GENERAL PRINCIPLES GOVERNING DISCLOSURES AND OBLIGATIONS


Regulation 4 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 enumerates principles governing disclosure and obligations of listed entities. There are two different set of principles one is general and second governance principle. In this post we will discuss general principles which deal with accounting standards, misrepresentation, adequate and timely disclosure, applicable laws and specified disclosures.

General Principles

The listed entity which has listed securities shall make disclosures and abide by its obligations under these regulations, in accordance with the principles enumerated in Regulation 4(1) of SEBI (LODR) Regulation 2015.

Accounting Standards

(a) Information shall be prepared and disclosed in accordance with applicable standards of accounting and financial disclosure.

“Accounting standards” is defined in the Companies Act, 2013. Standard for financial disclosure refer to Indian Financial Reporting Standards and any other standards applicable to company in accordance with these regulations.      

(b) The listed entity shall implement the prescribed accounting standards in letter and spirit in the preparation of financial statements taking into consideration the interest of all stakeholders and shall also ensure that the annual audit is conducted by an independent, competent and qualified auditor.

No Misrepresentation

(c) The listed entity shall refrain from misrepresentation and ensure that the information provided to recognised stock exchange(s) and investors is not misleading.

Adequate and timely

(d) The listed entity shall provide adequate and timely information to recognised stock exchange(s) and investors.

(e) The listed entity shall ensure that dissemination made under provisions of these regulations and circulars made thereunder, are adequate, accurate, explicit, timely and presented in a simple language.

(f) Channels for disseminating information shall provide for equal, timely and cost efficient access to relevant information by investors.

Here, equal access is subjective, undefined term. A company not ensure equal but easy or say equitable access.

Applicable Laws

(g) The listed entity shall abide by all the provisions of the applicable laws including the securities laws and also such other guidelines as may be issued from time to time by the Board and the recognised stock exchange(s) in this regard and as may be applicable.

Here, term “all the provisions of the applicable laws” is very subjective and may create confusion unless properly defined. Here, it is used as inclusive term. However, construction of this clause suggests that “all the provisions of the applicable laws” means securities laws and relevant applicable laws.  

Specified Disclosures

(h) The listed entity shall make the specified disclosures and follow its obligations in letter and spirit taking into consideration the interest of all stakeholders.

Specified disclosures are disclosures specified under Securities Laws and SEBI regulations.

(i) Filings, reports, statements, documents and information which are event based or are filed periodically shall contain relevant information.

(j) Periodic filings, reports, statements, documents and information reports shall contain information that shall enable investors to track the performance of a listed entity over regular intervals of time and shall provide sufficient information to enable investors to assess the current status of a listed entity.

 This principle is very important. This principle warrant complete disclosure from last disclosures so that enable investor to access and compare performance of the company.

Principles to Follow

In case of any ambiguity or incongruity between the principles and relevant regulations, the principles specified in this Chapter shall prevail. [Regulation 4(3) of SEBI (LODR) Regulations, 2015]

Please note: This blog invite readers to share their comments, suggestions, hardship, queries and everything in comment section. This blog post is not a professional advice but just a knowledge sharing initiative for mutual discussion.

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