ICSI issues guidance note on Directors Report and Related Party Transactions

ICSI issues guidance note on Directors Report and Related Party Transactions

The Boards Report is an important means of communication by the Board of Directors of a company with its stakeholders. The Boards Report provides the stakeholders with both financial and non-financial information, including the performance and prospects of the company, relevant changes in the management and capital structure, recommendations as to the distribution of profits, future and on-going programmes of expansion, modernisation and diversification, capitalisation of reserves, further issue of capital and other relevant information. The Companies Act, 2013, mandates certain disclosures to be made in the Boards Report, additionally, a listed company is required to comply with disclosures requirement stated under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. To promote uniformity of disclosures in the Boards Report, the Secretarial Standard on Report of the Board of Directors (SS-4), was issued by the Institute of Company Secretaries of India (ICSI), effective from 1st October, 2018 for recommendatory observance. This Guidance Note on Report of the Board of Directors issued by the ICSI, sets out the explanations, procedures and practical aspects in respect of the provisions contained in SS-4 to facilitate compliance thereof by the stakeholders.

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In order to understand and appreciate the nuances of RPTs, it is necessary to understand the various provisions of law and the related aspects which needs explanation. Hence, this Guidance Note on Related Party Transactions is formulated by the Secretarial Standards Board of ICSI and aims to explain the procedures, practices and compliances associated with RPTs.

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