Unlisted companies may face tough disclosure rules

Private companies in India are not required to make rigorous disclosures related to their financials or other material changes in the same way public companies are. This also applies to conglomerates that may have both listed and unlisted units. Sebi plans to review and standardise disclosures in public offer documents issued by private and listed companies, it said in its annual report that included a draft of other reviews. “There is a need to identify, monitor and manage the risks introduced into the securities market ecosystem by unlisted companies in a conglomerate with a complex set of listed and unlisted associates,” said Sebi.

Currently, there is no public disclosure of all related-party transactions at a conglomerate level, said Sai Venkateshwaran, a partner at KPMG. “The plan from Sebi to enhance transparency through reporting of transactions at a conglomerate level may not be achievable by the listed company on its own and will certainly require the active involvement of the promoter group (major shareholder). The regulator also said that group-level disclosures could be made mandatory around cross-holdings – where a publicly traded company owns stock in another listed company.
This fiscal, the regulator will also change what constitutes unpublished price-sensitive information (UPSI) to prevent insider trading. Currently, the listed entity has the onus of categorizing information as UPSI. But, Sebi said, it has come across several instances where information that ideally should have been disclosed as UPSI was not made public.