Companies may be asked to disclose fund flow

The government is considering making it mandatory for all companies to disclose a fund flow statement, an indicator of utilisation of financial resources by an entity, along with their annual financial reports.

The provisions for mandatory disclosure of fund flow statement is likely to be included in the Companies Bill, which is pending with the Rajya Sabha.

The fund flow statements indicate whether companies are efficiently using financial resources available to them or not.

“The unlisted companies will have to disclose the fund flow statement along with annual results to the Registrar of Companies (RoC),” a corporate affairs ministry official said.

Under the existing laws, the unlisted companies are required to file annual statements with RoC. The changes, sources said, would be incorporated in the Companies Bill, which has already been approved by the Parliamentary Standing Committee and is likely to be taken up for consideration and passage in the current session of Parliament.

Besides other things, the new Bill will be shorter and will try to harmonise the Company Law framework with sectoral regulations.

The proposed Bill will have 480 sections, compared to over 600 in the Companies Act, 1956, in addition to providing for greater shareholder democracy and less government intervention.

The new legislation would try to promote shareholders’ freedom with protection of rights of minority shareholders, responsible self-regulation with adequate disclosure and accountability and less government control over internal corporate processes, said the statement of objects and reasons of the new Bill.

It will also make it mandatory for listed companies to have 33 per cent independent directors and provides for the formation of One-Person Company, while empowering the government to provide a simpler compliance regime for small companies.

The Bill also proposes to make stringent provisions for companies seeking to raise money from public. They would not be allowed to raise deposits from public without obtaining permission from the relevant regulator.