Informal
Guidance on hosting of financials of subsidiaries on website of Holding Company
Background:-
Under SEBI
(Listing Obligations & Disclosure Requirements) Regulations, 2015 (SEBI
LODR Regulations), pursuant to an amendment on 9 May 2018, Reg 46 was amended
by way of insertion of Reg 46(2)(s) which provides that the separate
audited financial statements of each subsidiary of the listed entity, in
respect of relevant financial year, be uploaded on the website of the listed
entity at least 21 days prior to the date of the Annual General Meeting which
has been called to inter alia consider the accounts of that financial year. This
amendment is effective from 1st April 2019.
There was already
a similar requirement under 4th proviso to Section 136(1) of the
Companies Act, 2013, which provided that every listed company having
subsidiary or subsidiaries shall place separate audited accounts in respect of
each of subsidiary on its website, if any. Under 5th proviso
to Section 136(1), an exemption is given for listed companies having foreign
subsidiaries, as follows:-
·
where
foreign subsidiary is statutorily
required to prepare consolidated financial statement under any law of the
country of its incorporation, the requirement
of this proviso shall be met if
consolidated financial statement of such foreign subsidiary is placed on
website of the Company.
·
where
foreign subsidiary is not required to get its financial statement audited
under any law of the country of its incorporation and which does not get such
financial statement audited, the holding
Indian listed company may place such unaudited financial statement on its
website
·
where
such financial statement is in a language other than English, a translated copy
of the financial statement in English shall also be placed on website.
On comparison of
this Section 136(1) under Companies Act, 2013 and Regulation 46(2)(s) of SEBI
LODR Regulations, following are the key points:-
1.
The
Companies Act does not provide for timeline of hosting the audited financial
statements on website of the Company. However, SEBI LODR Regulations provide
the timeline of hosting, i.e., at least 21 days prior to the date of Annual
General Meeting (presumably of the listed company though it is not clearly
mentioned so in SEBI LODR Regulations).
2.
The exemption in case of foreign subsidiaries
provided under Companies Act, 2013 is not provided under SEBI LODR Regulations.
Hence there was
an ambiguity as to whether the exemption under Companies Act, 2013 for
foreign subsidiaries can be claimed even for the purpose of SEBI LODR Regulations
(as SEBI LODR Regulations are silent in this regard)?
Facts
of the Case:-
1.
HCL
Technologies Ltd (“the Company”) has 125 foreign direct / step down
subsidiaries, in addition to certain direct / step down subsidiaries in India.
During financial year 2018-19, the Company had acquired a Company named Actian
Corporation (“Actian”) in Delaware, USA having 15 direct / step down
subsidiaries, out of which 13 entities were foreign direct / step down
subsidiaries.
2.
In
accordance with the laws of countries of incorporation of Actian and /or some of
its foreign direct / step down subsidiaries, there is no statutory requirement
to get the annual financial statements audited. However, Actian shall be
preparing audited consolidated financial statements in accordance with the
local GAAP of the country of its incorporation.
3.
By
claiming the exemption provided under Section 136(1) of Companies Act, 2013,
the Indian listed Company proposed to place on its website 21 days prior to its
date of AGM the following:-
(a)
The
audited consolidated financial statements prepared by Actian
(b)
Unaudited
financial statements of those direct / step down subsidiaries, where there is
no statutory requirement to get the financial statements audited as per local
laws of the countries of their incorporation
(c)
Audited
financial statements of those direct / step down subsidiaries, where there is a
statutory requirement to get the financial statements audited as per local laws
of the countries of their incorporation
Query Asked:-
1.
Whether
hosting the above mentioned documents on website of Company in accordance with
Section 136(1) of the Companies Act, 2013 would meet the compliance requirement
under Regulation 46 of SEBI LODR Regulations?
2.
Can
they follow same practice for all of their foreign direct / step down
subsidiaries?
Reply given by
SEBI:-
SEBI has
re-iterated the exemption provided under Section 136(1) of Companies Act, 2013
and replied that if the same is followed, then it shall meet the compliance
requirement under Regulation 46 of SEBI LODR Regulations.
Copy of the Informal Guidance by SEBI can be accessed at the below link:
No comments:
Post a Comment