Integrated Disclosures


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Integrated Disclosures

  1. 1. Memorandum of Comments on the Report of the Sub-Committee on Integrated Disclosures Comments on Annexures: Since Annual Report is to be uploaded as a part of the Integrated Disclosures, such details which are proposed to be furnished annually and have already been provided in the Annual Report should not be required to be furnished again as it will be a repetition/duplication. For example, the frequency of reporting Related Party Transactions has been proposed as annual and these are disclosed in detail in the Annual Report. Therefore, to cut down duplication, this Disclosure should be dropped. Under ‘Capital Structure’, it has been proposed that history be given for the 10 preceding years and all offer documents of at least preceding 10 years should be attached as pdf files. 10 years is a very long period and history of 10 years may be more for academic interest rather than giving any meaningful insight to the investor. The disclosures should be only for the current period or at the most for preceding 3 years to be meaningful. Other issues: In Annexure I - ‘Disclosures on changes in shareholding of Promoters/Persons Acting in Concert’ requires providing the history of capital build up of the Company and the Promoters. This is a new disclosure and not required under the DIP Guidelines. Giving history of the capital build up of the promoters is practically not possible particularly in case of older companies. If at all the build up can be given for the last 1-3 years and not prior to that. Under Promoters, For Companies – the Annexure requires ‘Tree of shareholding to be given with names of immediate shareholding companies & ultimate shareholder with their beneficial holding’. This is not required to be given at present under any requirements. In case of large corporate houses where there are multiple promoter companies with cross holdings, giving such details will be very cumbersome and, even if given, will be very difficult for an investor to decipher. Such disclosure should not be required to be made. Para (d) requires disclosing ‘Reason for disassociation by promoter in group companies in past 3 years, if any’. This disclosure seems to be wrongly mentioned here as this requirement is appropriately required under Group Companies : para (c) and hence should be deleted. Under ‘History of Equity Shares – Number of shares’ the full offer document is required to be provided as a link. It is assumed that offer document here means an offer document as defined in SEBI (DIP) Guidelines since for certain capital issues, viz. preferential allotment, there may not be any offer document.
  2. 2. The filing frequency for Annexures II to V under Capital Structure has been stated as Quarterly. For most of the items covered under these forms, there will not be any change from one quarter to another quarter. The filing frequency therefore may be decided as Event Based subsequent to initial filing. At present, the ESOP details of Directors & Senior Management are required to be disclosed only annually in the Annual Report. For business and commercial reasons, giving such disclosures on quarterly basis as required in Annexure V under Capital Structure is not prudent and should be retained as annual disclosure. Further, the information required to be disclosed under coloumn – ‘No. of Underlying Shares’ is not clear. It is presumed that it requires disclosing the number of ESOPs granted and related underlying shares during the quarter. Under the Form for giving details about the Directors, Dates of Reappointments on the Board should be deleted as a Director who is reappointed in an AGM on retirement by rotation is considered to be continuing in office since the date of his first appointment and therefore this information does not seem to add any value to the reader. Borrowing Powers should be taken out from the Form as separate Form is required to be furnished for each director whereas the borrowing powers are for the entire Board as a whole. ‘Remuneration’ and ‘compensation’ can be merged for simplification of the form. For giving details of Senior Management & Key Personnel’ The SEBI (DIP) Guidelines does not define Key Management Personnel whereas the listing agreement for the purpose of Code of Conduct under Clause 49 defines ‘Senior Management’ as personnel of the company who are members of its core management team excluding Board of Directors. Accounting Standard 18 – Related Party Disclosures construes only managing director, whole time director and manager as Key Management Personnel and excludes even non-executive directors. In view of divergent definitions, it is important to define the employees to be covered in this disclosure. Neither SEBI (DIP) Guidelines nor Listing Agreement requires disclosure of ‘Gross Remuneration’, ‘Payment or Benefit (non-salary related)’ and ‘Directorships’ of key personnel at present. Giving such disclosures is not prudent for commercial reasons and should not be asked for. Proposed requirements under Industry, Project, Business & Business Strategy Disclosures are not clear and requires to be understood properly.