosure by listed companies, 2013 Act provides that: Listed company to file with ROC a report in respect of change in number of shares held by promoters or top 10 shareholders within 15 days of such change. This is an additional disclosure requirement which is independent of disclosures to be made under the SEBI Regulations relating to Takeovers and Prohibition of Insider Trading. Listed companies are required to file a report with ROC within 30 days of the conclusion of the AGM including a confirmation that AGM meeting was convened, held and conduct

The disclosures in the Annual Return are enhanced. Information relating to remuneration of directors and KMP, details of meetings of members, BOD and its various committees, matters relating to certification of compliances, disclosures, shares held by or on behalf of FII etc. are also to be provided.

MD or WTD of the company who is in receipt of any commission from the company will not be disqualified from receiving any remuneration / commission from its holding company or subsidiary company subject to necessary disclosures in the Directors report.

Role of CFO: 2013 Act has enhanced the role of CFO which would entail greater responsibilities on the CFO of a company. CFO made responsible and liable for penalty and / or prosecution for compliance with various provisions such as maintenance of books of accounts, preparation & filing of annual accounts, disclosure of financial information in offer document, risk management, internal control etc

Directors Report One of the measures adopted in 2013 Act is selfregulation, corporate democracy and enhance disclosure requirements which provides for greater transparency. Accordingly, 2013 Act has made the Directors Report more informative and includes disclosures amongst others: extract of the Annual Return, number of meetings of BOD, development and implementation of a risk management policy and CSR, related party contracts, certain loan / guarantees / investments and in case of listed and prescribed public companies to also provide for policy on directors appointment, remuneration and annual evaluation of the performance of the BOD. the Directors' Responsibility Statement shall also include the statement that 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. had laid down internal financial controls to be followed and that such internal financial controls are adequate and were operating effectively applicable to listed companies

2013 Act provides for some measures to protect the interest of minority shareholders. It includes the following:Where any benefit accrues to promoter, director, manager, KMP, or their relatives, either directly or indirectly as a result of non-disclosure or insufficient disclosure in the explanatory statement annexed to the notice of general meeting then such persons shall hold such benefit in trust for the company and shall be liable to compensate the company to the extent of the benefit received by himsn 26 Matters to be stated in prospectus.67Restrictions on purchase by company or giving of loans by it for purchase of its shares., 68, Power of company to purchase its own securities.69Transfer of certain sums to capital redemption reserve account89Declaration in respect of beneficial interest in any share102Statement to be annexed to notice.129Financial statement.131Financial statement.,135Corporate Social Responsibility.149, Company to have Board of Directors.167, Vacation of office of director.177, Audit Committee178, Nomination and Remuneration Committee and Stakeholders Relationship Committee182, Prohibitions and restrictions regarding political contributions.183, Power of Board and other persons to make contributions to national defence fund, etc.184, Disclosure of interest by director186, Loan and investment by company189, Register of contracts or arrangements in which directors are interested.191, Payment to director for loss of office, etc., in connection with transfer of undertaking, property or shares.197, Overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits.206, Power to call for information, inspect books and conduct inquiries.226, Voluntary winding up of company, etc., not to stop investigation proceedings.230, Power to compromise or make arrangements with creditors and members.236, Purchase of minority shareholding238, Registration of offer of schemes involving transfer of shares.272, Petition for winding up.275, Company Liquidators and their appointments.291Provision for professional assistance to Company Liquidator.310, Appointment of Company Liquidator.336, Offences by officers of companies in liquidation.390, Offer of Indian Depository Receipts.457 Nondisclosure of information in certain cases.