Mumbai, Aug. 23: The Y. H. Malegam accounting standards committee set up by the Securities and Exchange Board of India (Sebi) has recommended that the half-yearly results announced by companies shall be audited from the financial years beginning on or after April 1, 2004.
It has also made recommendations that the provisions applicable to the parent company regarding composition of the board of directors shall also be made applicable to the composition of the board of directors of the subsidiaries. If this is implemented it would fill a major loophole in the current provisions, which have no rules on subsidiaries.
When corporate disclosures are becoming a norm in the global context, the panel has recommended the watering down of certain crucial norms on disclosures.
The committee, which had representatives from stock exchanges, the department of company affairs, the Institute of Chartered Accountants of India, Institute of Company Secretaries of India and the Association of Mutual Funds of India, has recommended that it is not desirable to prescribe quarterly disclosure of loans, advances and investments.
Further, it said it is not desirable to prohibit companies from having more than one subsidiary investment company.
The committee was set up for the purpose of bringing disclosure standards and accounting practices in the country at par with international practices and the framework of the committee includes review of the continuous disclosures requirements under the listing agreement for the listed companies.
The panel suggested that at least 1/3rd of the directors of the subsidiary shall be non-executive directors of the parent company. The audit committee of the parent shall also review the accounts of the subsidiary.
The scope of the audit committee may be enlarged to include review of the investments by subsidiaries and associates to ensure that Section 77 of the Companies Act is not violated, the committee opined.