Section 217 – The Companies Act,1956

The Companies Act, 1956

217. Board’s report.

(1) There shall be attached to every balance-sheet laid before a company in general meeting, a report by its Board of directors, with respect to

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

(b)the amounts, if any, which it proposes to carry to any reserves 1[***] in such balance-sheet 2[***]

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

3[(d)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 balance-sheet relates and the date of report;]

4[(e)the conservation of energy, technology absorption, foreign exchange earnings and outgo, in such manner as may be prescribed.]

(2) The Board’s report shall, so far as is material for the appreciation of the state of the company’s affairs by its members and will not in the Board’s opinion be harmful to the business of the company or of any of its subsidiaries, deal with any changes which have occurred during the financial year

(a)in the nature of the company’s business;

(b)in the company’s subsidiaries or in the nature of the business carried on by them; and

(c)generally in the classes of business in which the company has an interest.

5[(2A) (a) The Board’s report shall also include a statement showing the name of every employee of the company who

(i)if employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than 6[such sum as may be prescribed]; or

(ii)if employed for a part of the financial year, was in receipt of remuneration for any part, of that year, at a rate which, in the aggregate was not less 7[such sum per month as may be prescribed8; or]

9[(iii)if employed throughout the financial year or part thereof, was in receipt of remuneration in that year which, on the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the managing director or whole-time director or manager and holds by himself or along with his spouse and dependent children, not less than two per cent, of the equity shares of the company.]

(b) The statement referred to in clause (a) shall also indicate,

(i)whether any such employee is a relative of any director or manager of the company and if so, the name of such director, and

(ii)such other particulars as may be prescribed.

Explanation.“Remuneration” has the meaning assigned to it in the explanation to section 198.]

10[(2AA) The Board’s report shall also include a Directors’ Responsibility Statement, indicating therein,

(i)that in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(ii)that 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 or loss of the company for that period;

(iii)that 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;

(iv)that the directors had prepared the annual accounts on a going concern basis.]

11[(2B) The Board’s report shall also specify the reasons for the failure, if any, to complete the buy-back within the time specified in sub-section (4) of section 77A.]

(3) The Board shall also be bound to give the fullest information and explanations in its report aforesaid, or in cases falling under the proviso to section 222, in an addendum to that report, on every reservation, qualification or adverse remark contained in the auditors’ report.

(4) The Board’s report and any addendum thereto shall be signed by its chairman if he is authorised in that behalf by the Board; and where he is not so authorised, shall be signed by such number of directors as are required to sign the balance-sheet and the profit and loss account of the company by virtue of sub-sections (1) and (2) of section 215.

(5) If any person, being a director of a company, fails to take all reasonable steps to comply with the provisions of sub-sections (1) to (3), or being the chairman, signs the Board’s report otherwise than in conformity with the provisions of sub-section (4), he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to 12[twenty thousand rupees], or with both:

Provided that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully:

Provided further that in any proceedings against a person in respect of an offence under sub-section (1), it shall be a defence to prove 13[***] that a competent and reliable person was charged with the duty of seeing that the provisions of that sub-section were complied with and was in a position to discharge that duty.

(6) If any person, not being a director, having been charged by the Board of directors with the duty of seeing that the provisions of sub-sections (1) to (3) are complied with, makes default in doing so, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to 12[twenty thousand rupees], or with both:

Provided that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully.

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1. The word “either” omitted by Act 65 of 1960, sec. 65 (w.e.f. 28-12-1960).

2. The words “or in a subsequent balance-sheet; and” omitted by Act 65 of 1960, sec. 65 (w.e.f. 28-12-1960).

3. Ins. by Act 65 of 1960, sec. 65 (w.e.f. 28-12-1960).

4. Added by Act 31 of 1988, sec. 30 (w.e.f. 1-4-1989).

5. Ins. by Act 41 of 1974, sec. 22 (w.e.f. 1-2-1975).

6. Subs. by Act 31 of 1988, sec. 30, for “thirty-six thousand rupees” (w.e.f. 15-6-1988).

7. Subs. by Act 31 of 1988, sec. 30, for “three thousand rupees per month” (w.e.f. 15-6-1988).

8. Rs. 2,00,000 per month (w.e.f. 17-4-2002).

9. Ins. by Act 31 of 1988, sec. 30 (w.e.f. 15-6-1988).

10. Ins. by Act 53 of 2000, sec. 101 (w.e.f. 13-12-2000).

11. Ins. by Act 21 of 1999, sec. 15 (w.r.e.f. 31-10-1998).

12. Subs. by Act 53 of 2000, sec. 101, for “two thousand rupees” (w.e.f. 13-12-2000).

13. The words “that he had reasonable ground to believe, and did believe,” omitted by Act 65 of 1960, sec. 65 (w.e.f. 28-12-1960).

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