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By: Ankita Aggarwal(14053) Anu Bumra (14054) Avneet Rana (14056)

Meaning The act of releasing all RELEVANT information pertaining to a company that may influence an investment decision Good or bad

It includes disclosure about: company objective financial details- operating results governance structure and policies the board of directors, their remuneration significant foreseeable risk factors material issues regarding employees and other stakeholders, etc.

Corporate Disclosure



disclose information in a timely, consistent and appropriate manner; to protect and prevent the improper use or disclosure of Material Information and Company Information; to broadly disseminate Material Information in accordance with all applicable legal and regulatory requirements.


about performance during the year, or prospects and potential problems, is not detailed in a satisfactory manner Information about intra-group and subsidiary company transactions Companys ongoing and future capital expenditure Problems confronting the industry or the company Overstatement of profits


support at stock exchanges Attracts more investors Fulfill the demands of labour unions who are interested in the security and welfare of the employees Information provided to government to comply with legal regulations Fulfill the demand of society at large


source of information to the shareholders and other users The purpose is to place before the shareholders, the state of companys affairs and salient features of its working results for the year covered, including future prospects. Since it is an audited document, it provides authenticated information

The report should cover the following: 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 and the date of report, conservation of energy, technology absorption, foreign exchange earnings and outgo, changes which have been occurred during the financial year in the nature of companys business in the companys subsidiaries, particulars in respect of certain employees. Some information required to be included in the Boards report may not be included and such non-disclosure maybe defended on the plea that the disclosure thereof would be harmful to the business of the company or any of its subsidiaries.

WORKING GROUP : In august 1996, a working group was constituted. The working group has recognized that the quality of financial disclosures is fundamental to corporate transparency and that it offers long term shareholders support. The report states that the half yearly and annual results of all significant companies are carefully examined and analyzed.
FINANCIAL DISCLOSURES RECOMMENDED BY THE WORKING GROUP ON THE COMPANIES ACT : 1. A tabular form containing details of each directors remuneration and commission should form a part of the directors report in addition to the usual practice of having it in a note to the profit and loss account. 2. Costs incurred if any in using the services of a group resources company must be clearly and separately disclosed in the financial statement of the user company.


A listed public limited company must give certain key information on the division of business segment as a part of directors report in the annual report. This should encompass : the share in total turnover review of operations during the year in question market conditions Future prospects For the present, the cut-off may be 10 percent of the total turnover. 4. Where a company has raised funds from the public by issuing shares, debenture or other securities, it would have to give a separate statements showing the end use of such funds, namely, how much was raised versus the stated and actual project cost; how much has been utilised in the projects up to the end of the financial year, and where are the residual funds, if any, invested and in what form. This disclosure would be in the balance sheet of the company as a separate note forming a part of accounts. 5. This disclosure on debt exposure of the company should be strengthened.

NON FINANCIAL DISCLOSURES RECOMMENDED BY THE WORKING GROUP ON THE COMPANIES ACT : 1. Comprehensive report on the relatives of directors-either as employee or board member-to be an integral part of the directors report of all public limited companies 2. Companies have to maintain a register which enclose interest of directors in any contract arrangements of company. The existence of such a register and the fact that is open for inspection by any shareholder of the company should be explicitly stated in the notice of the AGM of all public limited companies. 3. Similarly , the existence of the directors shareholding register and the fact that it can be inspected by members in any AGM should be explicitly stated in the notice of the AGM of all public limited companies. 4. Details of loans to directors should be disclosed as an annex to the directors report in addition to being a part of the schedules of financial statements. Moreover such loans should be limited to only three categories housing , medical assistance and education for family members and be available only to full time directors. The loans should not exceed five times the annual remuneration of the whole time directors and would need shareholders approval at a general meeting.

The report on CG released by the CII also has elaborately dealt with the desirable disclosure by companies. The task force report has recommended that though the disclosures recommended by the Working Group in its report as well as in the modified Schedule VI that would accompany the Draft Bill go far beyond existing levels, much more needs to be done outside the framework of law, particularly

(i) a model of voluntary disclosure in the current context, and

(ii)consolidation of accounts. Under Additional Shareholders Information, listed companies should give data on: 1. High and low monthly averages of share prices in a major Stock Exchange where the company is listed for the reporting year. 2. Greater detail on business segments up to 10% of turnover, giving share in sales revenue, review of operations, analysis of markets and future prospects.

The Working Group on the Companies Act has recommended that consolidation should be optional, not mandatory. There were two reasons: (i) first, that the Income Tax Department does not accept the concept of group accounts for tax purposes and the Report of the Working Group on the Income Tax Act does not suggest any difference, and (ii) the public sector term lending institutions do not allow leveraging on the basis of group assets.
1. If a company chooses to voluntarily consolidate, it should not be necessary to annex the accounts of its subsidiary companies under section 212 of the Companies Act. 2. However, if a company consolidates, then the definition of group should include the parent company and its subsidiaries (where the reporting company owns over 50% of the voting stake).

SEBI during March 1995 constituted a committee under the chairmanship of Mr. Y.H.Malegam to review the existing disclosure requirements in offer documents and recommend additions and modifications thereof. This step was taken in the interests of investors and to promote an orderly development of capital market. Apart from the general review of the adequacy of the existing disclosure requirements the committee was given the task to address itself to the matters relating to the basis for pricing of issues, the adequacy and relevance of financial projections, performance of group companies, material facts relating to pending litigations against issuers etc ., For appropriate disclosure.

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In a recent board meeting held in august 1997, SEBI has since approved the draft compendium of SEBIs disclosure and investor protection guidelines. SEBI has modified the entry barrier requirement for unlisted companies and prescribed payment of dividend in the immediately preceding three years instead of the present stipulation of dividend payment in at least three out of the preceding five years. A listed company will be required to meet the entry norm only if the post issue net worth becomes more than five times the preissue net worth. The significant amendments made in the existing provisions are : Unlisted companies required to make a dividend payment in the immediately preceding three years o access the primary market, Companies would be required to make their partly paid up shares fully paid up of forfeit the same before making a public/right issue. An unlisted company can freely price its securities provided it has shown net profit in the immediately preceding three years subject to fulfilling the existing disclosure norms. The promoters contribution has now been made uniform at 20 percent irrespective of the issue size. Only such securities can be offered for promoters contribution for which a specific written consent has been obtained from the shareholders for lock in. Appointment of registrar for rights issue made mandatory

Investor protection focuses on making sure that investors are fully informed about their purchases, transactions, affairs of the company that they have invested in and the like. Investor protection is one of the most important elements of a thriving securities market or other financial investment institution. Simply put, investor protection is the effort to make sure that those who invest their money in regulated financial products are not defrauded by brokers or other parties

The Securities and Exchange Board of India Act, 1992 (the SEBI Act) was amended in the years 1995, 1999 and 2002,the primary function of which is the protection of the investors interest and the healthy development of Indian financial markets. OBJECTIVES OF SEBI

Investor protection, so that there is a steady flow of savings into the Capital Market. Ensuring the fair practices by the issuers of securities, namely, companies so that they can raise resources at least cost. Promotion of efficient services by brokers, merchant bankers and other intermediaries so that they become competitive and professional.

regulating substantial acquisition of shares and takeover of companies promoting investors education and training of intermediaries of securities markets Carry out inspection/ audits of the SEs / intermediaries etc. call for information from any bank / any authority / corporation / agencies in respect of any transaction in securities which is under investigation or inquiry by SEBI performing such functions and exercising such powers under the Securities Contracts (Regulation) Act, 1956 (SCRA) conducting research

Section 11(2) of the SEBI Act contains measures available with SEBI to implement the legislated desire of investor protection. The measures available with SEBI include the following: regulating the business in Stock Exchanges (SEs) and any other securities markets registering and regulating the working of intermediaries like stock brokers, sub-brokers, registering and regulating the working of venture capital funds and collective investment schemes, including mutual funds prohibiting fraudulent and unfair trade practices relating to securities markets prohibiting insider trading in securities

SEBI regulates the credit rating agencies, for the purpose of streamlining work of the credit rating industry as well as to safeguard the interest of the investors. SEBI plans to bring all the credit rating companies under its direct control to bring about consistency and credibility. Rating is only an informed professional opinion. Rating agencies are retained by the issuer and not by the investing public. Its the issuer who pays them and consequently, they are under great pressure to give a good rating.

The introduction of electronic book entry transfer in a depository will eliminate the need for physical movement of securities, which is a significant bottleneck. It will offer benefits to the investors in the form of greater accuracy and safety in share transactions as well as improved liquidity of secondary market The problem of share transfers and delays taking place in the settlement process in stock exchanges can be overcome with scheme of depositor. Investor can either retain their share certificate or convert it into a depository receipt.

The Dave Committee report on infrastructure for capital markets was prepared with the help of Association of Merchant Bankers (AMBI) and was released in July 1997. The report refers to the SEBI Act-1992, SCRA 1956, FERA 1973, Depositories Act, Debt Recovery Act, Benami Prohibition Act, Arbitration and Conciliation Act-1996, the Indian Penal Code, the Banking Regulation Act, the Indian Evidence Act-1872 and the Indian Telegraph Act1885.


Committee has recommended that a comprehensive, integrated and harmonized redrafting effort should be undertaken for each of these laws. The committee wants SEBI to define norms governing the disclosure of information by companies. These norms should indicate what, when and how information must be disclosed.


education and protection fund has been set up for educating investors towards a better understanding of company balance sheets and accounting norms. The proposed fund would be financed through unclaimed dividends, matured deposits, debentures and interests accrued on them, which have remained unclaimed for a period of seven years The fund will also use grants and donations of government, companies and institutions.

Thank You