Section 2(85) of the Companies Act, 2013 defines small company as “small company” means a company, other than a public company-
(i) paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than ten crore rupees; and
(ii) turnover of which as per profit and loss account for the immediately preceding financial year does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than one hundred crore rupees:
(A) a holding company or a subsidiary company;
(B) a company registered under section 8; or
(C) a company or body corporate governed by any special Act;
Section 2(62) of the Companies Act, 2013 defines One Person Company as a company which has only one person as a member;
Section 134(3) of the Companies Act, 2013 mandates that a report by Board of Directors shall be attached with Financial Statements of every Company.
Rule 8A of Companies (Accounts) Amendment Rules, 2018 prescribes matters to be included in Board’s Report for One Person Company and Small Company. This Rule was inserted by The Companies (Accounts) Amendment Rules, 2018. The said Rule has prescribed following matters:
The Board’s Report of One Person Company and Small Company shall be prepared based on the stand-alone financial statement of the company, which shall be in abridged form and contain the following:
- the web address, if any, where annual return referred to in sub-section (3) of section 92 has been placed;
- number of meetings of the Board;
- Directors’ Responsibility Statement as referred to in sub-section (5) of section 134;
- details in respect of frauds reported by auditors under sub-section (12) of section 143 other than those which are reportable to the Central Government;
- explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report;
- the state of the company’s affairs;
- the financial summary or highlights;
- material changes from the date of closure of the financial year in the nature of business and their effect on the financial position of the company;
- the details of directors who were appointed or have resigned during the year;
- the details or significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operations in future.
Thus, Rule 8A acts as relief for small companies & One Person Companies who are not required to give detailed disclosures in Board’s Report as stipulated under Rule 8. Such Companies can only specify the above-mentioned details in the Board Report.