We briefly mentioned earlier that the business specified in section 173 that is ordinarily considered their documents at an annual general meeting come within the scope of ordinary business placed at such meetings.
Documents and information required to be forwarded to members in respect of an AGM
It is now proposed to enumerate the specific information and documents that shall be supplied to all members in respect of every general meeting which are all first approved by the board at meeting of the board before they are sent to members.
Balance sheet and profit and loss account
On the conclusion of every financial year, the board of directors shall ensure that the accounts of the company are finalized and simultaneously the auditors would be carrying out the audit of the accounts. The balance sheet and profit and loss account finalized by the company will be placed for consideration of the board at a board meeting.
After signature, the accounts will be passed on to the auditors for their report thereon. It may be noted that although the accounts are audited before their profit and loss account. If the company is registered with one person company and there is only one directors. He is only managed the board meetings with their own decisions.
Appropriations out of profit
It is good to remember another aspect of annual accounts that are placed before the board for consideration. The profit and loss account would show the net profit if any after tax on the years operations. It is for the board to decide how much of the profits will be transferred to general reserve pursuant to companies transfer of profits to reserves rules 1975.
Directors report section 217
It is mandatory for every public company and private limited company, to send annual balance sheet and profit and loss account to it’s the director’s report. The important document of a directors report in which the board gives a complete review of the performance of the company during the year and other information as explained below:
State of company’s affairs
The directors report starts with the financial results of the year which will show the working results for the year under review, the net profits before tax and the net profits after provision for tax and the appropriation of profits including the mandatory transfer to general reserve.
The report will mention the year’s total sales turnover and income and point out any problems faced by the company which have affected the profits and measures which have been taken to improve the working and reduce costs.
Mandatory transfer to reserve before declaration of dividend
Pursuant to provision in section 205(2A), no dividend shall be declared by a company for any financial year out of profits for that year except after providing for depreciation and except after the transfer to the reserves of the company such percentage of profits for that year not exceeding 10% as may be prescribed.
Where it is proposed to pay dividend, the directors report shall contain the recommendation of the board as to the rate of dividend for the year under review for the approval of members at the annual general meeting. The boards proposal about dividend shall be in conformity with the relevant rules in terms of which:
It is not obligatory for a company to transfer any amount from net profit to general reserve if the rate of dividend does not exceed 10%. The registration is also mandatory to these kind of recommendations.
Where the rate of dividend exceeds 20% the transfer to reserves shall not be less than 10%.
There is no prohibition on the company to transfer more than 10% to reserves provided the company is able to maintain payment of dividend an average of last 3 years immediately during the financial year.
Material changes since the conclusion of the financial year
As there is bound to be some interval of time between the end of the financial year and the day when the board finalized the directors report. The board shall indicate in the report the up-to-date position affecting the financial position of the registration company as well as material changes that have occurred which have a bearing on the working of the company.
Publication of particulars of certain employees
Pursuant to sub-section (2A) of section 217, the boards report shall contain information in a statement about employees who are in receipt of remuneration of such sum as may be prescribed per annum if employed in the whole of last year or per month if employed for the part of their year.
- Designation of employees
- Remuneration received
- Nature of employment, whether contractual or otherwise.
- Other terms and conditions.
- Nature of duties of the employees.
- Age of the employee
The remuneration referred to above is stated to mean the same way as in section 198. In terms of section 198, the registrar of located place is in Bangalore. The term shall include all expenditure incurred by the company in providing rent free accommodation, benefit or amenity and any expenditure incurred by the company which would have been incurred by the employee if not paid by the company.