1. CHANGES IN DISCLOSURES: A COMPARATIVE
ANALYSIS OF COMPANIES ACT 1956 AND 2013
Arbaaz Hussain: B.B.A.LL.B
Adhiraj Gupta: B.A.LL.B

2. DISCLOSURE NORMS- WHAT ARE THEY?

Disclosure- The act or process of revealing or uncovering.

Disclosure as one of the tenets of corporate governance. It
constitutes an essential requirement for the efficacy of most
of the provisions of company legislation

Disclosure enhances transparency, helps stakeholders of the
firms and other market participants to act properly.

It prevents asymmetry of information and acts as a
yardstick for managerial performance.

3. DISCLOSURES IN PROSPECTUS



Section 56 of CA’ 1956 provided for matters to be stated and
reports to be set out in prospectus with reference to Part I and
II of Schedule II.
CA’ 2013 has reduced the number of items to be specified in
prospectus, and the same is contained in the section itself.
Additions made:
 26(1) (a)(xi): Particulars relating to gestation period of
project, extent of progress made, deadline for completion
and pending litigation by government or statutory body
against promoter.
 26(1)(c): Disclaimer stating that the contents of the
products are not contrary to the provisions of the CA’
2013, SCRA 1956, SEBI 1992, and the rules made
thereunder.

4. BOARDS REPORT
Section 217 of CA’1956 provided for the attachment of
the board’s report to the balance sheet in the general
meeting.
 The above section also provided for the essential
information to be furnished in the board’s report.
 Section 134 of the CA’ 2013 specifies for the furnishing
of the boards report in the general meeting, and mandates
the presence of certain additional information, which was
absent in the CA’ 1956.


5. BOARDS REPORT CONTD.

The additional information to be specified are:
 Extract of the annual return.
 Statement of declaration given by independent directors
 Companies policy on directors appointment and
remuneration in case of constitution of NRC.
 Explanation or comments by the board on every remark
given by the auditor and the CS in their reports
 Particulars of loans, guarantees and investments
 Particulars of contracts with related parties.
 Statement indicating development and implementation of
risk management policy.
 Details of policies developed and implemented on CSR.

6. BOARDS REPORT CONTD.


Directors responsibility statement in the boards report shall
include In the case of listed company, disclosures relating to the
operation and effectiveness of the companies internal financial
controls.
 Disclosure regarding the operation and effectiveness of the
devised system which seeks to ensure compliance with all
applicable laws.
Penalty to be imposed in case of contravention of these
requirements.
 Fine amounting to minimum 50,000 which may extend up to
25, 00,000. (For Company)
 Imprisonment for a term which may extend to three years or
with fine amounting to minimum of Rs. 50,000 which may
extend up to Rs. 5 lacs, or with both. (For officers)

7. ANNUAL RETURN
The CA’1956 made a distinction between the annual
return to be filed by a company having share capital, and
a company without share capital. (159-160)
 Section 161 provided for the procedure to be followed
while filing annual return with the ROC, and 162
provided for penalties.
 Section 92 of the CA’ 2013 has removed the
aforementioned distinction, and has additionally
provided for disclosures in the particulars of the annual
return.


8. ANNUAL RETURN CONTD.

The additional details to be mentioned are:
 The principal business activity of the company, the particulars of
its holdings, subsidiary and associated companies.
 Matters relating to certification of compliances, disclosures as
may be prescribed.
 A certification by the company secretary, stating that the
statements in the annual return are correct, adequate and
true, and that the company has complied with all provisions of
the act.
 Penalty to be imposed in case of contravention of these
requirements.
 Fine amounting to minimum 50,000 which may extend up to
25, 00,000. (For Company)
 Imprisonment for a term which may extend to three years or
with fine amounting to minimum of Rs. 50,000 which may
extend up to Rs. 5 lacs, or with both. (For officers)

9. AUDIT COMMITTEE



Section 292A of the CA’ 1956 provided for the constitution of
an audit committee, and its functioning only in case of public
companies having paid up capital of not less than Rs. 5 crore.
Section 177 of the CA’ 2013 mandated for the constitution of
an audit committee in every listed company and such other
class or classes of companies.
The additional disclosures to be given are:
 The Boards report under 134(3) shall disclose the
composition of an audit committee.
 Non acceptance of recommendation of the audit committee
shall be disclosed in the boards report along with the
required reasoning.
 The boards report and website of the company shall
contain details regarding the establishment of a mechanism
to maintain vigilance over the directors and employees.

10. NOTICE OF MEETINGS
Section 173 of CA’ 1956 provided for the attachment of
an explanatory statement to the notice of a meeting for
every special business to be conducted in such meeting.
 Section 102 of the CA’ 2013 also specifies for the
attachment of a statement to the notice with the
following additional details:
 Disclosures relating to the nature and extent of
interest of directors, KMP.
 Disclosure of the extent of interest of every
promoter, director and KMP in any other company to
be affected by the proposed resolution if they hold not
less than 2% of paid up shareholding of such other
company.


11. NOMINATION AND REMUNERATION
COMMITTEE & STAKEHOLDER COMMITTEE
Schedule XIII of CA’ 1956 provided for the approval of
the managerial remuneration by the remuneration
committee in a situation where the company had no
profits or inadequate profits. The listing agreement
contains provisions regarding NRC which are not
mandatory.
 Section 178 of CA’ 2013 mandates for the creation of
Nomination and Remuneration Committee & The
Stakeholder Committee.
 Policy
relating to the remuneration for the
directors, KMP and other employees formulated by NRC
is to be disclosed in the boards report.


12. CONSOLIDATED FINANCIAL STATEMENT

Section 211 of the CA’ 1956 provided for the form and
contents of balance sheet and profit and loss account.

Section 129 of the CA’ 2013 provides for the forms and
contents of the financial statements of the company.

Additionally it mandates the preparation of CFS, when a
company has one or more subsidiaries. The company
shall also attach along with its financial statement, a
separate statement containing the salient feature of its
subsidiary or subsidiaries.

13. CONCLUDING REMARKS

Additional disclosures in the CA’ 2013 will increase
transparency and thereby will result in the enhancement
of stakeholders confidence in the company.

However this disclosure of too much information in the
public
may
put
companies
in
a
competitive
disadvantageous position.

The non-discriminate imposition of stringent penalties
for every contravention seems to be inappropriate.

14. THANK YOU