Yes, Governance Matters.: MCA’s Push for Gender-Sensitive Corporate Governance

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:

1. 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.
2. 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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