Large private firms to be mandated to file ‘periodic’ financial statements

Call this the effect of blowouts in the NBFC and financial sector in recent years. The Centre has taken the next big step towards making it mandatory for certain large private companies to file their financial results on a “periodic basis” to the government.

This proposal, which will form part of the Companies (amendment) Bill 2020, will be in addition to the annual filing of financial statements — which is filed within six months of the closure of the financial year, official sources said.

“A new section 129A is proposed to be inserted to ensure that prescribed classes of unlisted companies file their financial results on a periodic basis. Periodic financial returns will have to be submitted so that periodic economic data is made more scientific,” they added.

Indications are that the periodicity of the filing will be made known through rules (subordinate legislation) once the enabling provision is introduced in the company law.

Easing compliance burden

Meanwhile, the Centre plans to bring amendments to the Company law so as to provide that private companies which list non-convertible debentures (NCDs) on stock exchanges would not be regarded as “listed companies” for the purpose of compliances.

“We propose to exclude certain class of companies from the definition of listed company’ mainly for listing of debt securities, in consultation with SEBI”, sources in the Corporate Affairs Ministry (MCA) said. This is expected to lower the compliance burden for companies that are only looking to list their debt securities in bourses.

Cross border insolvency

The Centre will not bring the proposed cross border insolvency framework as part of the proposed Companies (amendment) Bill, which will do an overhaul of the Companies Act, a government official said. The thinking in the Ministry is that cross border insolvency framework should be handled separately, the official said.

Meanwhile, the Standing Committee on Finance headed by BJP leader Jayant Sinha has in its report on the Insolvency and Bankruptcy (second amendment) Bill 2019 highlighted that cross border cases have already resulted in uncertain recoveries for creditors.

The Committee has urged the government to introduce the Bill (now in draft state and dedicated for cross border insolvency) in Parliament as soon as possible to further strengthen the insolvency framework.