Securities and Exchange Board of India [SEBI] has, on 5 April 2010, directed Stock Exchanges [SE] to amend the Equity Listing Agreement [LA]. The amendments to LA puts in place of earlier decisions of SEBI Board meetings held on 22 September 2009 and 9 November 2009 and are applicable to companies listed on SE in India. The highlights of the amendments to LA are as under:

Submission of auditors’ certificate to the Stock Exchange for accounting treatment under scheme of arrangement

A listed company is required to file with SE a scheme / petition for amalgamation / merger / reconstruction etc. [the Scheme] proposed to be filed before any Court / Tribunal under sections 391, 394 and 101 of the Companies Act, 1956 [the Act], for approval at least 1 month before it is presented to the Court / Tribunal.

SEBI observed that certain schemes of listed companies included details of the accounting treatment to be given to various items in the process of amalgamation / merger / reconstruction etc. SEBI felt that if this accounting treatment is not in accordance with the Accounting Standards [AS] specified under section 211 (3C) of the Act, the resultant financial statements of the entity concerned will not be in conformity with the AS.

A new Clause 24(i) has therefore been inserted in the LA. It provides that a listed company while filing the Scheme with the SE under Clause 24(f) of the LA, shall also file auditors’ certificate to the effect that the accounting treatment contained in the Scheme is in compliance with all the AS specified under Section 211 (3C) of the Act. Mere disclosure of deviations in accounting treatments as provided in para 42 of AS 14 (viz. Accounting for Amalgamations) shall not be deemed as compliance with the new requirement. It is clarified that in case of companies where the respective sectoral regulatory authorities have prescribed norms for accounting treatment of items in the financial statements, which are contained in the Scheme, the requirements of the regulatory authorities shall prevail.

The new clause is made applicable to all the Schemes of listed companies filed with the Courts / Tribunals on or after 5 April 2010.

Amendments to Clause 41 – Submission, Disclosures and Publication of Interim and Annual Financial Results

Changes in timeline / disclosure requirements for quarterly / yearly financial results

The timeline contained in Clause 41 of the LA relating to submission, disclosure and publication of interim and annual financial results have been made uniform and reduced. All listed entities shall disclose:

  • on standalone or consolidated basis, their quarterly (audited or un-audited with limited review), financial results within 45 days from the end of every quarter.
  • audited annual results on stand-alone as well as consolidated basis within 60 days from the end of the financial year for such entities, where they opt to submit annual audited results in lieu of the unaudited financial results with limited review for the last quarter.

Publication of consolidated financial results

  • All companies shall disclose on a standalone basis (a) Turnover (b) Profit before tax and (c) Profit after tax, where they submit consolidated financial results in additions to standalone financial results and publish consolidated financial results only.
  • Companies that are required to prepare consolidated financial results for the first time at the end of a financial year shall exercise the option of publishing consolidated financial results alone in the newspapers in respect of the quarter during the financial year in which they first acquired the subsidiary.

Half yearly / annual disclosure of statements of Assets and Liabilities

  • In respect of half yearly results – Company is required to submit to the SE, a statement of assets and liabilities as at the end of the half-year by way of a note as a part of its audited / unaudited financial results in the prescribed format.
  • In respect of annual results – when a company opts to submit un-audited financial results for the last quarter, statement of assets and liabilities as at the end of the financial year should be submitted along with audited financial results for the entire financial year as soon as they are approved by the board of the Company.

Voluntary adoption of International Financial Reporting Standards [IFRS] by listed entities having subsidiaries

A new provision has been inserted which provides that, in case the company has subsidiaries and it opts to submit consolidated financial results, the company has the option to submit the same either in accordance with IFRS notified by International Accounting Standards Board or AS specified under Section 211(3C) of the Act.

  • Where the figures for the current period are as per IFRS and the figures for the corresponding previous period are as per the AS specified under Section 211(3C) of the Act, a reconciliation in respect of significant differences between the figures as disclosed as per IFRS and the figures as per AS, had AS been followed, shall be provided.
  • Submission of stand-alone financial results to the SEs shall continue to be made in accordance with Indian Generally Accepted Accounting Principles.

The above changes in Clause 41 of the LA are effective immediately. Requirement of a valid peer review certificate for statutory auditors

Limited review / audit reports submitted to the SEs on quarterly / annual basis shall be given by the auditors who have subjected themselves to the peer review process of Institute of Chartered Accountants of India [ICAI] and who holds a valid certificate issued by the Peer Review Board of ICAI. This new clause in Clause 41 of the LA would be applicable to all financial statements submitted by listed entities to the SEs after appointment of auditors for accounting periods commencing on or after 1 April 2010.

Modification in formats of limited review report and statutory auditor’s report

Limited review report and statutory auditor’s report formats are modified to make it clear that disclosures pertaining to details of public shareholding and promoter and promoter group shareholding, including details of pledged / encumbered shares of promoters / promoter group, contained in the format have been traced from disclosures made by the management and not reviewed / audited by the auditor.

Amendment to Clause 49 – Approval of appointment of ‘CFO’ by the Audit Committee

Appointment of the CFO (i.e. the whole-time Finance Director or any other person heading the finance function or discharging that function) is now mandatorily required to be approved by the Audit Committee before finalization of the same by the management. The Audit Committee, while approving the appointment of CFO shall assess the qualifications, experience & background etc. This amendment to Clause 49 of the LA is effective immediately.


Circular No. CIR/CFD/DIL/1/2010 dated April 5, 2010 issued by SEBI.


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