134. Financial statement, Board’s report, etc

(1) The financial statement, including consolidated financial statement, if any,

shall be approved by the Board of Directors before they are signed on behalf of the Board at

least by the chairperson of the company where he is authorised by the Board or by two

directors out of which one shall be managing director and the Chief Executive Officer, if he is

a director in the company, the Chief Financial Officer and the company secretary of the

company, wherever they are appointed, or in the case of a One Person Company, only by one

director, for submission to the auditor for his report thereon.

(2) The auditors’ report shall be attached to every financial statement.

(3) There shall be attached to statements laid before a company in general meeting, a

report by its Board of Directors, which shall include—

(a) the extract of the annual return as provided under sub-section (3) of section 92;

(b) number of meetings of the Board;

(c) Directors’ Responsibility Statement;

(d) a statement on declaration given by independent directors under sub-section

(6) of section 149;

(e) in case of a company covered under sub-section (1) of section 178, company’s

policy on directors’ appointment and remuneration including criteria for determining

qualifications, positive attributes, independence of a director and other matters

provided under sub-section (3) of section 178;

(f) explanations or comments by the Board on every qualification, reservation or

adverse remark or disclaimer made—

(i) by the auditor in his report; and

(ii) by the company secretary in practice in his secretarial audit report;

(g) particulars of loans, guarantees or investments under section 186;

(h) particulars of contracts or arrangements with related parties referred to in

sub-section (1) of section 188 in the prescribed form;

(i) the state of the company’s affairs;

(j) the amounts, if any, which it proposes to carry to any reserves;

(k) the amount, if any, which it recommends should be paid by way of dividend;

(l) material changes and commitments, if any, affecting the financial position of

the company which have occurred between the end of the financial year of the company

to which the financial statements relate and the date of the report;

(m) the conservation of energy, technology absorption, foreign exchange

earnings and outgo, in such manner as may be prescribed;

(n) a statement indicating development and implementation of a risk management

policy for the company including identification therein of elements of risk, if any,

which in the opinion of the Board may threaten the existence of the company;

(o) the details about the policy developed and implemented by the company on

corporate social responsibility initiatives taken during the year;

(p) in case of a listed company and every other public company having such

paid-up share capital as may be prescribed, a statement indicating the manner in which

formal annual evaluation has been made by the Board of its own performance and that

of its committees and individual directors;

(q) such other matters as may be prescribed.

(4) The report of the Board of Directors to be attached to the financial statement under

this section shall, in case of a One Person Company, mean a report containing explanations

or comments by the Board on every qualification, reservation or adverse remark or disclaimer

made by the auditor in his report.

(5) The Directors’ Responsibility Statement referred to in clause (c) of sub-section (3) 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) the 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.

Explanation.—For the purposes of this clause, the term “internal financial

controls” means the policies and procedures adopted by the company for ensuring

the orderly and efficient conduct of its business, including adherence to company’s

policies, the safeguarding of its assets, the prevention and detection of frauds and

errors, the accuracy and completeness of the accounting records, and the timely

preparation of reliable financial information;

(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.

(6) The Board’s report and any annexures thereto under sub-section (3) 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.

(7) A signed copy of every financial statement, including consolidated financial

statement, if any, shall be issued, circulated or published along with a copy each of—

(a) any notes annexed to or forming part of such financial statement;

(b) the auditor’s report; and

(c) the Board’s report referred to in sub-section (3).

(8) If a company contravenes the provisions of this section, the company shall be

punishable with fine which shall not be less than fifty thousand rupees but which may

extend to twenty-five lakh rupees and every officer of the company who is in default shall be

punishable with imprisonment for a term which may extend to three years or with fine which

shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with

both.