Clause 32 listing agreement disclosures

(i) Soft copies of full annual reports containing its Balance Sheet, Profit & Loss account and Directors Report to all those shareholder(s) who have registered their email address(es) for the purpose; (ii) Hard copy of statement containing the salient features of all the documents, as prescribed in subclause (iv) of clause (b) of proviso to section 219 of the Companies Act, 1956 to those shareholder(s) who have not so registered;

Dear Under Section 219 of the Companies Act, 1956(the Act) every company is required to send to its members copies of the Balance Sheet including the Profit and Loss Account and the Auditors Report and every other document required by law to be annexed or attached, as the case may be to the balance sheet not less than twenty one days before the date of the meeting at which the same would be laid for adoption. The use of the expression, ‘required by law’, is significant. The same has been deliberately used to cover the requirements that could be imposed by Acts other than the Companies Act. Under section 212 of the Act a company which has a subsidiary is required to attach to its balance sheet, the profit and loss account, the directors report, the auditors report and other statements referred to in the said section of the subsidiary. Under section 217 of the Act the Report of the Board of Directors is required to be attached with every balance sheet. In the case of listed companies under the listing agreement which derives its authority from the Securities Contracts (Regulation) Act, 1956, companies are required to give in the Annual Report Cash Flow Statement, and Consolidated Balance Sheet and Profit and Loss Account in case they have subsidiaries. Such companies are also required to give a report on Corporate Governance containing the prescribed particulars and a Management Discussion Analysis. Such companies are further required to give the following certificates/declaration: „ A declaration by the Chief Executive Officer, to the effect that members of the Board and Senior Management Personnel of the Company have affirmed to the Board of compliance with the Code of Conduct laid down by the Board. „ A Certificate signed by Chief Executive Officer and Chief Finance Officer (or by the person heading the finance function) certifying in the manner stipulated about the financial statements and cash flow statement. „ A Certificate by the Statutory Auditors or a Practising Company Secretary certifying that the company has complied with the requirements of Corporate Governance laid down under the Listing Agreement. They are also required to detail the transactions with related parties in the balance sheet. Thus it would be seen that a host of documents is required to be attached or annexed to the balance sheet and considerable information is required to be given therein. Naturally this involves huge costs in the form of paper, printing, postage etc. in sending a complete copy of the balance sheet to each and every member of the company. Even though on the face of it, it would appear that the cost is borne by the company, the burden really falls on the shareholders, whose interest the authorities desire to protect. Further every member of a company is not interested in all the information contained in the accounts and in fact it is beyond an average man’s capacity to understand and assimilate them. Keeping this in mind, the Companies (Amendment) Act, 1988 amended the requirements of section 219. The said section after amendment provided that a listed company need not send a complete copy of the balance sheet to its members provided – „ The complete copy of the balance sheet is kept open for inspection at the registered office during working hours for a period of twenty one days before the date of the meeting, and „ A statement containing the salient features of such documents in the prescribed form or copies of the documents, as the company may deem fit are sent to the members and to every trustee for the holders of the debentures of the company not less than twenty one days before the date of the meeting. Companies, particularly listed companies, which have considerable number of members in order to reduce cost made use of this wholesome provision in section 219. But gradually through the medium of listing agreement this laudable objective was given a go by and companies were required to send a complete copy of the balance sheet to each and every member of theirs as would be evident from the following clause 32 of the Listing Agreement: “The Company will supply a copy of the complete and full Balance Sheet, Profit and Loss Account and the Directors’ Report, to each Shareholder and upon application to any member of the Exchange. However, the company may supply single copy of complete and full Balance Sheet and Profit & Loss Account and Directors report to shareholders residing in one household (i.e., having same address in the Books of Company/Registrars/Share transfer agents). Provided that, the company on receipt of request shall supply the complete and full Balance Sheet and Profit & Loss Account and Directors report also to any shareholder residing in such household. Further, the company will supply abridged Balance sheet to all the shareholders in the same household. In case the company has changed its name suggesting any new line of business (including software business), after 1st January, 1998 or it changes the name hereafter, then the company will disclose the turnover and income, etc., from such new activities separately in the annual results for a period of 3 years from the date of change in the name of the company. In addition to the above provisions, listed companies which decide to change their names would be required to comply with the following conditions : 1. a time period of at least 1 year should have elapsed from the last name change 2. at least 50% of the total revenue in the preceding 1 year period should have been accounted for by the new activity suggested by the new name. The new name along with the old name shall be disclosed through the web sites of the respective stock exchange/s where the company is listed and also through the EDIFAR web site for a continuous period of one year, from the date of the last name change. The Company will also give a Cash Flow Statement along with Balance Sheet and Profit and Loss Account. The Cash Flow Statement will be prepared in accordance with the Accounting Standard on Cash Flow Statement (AS-3) issued by the Institute of Chartered Accountants of India, and the Cash Flow Statement shall be presented only under the Indirect Method as given in AS-3. The company will mandatorily publish Consolidated Financial Statements in its Annual Report in addition to the individual financial statements. The company will have to get its Consolidated Financial Statements audited by the statutory auditors of the company and file the same with the Stock Exchange. The company will make disclosures in compliance with the Accounting Standard on “Related Party Disclosures” in its Annual Report. Disclosure of loans/advances and investments in its own shares by the listed companies, their subsidiaries, associates etc. The following disclosure requirements shall be complied by the companies in the Annual Accounts Sr. In the accounts of Disclosures of amounts at the No. year end and the maximum amount of loans/advances/ Investments outstanding during the year. 1 Parent • Loans and advances in the nature of loans to subsidiaries by name and amount. • Loans and advances in the nature of loans to associates by name and amount. • Loans and advances in the nature of loans where there is (I) no repayment schedule or repayment beyond seven years or (II) no interest or interest below section 372A of Companies Act by name and amount Loans and advances in the nature of loans to firms/companies in which directors are interested by name and amount. 2 Subsidiary Same disclosures as applicable to the parent company in the accounts of subsidiary company. 3 Parent Investments by the loanee in the shares of parent company and subsidiary company, when the company has made a loan or advance in the nature of loan. Note : (1) For the purpose of the above disclosures the terms “parent” and “subsidiary” shall have the same meaning as defined in the Accounting Standard on Consolidated Financial Statement (AS-21)” issued by ICAI. (2) For the purpose of the above disclosures the terms ‘Associate’ and ‘Related Party’ shall have the same meaning as defined in the Accounting Standard on “Related Party Disclosures (AS-18)” issued by ICAI. (3) For the purpose of above disclosures directors interest shall have the same meaning as given in Section 299 of Companies Act. The above disclosures shall be applicable to all listed companies except for listed banks.”

The Company shall supply: (i) Soft copies of full annual reports containing its Balance Sheet, Profit & Loss account and Directors Report to all those shareholder(s) who have registered their email address(es) for the purpose; (ii) Hard copy of statement containing the salient features of all the documents, as prescribed in subclause (iv) of clause (b) of proviso to section 219 of the Companies Act, 1956 to those shareholder(s) who have not so registered; (iii) Hard copies of full annual reports to those shareholders, who request for the same. The Company will also give a Cash Flow Statement along with Balance Sheet and Profit and Loss Account. The Cash Flow Statement will be prepared in accordance with the Accounting Standard on Cash Flow Statement (AS-3) issued by the Institute of Chartered Accountants of India, and the Cash Flow Statement shall be presented only under the Indirect Method as given in AS-3. The company will mandatorily publish Consolidated Financial Statements in its Annual Report in addition to the individual financial statements. The company will have to get its Consolidated Financial Statements audited by the statutory auditors of the company and file the same with the Stock Exchange. Companies shall be required to make disclosures in compliance with the Accounting Standard or “Related Party Disclosures” in the Annual Report Thanks