Information to shareholders - Publication of periodical reports by companies engaged in production - Companies Law - No. 7/15/64-PR,

Circular: No. 7/15/64-PR, dated 27-7-1964. Subject:- Information to shareholders - Publication of periodical reports by companies engaged in production In para 76 of their 53rd report (3rd Lok Sabha) on the Ministry of Finance, Department of Revenue and Company Law (Company Law Division), presented to the Lok Sabha in April 1964, the Estimates Committee have recommended that with a view to enabling the shareholders to take intelligent interest in the affairs of the companies engaged in production, Government may consider the feasibility of persuading such companies to furnish to the Stock Exchanges and to shareholders, if possible, quarterly statements containing, inter alia, the following information: a. general survey of business development; b. comparative figures relating to production and sales; and c. current and future prospects. An extract of the said para is attached as an annexure to this letter. In this connection it is pointed out that the question of issuing periodical statements relating to the working and earnings of companies whose securities are listed on any stock exchange had been under consideration of the Government for some time past and, as you may be aware, the Stock Exchange Division of this Department had sent a communication in January last to the various Stock Exchanges in the country requesting them inter alia to advise the listed companies to acquaint their shareholders periodically at the end of every quarter and half-year about their working and earnings. As stated in that communication, closer relationship between the shareholders and companies which they own can be cultivated and personal interest in the working of the companies can be created among shareholders if information regarding production, output, sales, labour relations, expansion programmes and the like are released to the shareholders and the general public from time to time. That would also provide a sound basis for making investment decisions and for evaluating investment results. It would also appear that the practice of publishing periodical reports is widely prevalent in advanced countries like USA and UK, etc., and even in this country the two principal steel companies in the private sector have been publishing monthly production figures for a long time and the plantation companies in general have also been issuing periodical reports. It is hoped that the companies in India, particularly those engaged in production, would not lag behind in emulating this wholesome practice by giving periodical publicity to their working and earnings so that the dangers inherent in a false market created by rumour-mongers at dividend time could be avoided. ANNEX - EXTRACT OF ESTIMATES COMMITTEE S REPORT It has been represented to the Committee by a leading stock exchange that companies engaged in production should be required to furnish quarterly progress reports setting out their targets and achievements to stock exchanges and shareholders. Another leading stock exchange association has represented to the Committee that: At present companies in this country generally publish their working results once in a year. Such a big lap of time interval between two reports naturally help rumour-mongers to manipulate the stock market. When such rumours overwhelm the market, if the companies were prompt enough to contradict the rumours, then the position would have been otherwise. But as such practice on the part of companies is rare in this country, it is suggested that the companies should issue at least quarterly statements relating to working, earnings and important developments in their affairs. Such a quarterly statement need not be a full-fledged balance-sheet or profit and loss account, but a simple informative statement of interest to the shareholders. Though the issue of a more elaborate statement is in vogue in the US, yet we believe that in this country the companies should make a modest beginning by issue of a statement containing inter alia the following information: a. general survey of business development; b. comparative figures relating to production and sales; and c. current and future prospects. A statement of this kind should be issued at the end of every quarter to the Stock Exchange, newspapers and also on request to the shareholders. With a view to enabling shareholders to take intelligent interest in the affairs of the companies engaged in production. Government may consider the feasibility of persuading such companies to furnish to the Stock Exchanges and to shareholders, if possible, quarterly statements containing inter alia the following information: - general survey of business development; - comparative figures relating to production and sales; and - current and future prospects.