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Richa Mishra

NEW DELHI, Oct. 11

COMPANIES may soon have to disclose the identity of lenders from whom they have borrowed monies either directly or indirectly. The Working Group on Corporate Governance constituted by the Department of Company Affairs (DCA) is in favour of tighter norms for disclosures for companies in order to give a "clear and fair" picture to stakeholders.

Some of the broad areas where the Working Group felt that this was called for were loans to directors, deposits raised and given by companies and appointments of directors, sources told Business Line.

Elaborating further, they said, that direct and indirect loans taken by a company needed to be disclosed to its stakeholders. The stakeholder has the right to know about the amount directly raised from the public by way of shares or deposits as well as indirect interests like placing equity with financial institutions.

The panel is also in favour of stringent disclosure norms for transfer of funds within the group/associate companies. Information on the capital raised by a company also needed to be mandatorily disclosed, sources said. Further, the panel is likely to emphasis on social responsibility ethics for the corporate.

The Working Group, which had a marathon session on Wednesday and proposes to hold two more meetings before giving its finally recommendations to the department, has put in place a final structure based on which guidelines can be made, according to sources.

"Though the Working Group is putting in place recommendations for norms for unlisted and private companies, our suggestions are applicable to all companies," sources said. The Group was not looking into the aspect of how a company can manufacture better but how the quality of business could be improved, they said.

The Working Group is examining the provisions of the Companies Act, 1956, which should be amended to conform to the requirements of Good Corporate Governance. It is examining the amendments necessary for harmonising various provisions of the Companies Act and the Listing Agreement, Secretarial Standards, Accounting Standards, and various Securities and Other Laws such as the Depositories Act, SCRA, SEBI Act, Insider Trading and Takeover Code, Competition Law, etc with a view to bringing about Good Corporate Governance. The Group comprises representatives of apex chambers of commerce, professional institutes and DCA representatives among others. The convenor of the Group is Mr Pavan Kumar Vijay, Vice-President, Institute of Company Secretaries of India (ICSI).

Meanwhile, the department is examining whether there is a need to have a separate regulation for Corporate Governance in the Companies Act or whether the existing Act can be amended, according to sources.

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