On May 30, 2025, the Ministry of Corporate Affairs (MCA) in India has via notification G.S.R. 357(E) introduced significant amendments to the Companies (Accounts) Rules, 2014, through the Companies (Accounts) Second Amendment Rules, 2025 ("2025 Rules"), effective from July 14, 2025. The 2025 Rules mark a significant step toward enhancing employer accountability in India by mandating disclosures on sexual harassment complaints and maternity benefit compliance, alongside digitized financial reporting, and aim to foster a transparent and equitable corporate environment.
The 2025 Rules impose compliance obligations on employers to enhance transparency and accountability in corporate governance as below:
1. Enhanced Disclosures on Sexual Harassment Complaints
One of the critical amendments by 2025 Rules is the requirement for companies to report detailed statistics on complaints of sexual harassment under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act). As per the revised Rule 8(5)(x) of the Companies (Accounts) Rules, companies must now include the following in their Board's report:
- Number of sexual harassment complaints received during the financial year.
- Number of complaints disposed of during the year.
- Number of cases pending for more than 90 days.
Pre-2025 Requirements
Prior to the 2025 Rules, the Companies (Accounts) Rules did not explicitly require companies to include specific details about sexual harassment complaints in their Board's report under the Companies Act, 2013. Earlier, under Rule 8(5)(x) of the Companies (Accounts) Rules, 2014, companies were required to include a statement in the Board's report confirming compliance with the provisions of the POSH Act. This typically involved confirming the constitution of an Internal Complaints Committee (IC) where applicable and adherence to the POSH Act. There was no explicit requirement to provide detailed metrics or statistics on sexual harassment complaints.
Impact on employers
Now, amongst other requirements, the requirement to report pending cases beyond 90 days pressures employers to resolve complaints promptly, aligning with the POSH Act's emphasis on timely redressal. The shift from a broad compliance statement to detailed reporting of complaint statistics represents a significant enhancement. Employers now face greater scrutiny and must ensure their ICs are functional and effective, with proper documentation to support the reported figures.
2. Compliance with the Maternity Benefit Act, 1961
A new clause, Rule 8(5)(xiii), requires companies to include a statement in their Board's report confirming compliance with the provisions of the Maternity Benefit Act, 1961 (MB Act), which mandates benefits such as paid maternity leave, nursing breaks, and crèche facilities for eligible employees.
Pre-2025 Requirements
The Companies (Accounts) Rules, 2014, did not explicitly mandate a statement on compliance with the Maternity Benefit Act, 1961, in the Board's report. Employers were required to comply with the MB Act's provisions (e.g., maternity leave, crèche facilities etc.), but there was no specific reporting obligation under these rules. The MB Act compliance was monitored through labour inspections or employee grievances, but it was not a mandatory disclosure in the Board's report under the Companies Act.
Impact on employers
By explicitly requiring a compliance statement under 2025 Rules, the MCA underscores the importance of supporting female employees' rights and ensuring adherence to statutory obligations. This addition compels employers to review their policies and practices to align with the MB Act's requirements, such as providing twenty six (26) weeks of maternity leave for up to two children and twelve (12) weeks for additional children or adoption cases. Non-compliance could lead to penalties and reputational risks, making it essential for companies to document and report adherence.
3. Employee-Related Disclosures:
As per the format of the Board Report in 23 (h) (j), Companies must disclose the number of employees as on the closure of financial year being Female, Male or Transgender.
Impact on employers
The new requirement to report employee numbers by gender introduces a layer of transparency in workforce composition, potentially aiding diversity, equality and inclusion initiatives.
4. Transition to e-Forms for Financial Reporting
The 2025 Rules also emphasizes digitization by mandating the use of electronic forms (e-Forms) for key filings. Specifically, Rule 5 and Rule 8(2) replace Form AOC-1 and Form AOC-2 with e-Form AOC-1 and e-Form AOC-2, respectively, for reporting financial statements of subsidiaries and related-party transactions. Additionally, Rule 12(1C) introduces a requirement for companies to file the following alongside e-Form AOC-4 and its variants:
- e-Form Extract of Board Report.
- Extract of Auditor's Report (Standalone).
- Extract of Auditor's Report (Consolidated), where applicable.
These documents, along with signed financial statements in PDF format, must be attached to XBRL filings. The shift to e-Forms streamlines submission processes but requires employers to ensure accurate and timely preparation of digital records, potentially necessitating upgrades to their compliance systems.
Overall Implications of 2025 Rules for Employers
The focus on sexual harassment and maternity benefits aligns with broader goals of workplace equity, potentially influencing hiring and retention policies. The mandatory disclosures on sexual harassment and maternity benefits signal a push for greater accountability in workplace policies. Employers must strengthen their HR frameworks to track complaints, ensure timely resolutions, and maintain compliance with labour laws. By requiring detailed reporting in Board's reports, the MCA aims to enhance stakeholder trust. Investors, employees, and regulators will have access to critical data on how companies handle workplace issues, influencing corporate reputation.
Steps for Employers to Ensure Compliance
To align with the new 2025 Rules, employers should consider the following actions:
- Employers need to audit the functioning of ICs under POSH Act, ensure employee awareness of grievance mechanisms, and maintain records of complaints and resolutions.
- Employers need to verify that maternity leave, crèche facilities, and other benefits comply with the MB Act, and document these in annual reports.
- Employers need to invest in software for preparing and filing e-Forms, ensuring all financial and compliance data is accurately formatted for XBRL submissions.
- Employers need to conduct training sessions for HR and finance teams to understand the new reporting obligations and timelines.
Anhad Law's Perspective
The Companies (Accounts) Rules, 2014, as amended by the 2025 Rules, is significant as it applies to all companies incorporated under the Companies Act, 2013 (public, private, listed, or unlisted) unless exempted. The 2025 Rules is framed in exercise of powers conferred under Sections 128 (books of account), 129 (financial statements), 133 (accounting standards), 134 (financial statement, Board's report), 135 (CSR), 136 (circulation of financial statements), 137 (filing of financial statements), and 138 (internal audit) of the Companies Act, 2013.
The practical implication of the 2025 Rules is that even though companies with fewer than 10 employees are not required to constitute an IC under the POSH Act, they must now comply with the POSH Act's provisions and include a general compliance statement in the Board's report, even if no complaints are reported.
Similarly, companies with fewer than 10 employees (50 employees for crèche) may not be subject to the MB Act, but those preparing a Board's report must still include a compliance statement, which could confirm non-applicability if they have fewer employees.
By requiring detailed reporting in Board's reports, the MCA aims to enhance stakeholder trust. Investors, employees, and regulators will have access to critical data on how companies handle workplace issues, influencing corporate reputation. As a consequence, employers must now strengthen their HR frameworks to track complaints, ensure timely resolutions, and maintain compliance with labour laws.
Non-compliance with the 2025 Rules could attract penalties under Sections 448 and 449 of the Companies Act, 2013, which address false statements and evidence. Employers must prioritize accurate reporting to avoid legal repercussions.
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