More must be done to prevent false disclosures

The statements made by a company (whether private, listed, or unlisted) in its financial disclosures form the backbone of corporate governance. These disclosures provide valuable insights into the financial health of a corporation, and give existing shareholders, creditors and prospective investors a clear idea about its performance and its position in the market.

The listing agreement and the Companies Act, 1956, require financial disclosures to be made by companies on a regular basis. This article describes some of the existing provisions aimed at preventing false statements in financial disclosures by a listed company, and also considers issues and problems in enforcement.

Clause 41 of the listing agreement describes the method by which financial results should be prepared and submitted. It gives companies the option to furnish audited or unaudited quarterly and year-to-date financial results to the stock exchange within one month from the end of each quarter.

Priti Suri is the proprietor of PSA, Legal Counsellors.