The Securities and Exchange Board of India SEBI asked listed companies to disclose the expected impact of the lockdown of the crisis on account of the Coronavirus on their revenues and also profits, in line with international practices. The move is aimed to help the investors assess the extent of damage caused by the disruption of the particular business. Sebi said the economic turmoil because of the lockdown has led to distortions in the market due to the gaps in the information available about the operations of a company.
As Sebi said in a circular on Wednesday – “It is important for a listed entity to ensure that all available information about the impact of these events on the company and its operations is communicated in a timely and cogent manner to its investors and stakeholders,”.
At present, rules mandate companies to disclose material events that have a bearing on its performance or operations in case of disruptions due to natural calamity, force majeure, and other events.
The regulator said most companies have intimated stock exchanges about the shutdown of operations owing to the pandemic and resultant lockdowns.
“The number of entities that have disclosed the financial impact, however, is small,” Sebi also added.
Companies would also have to give details of the impact of the lockdown on their ability to service debt and other financial arrangements, assets, supply chain, and demand for their products and services among other things. Companies would have to specify the impact of the pandemic in their financial statements.
“The object of the regulator appears to be to build a regulatory framework which ensures clarity, consistency, transparency, and uniformity in a disclosure-based regime,” said Zerick Dastur, founder of Zerick Dastur Advocates and Solicitors.
Sebi warned companies against resorting to selective disclosures while revealing the impact of the lockdown on their businesses. Companies will also have to updates their previous disclosures regularly.
“An illustrative list of the information for the consideration of listed entities will facilitate its compliance adequately. This would also iron out gaps if any in disclosures made and make them contextual and relevant,” as told by S. N. Ananthasubramanian who is the practicing company secretary and former president Institute of Company Secretaries of India.