Securities and Exchange Board of India
SEBI/CFD/DIL/LA/3/2007/10/07
July 10, 2007
The Managing Director/ Executive Director/Administrator
of All Stock Exchanges
Dear Sirs,
Sub.: Amendments to Clause 41 of Equity Listing Agreement
I. In order to rationalize and modify the process and formats for submission of financial results to the stock exchanges and also with a view to simplify the same, SEBI has decided to replace the existing Clause 41 of the Listing Agreement. Inter alia, the following amendments have also been made in the revised clause:
1. Submission of Financial Results
With a view to enable investors know the performance as early as possible, companies have an option to furnish either unaudited or audited quarterly and year to date financial results to the Stock Exchange within one month from the end of each quarter. Where a company furnishes unaudited financial results, the results shall be subjected to a Limited Review and a copy of the Limited Review Report shall be submitted to the Stock Exchange within two months from the end of the quarter.
Further, it has been decided to simplify the provision for explanation in variation between items of unaudited and audited quarterly! year to date ! annual results. As against the extant requirement for providing explanation for variation in any of the items in the proforma, the revised clause 41 requires the same to be furnished only in respect of Net Profit or Loss After Tax and for exceptional ! extraordinary items. Further, it has been decided to reduce the percentage of variation for the purpose from ‘20% or more’ to ‘10% or Rs.10 lakhs, whichever is higher’.
In case of a company having subsidiaries, such company has an option to submit the quarterly consolidated financial statements in addition to the stand alone financial results. However, such a company shall submit the annual consolidated financial results along with the annual stand-alone financial statements to the stock exchanges. The modified requirements on publication are detailed in the following paragraph.
2. Publication of Results
As regards the publication of financial results, companies having subsidiaries who file both stand-alone and consolidated results to the stock exchange are provided with an option of publishing of stand-alone or consolidated results, subject to the condition that a choice once exercised cannot be changed during the year.
In case the company changes its option in any subsequent financial year, it shall furnish comparative figures for the previous financial year in accordance with the option exercised for the current year. The company, if it opts to publish consolidated financial results only, shall also, in the advertisements, state the places, such as the company’s website, Stock Exchange web site, etc., where the stand-alone financial results, will be available. In case the company opts for publishing stand-alone financial results only, it shall also publish information in respect of its consolidated turnover, net profit after tax and earnings per share.
3. Simplification in the revised Clause 41
During the process of revision of the clause, it was felt necessary to further simplify and organize the presentation of the sub-clauses. The following are areas simplified in the Revised Clause 41:
i. Wherever possible, repeated requirements in the existing clause have been removed and similar requirements have been consolidated.
ii. Formats have also been consolidated wherever possible and given in one place as Annexures to Clause 41.
iii. Since the Notes to various formats were common across formats, the same have been rationalized and consolidated in one place under the clause itself.
iv. Certain additional information such as other provisions, miscellaneous expenditure & exceptional / extraordinary items has been included.
v. Based on feed back from the companies, clauses have been interpreted and clarified wherever necessary.
II. Applicability
The revised Clause 41 of Equity Listing Agreement shall come into force for all filings made to stock exchanges in respect of accounting periods commencing on or after July 01, 2007. Financial statements for such periods shall be prepared, submitted and published as prescribed under the revised clause.
III. Direction to Stock Exchanges
1. All Stock Exchanges are advised to do the following:
a. Give effect to the abovementioned policies and appropriately amend Clause 41 of Equity Listing Agreement in line with the text of the amendments specified in Annexure I.
b. Make consequential changes, if any, in other clauses of Equity Listing Agreement.
2. All Stock Exchanges are further advised to do the following:
a. Monitor compliance with the submission of financial results, based on quarterly returns submitted by companies.
b. Communicate to SEBI, status of implementation of the requirements of this circular in the next Monthly Development Report.
IV. This circular is issued in exercise of powers conferred by sub-section (1) of Section 11, read with sub-section (2) of Section 1 1A, of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. The provisions of SEBI circular no. SMDRP/POLICY/CIR-2/2003 dated January 10, 2003 to the extent that it pertains to Clause 41 of Equity Listing Agreement shall stand superseded accordingly.
V. This circular is available on SEBI website at www.sebi.gov.in.
Yours faithfully,
Parag Basu
Enc~.: Annexure I – Revised Clause 41 of Equity Listing Agreement.
