Sebi asks companies to reveal more

Companies, which divert funds and mismanage their operations, will have to watch out now. The market regulator, Sebi has asked stock exchang...

Companies, which divert funds and mismanage their operations, will have to watch out now. The market regulator, Sebi has asked stock exchanges to amend their listing agreements with corporates making it mandatory to disclose information on loans extended to subsidiaries and associate companies, explanation for audit qualifications and limited review from the quarter ending on or after June 2003.

The bourses should amend the Clause 32 of the listing agreement to disclose information about loans and advances extended by the parent company to subsidiaries and associates by name and amount and vice-versa, Sebi said in a communication to exchanges.

“This means companies will have to disclose details about such loans and audit qualifications to the stock exchanges. Investors in the market never used to get such information while companies siphoned off funds by giving loans and advances to associate companies and subsidiaries,” said BSE dealer Venkat Aiyer.

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All provisions of Clause 41 relevant to half-yearly limited review would now be applicable to limited review of un-audited quarterly results, it said.

These changes are based on the recommendations of Sebi’s Accounting Standards Committee headed by Y. H. Malegam, which was set up to review the continuous disclosure requirements of the listed companies.

The listed entities should explain audit qualification in their accounts and reasons for failure to disclose the same, it added.