July 18, 2025
MCA’s Push for Gender-Sensitive Corporate Governance
MCA has amended the Companies (Accounts) Rules, 2014 to mandate disclosure of data related to sexual harassment at the workplace under the POSH Act, and a statement of compliance with the Maternity Benefit Act, 1961, in the Board Report of companies. The amendment requires companies to report the number of complaints received, disposed of, and pending under the POSH Act, along with the gender-wise employee count (male, female, transgender) as part of their annual disclosures. Effective July 14, 2025, these changes aim to enhance corporate accountability, promote gender-sensitive governance, and align financial disclosures with statutory compliance under both the POSH Act, 2013 and the Companies Act, 2013.
The Ministry of Corporate Affairs (“MCA”),
vide its notification dated May 30, 2025, introduced
amendments to the Company (Accounts) Rules, 20141
(“CAR”) aimed to digitize
the form filing process and introducing additional
disclosure requirements in the Board’s Report,
in alignment with the Sexual Harassment of Women
at Workplace (Prevention, Prohibition and Redressal)
Act, 2013 (“POSH”)
and the Maternity Benefit Act, 1961 (“MB
Act”). The amendments have come into
effect from July 14, 2025, and
are applicable to all companies registered under
the Companies Act, 2013 (“Act”)
including public, private, listed and unlisted companies.
BACKGROUND
The CAR lay down rules regarding the preparation,
maintenance, and filing of financial statements
and disclosures in the Board’s Report by companies.
These rules are read with Sections 128 to 137 of
the Act and mandate several disclosures to ensure
transparency, accountability, and good governance.
On May 30, 2025, MCA notified the Companies (Accounts)
Second Amendment Rules, 2025 (“Amendment
Rules”),2 and introduced
crucial changes to CAR with the aim to standardize
and simplify how companies report their financial
information under the Act by amending rules 5, 8,
and 12 of the CAR to introduce new requirements
in the annexure to the prescribed e-forms that companies
must file on annual basis as specified under the
Act.
This amendment represents more than a mere procedural
update; they reflect a broader shift in regulatory
philosophy towards enhanced governance and corporate
accountability.. By incorporating new disclosure
obligations relating to POSH and MB Act, the MCA
has signaled that financial transparency should
go hand in hand with social responsibility and greater
internal governance, especially when it comes to
promoting a nurturing workplace culture for women.
The amendment highlights the government’s
intent to make corporate reporting more holistic,
linking financial disclosures with commitments to
employee welfare and gender-sensitive policies.
KEY CHANGES INTRODUCED
The changes brought in by the Amendment Rules,
being majorly focused on extensive disclosure requirements
and digitization of forms are as follows:
Earlier,
all companies were required to include, in their
Board Report, a statement confirming compliance
with the provisions of POSH Act, including
the constitution of an Internal Complaints Committee
(“ICC”). Pursuant to the revised Rule
8, companies are now required to provide a more
detailed disclosure in their Board Report relating
to workplace sexual harassment. This includes a
confirmation of compliance with the POSH Act (including
constitution of the ICC), and, in addition, disclosure
of the following information:
(a) the number of sexual harassment complaints
received in year;
(b) the number of cases disposed off in
a year; and
(c) the number of cases that are pending for
more than ninety (90) days in their Board Report.
Furthermore, the format of the extract to be
included in the Board’s Report, as prescribed
under the Amendment Rules, also mandates that the
companies disclose the number of female, male, and
transgender employees, respectively, as on the close
of the financial year. The company
shall now also include a declaration in its Board
Report signifying its compliance with the provisions
of the MB Act. To support the veracity of such statement,
the companies must ensure that they are in compliance
with all the requirements of the state specific
maternity benefit rules as well, which may include,
actions such as filing of returns, maintenance of
registers, allowing maternity leaves, maintaining
creche facility at their office premises etc.
PROMOTION
OF GOOD GOVERNANCE THROUGH KEY CHANGES
Reporting related
to POSH Act
The key highlight of the Amendment Rules is the
significant expansion of the Board’s Report
to include social compliance disclosures, with the
aim of making workplace a safer environment for
women, thus increasing more gender inclusivity and
promoting good governance within the employees of
the company. With an increasing trend of recorded
POSH complaints (as shown in the graph below), the
amendment comes in at the right time to enhance
accountability on corporates to disclose the internal
governance related to safety of women at workplace.
Source: Centre for Economic Data
and Analysis3
Based on the data available, when the POSH Act
came into force in FY 2013–14, the number
of reported sexual harassment complaints in listed
Indian companies increased significantly from 161
cases in FY 2013–14 to 465 in FY 2014–15,
and reached 961 in FY 2020–21. Post the pandemic,
number of reports bounced back to 767 in FY 2021–22
and further jumped by 51.2% to 1,160 in FY 2022–23.4
However, resolution of these complaints has not
kept pace with the rise in filings, with a widening
gap seen in recent years. Reporting remains highly
concentrated in a small number of companies: of
the 300 NSE-listed firms studied, only 81 reported
complaints in FY 2022–23, and just eight of
them accounted for half of all complaints. In contrast,
219 companies disclosed zero complaints that year,
with most reports coming from the top 100 listed
companies.5
Compliance
with MB Act
The requirement to include a statement of compliance
with the MB Act, now mandates that the companies
formally confirm, in their Board’s report
notifying that the company has adhered to the provisions
of MB Act and any applicable state specific rules
therein. Such an adherence would carry benefits
like paid maternity leave, nursing breaks, and protection
from dismissal during maternity periods for female
employees. By linking reproductive rights and gender
equity directly with the financial reporting process,
the amendment raises the compliance bar for companies
across both private and public sectors an aim at
striking a balance between corporate governance
and social responsibility.
In terms of the data available, V. V. Giri National
Labour Institute (Ministry of Labour & Employment,
Govt. of India), in their report published in 2025,6
have highlighted persistent non-compliance with
the MB Act among Indian companies. Analysis of data
from labor inspections and employer filings reveals
that over 38% of surveyed establishments failed
to provide the mandatory 26 weeks of paid maternity
leave, while nearly 60% lacked functional crèche
facilities despite statutory obligations. Alarmingly,
only 43% of employers submitted complete statutory
returns disclosing maternity benefits, pointing
to significant under-reporting. The report also
notes that digital compliance platforms have had
limited impact, underscoring systemic enforcement
weaknesses and the urgent need for stricter regulatory
oversight.
Therefore, the significant amendment to make
reporting under the POSH and MB Act in the Board
Report attract significant attention of the directors
of the board to address problems faced by women
in the workplace. The regular reporting will allow
authorities and the investors to assess how the
management of a company treats it female employees
and their good governance strategies, which have
observantly become an important consideration for
many investors today.
LEGAL ANALYSIS
The Amendment Rules are aligned with the existing
statutory framework under the POSH Act, specifically
Sections 21 and 22, read with Rule 14 of the POSH
Rules. These provisions mandate that every employer
must constitute an ICC in accordance with the POSH
Act and ensure that the ICC submits an annual report
to the employer, containing, inter alia,
the following details:
the number of sexual
harassment complaints received and disposed
during the year the number of cases
pending for more than ninety days; the number of workshops
or awareness programmes conducted on the prevention
of sexual harassment; and the nature of action
taken by the employer.
Additionally, under Section 22 of the POSH Act
employers are required to include, in the company’s
annual report, information relating to the number
of sexual harassment cases filed and their status
of disposal to the designated District Officer.
Consequently, any failure to adhere to the prescribed
disclosure requirements may expose companies to
penal consequences under both the POSH Act and the
Companies Act.
With these amendments coming into effect, in
practice, the following points will have to be considered
by the following parties:
Companies-
The companies must ensure that the disclosures
are made to both the designated District Officer
as well as the Registrar of Companies, to avoid
any penalties that may be levied under the POSH
Act and/ or the Act. The senior management and
directors will now have to be more vigilant
of the legal implications that come with these
new reporting obligations and improve their
internal policies. Investors-
Investors undertaking due diligence on the companies,
may consider that the Board Reports are providing
with such required information and may also
assess the internal governance within the company
by such statements. They would also want to
undertake the assessment of risk of penalty
not only from an employment law perspective
but also from the view of any action that may
be initiated by the registrar upon non-disclosure
of the requisite information and accordingly
negotiate the consideration for the concerned
transactions.
PENAL
CONSEQUENCES
Under the POSH Act, failure to include the mandated
information in the company’s annual report
may attract a monetary penalty ranging from INR
50,000 to INR 1,00,000, depending on the nature
and frequency of non-compliance. Repeated violations
may result in more severe repercussions, including
suspension, cancellation, or non-renewal of the
establishment’s license or registration.
Separately, under Section 134(8) of the Act,
non-compliance with the disclosure obligations in
the Board’s Report may lead to significant
penalties, with the company being liable to a fine
of up to INR 3,00,000 and each defaulting officer
facing a fine of up to INR 50,000.
Sections 448 and 449 of the Act imposes penalties,
including civil and criminal liability, for false
statements and evidence in statutory filings. With
these disclosures now part of official filings,
companies must treat their accuracy and completeness
with the highest level of diligence and care.
WAY FORWARD
These amendments significantly overhaul the company’s
internal compliance, documentation, and reporting
mechanisms. ICC committee must now maintain accurate
and timely records of all complaints received, investigations
conducted, and actions taken. Close coordination
between legal and HR departments will be essential
to ensure that this information is systematically
collected and formatted for inclusion in the Board’s
Report. Company secretarial teams will also need
to adapt, ensuring these new disclosures are correctly
integrated into the updated e-Forms and that all
filing deadlines and technical requirements are
strictly met.
Effective from July 14, 2025, all the forms dealing
with financial statements, CSR responsibilities,
related party information and information relating
to subsidiaries/associates/joint ventures are required
to be filled electronically with the Registrar of
Companies. Companies will have to ensure a stricter
compliance with the Maternity Benefit Act, 1961,
including any state-specific rules and an additional
record-keeping of sexual harassment cases along
with an establishment of an ICC as mandated by the
CAR and the POSH Act.
Authors:
Divyansh Bhardwaj and
Maulin Salvi
You can
direct your queries or comments to the relevant member.
1Available at:
https://e-book.icsi.edu/Default.aspx?page=rules
2Available at:
https://ca2013.com/wp-content/uploads/2025/06/MCA-Notification-regarding-Companies-Accounts-Second-Amendment-Rules-2025-dated-30.05.2025.pdf
3Available at:
https://ceda.ashoka.edu.in/a-decade-of-the-posh-act-what-the-data-tells-us-about-how-india-inc-has-fared/#:~:text=In%20FY%202013%2D14%2C%20the,compared%20to%20a%20year%20ago.
4CEDA, Ashoka University. A Decade
of the POSH Act: What the Data Tells Us About How
India Inc. Has Fared.
https://ceda.ashoka.edu.in/a-decade-of-the-posh-act-what-the-data-tells-us-about-how-india-inc-has-fared
5The Mooknayak. A Decade of POSH
Act: Increase in Harassment Reports and the Missing
Committees in Small Firms.
https://en.themooknayak.com/women-news/a-decade-of-posh-act-increase-in-harassment-reports-and-the-missing-committees-in-small-firms
6Samantroy, E. (2025). Implementation
of the Maternity Benefit Act, 1961: A Study of Selected
Establishments in India. V.V. Giri National Labour
Institute. Retrieved from
https://vvgnli.gov.in/sites/default/files/171-2025%20Ellina%20Samantroy.pdf
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