Annual Information Memorandum – SEBI’s new thinking

SEBI has drafted a discussion paper on Annual Information Memorandum for listed companies. Basically what it means is that all disclosures, reports under the listing agreement which are periodically sent to stock exchanges will now be subsumed in the Annual Information memorandum which is required is to be filed electronically on the company’s website and also filed with the stock exchanges simultaneously. So reports such as Corporate Governance Report (Clause 49), Business Responsibility Report (Clause 55) and Related Party disclosures (Clause 32) etc. in the AIM could pave way for removing such disclosures from Annual Report limiting its scope only to details required under the Companies Act, 1956/ Companies Act, 2013, thereby significantly reducing disclosures required in Annual Report and consequently reducing costs for the listed companies as AIM will be required to be filed in electronic format.

But clause 35 shareholding pattern and the annual reports under the Takeover Code will not be impacted. They will need to be separately sent to the stock Exchanges. The annual reports are sought to be made less bulkier which is good for the corporates because of the cost implications involved. 

 

Proposed AIM Framework 

1. Format
The proposed framework for disclosure in AIM is enclosed as Annexure. Format of AIM is in line with the format of offer documents prepared for  primary market offerings to maintain consistency in disclosures.
2. Frequency of Preparation
Frequency for preparation of AIM shall be yearly.
3. Timeline for Dissemination
AIM shall be disseminated within 135 days from the end of financial year.
4. Mode of Dissemination
AIM may be disseminated electronically by uploading the same on the company’s website and simultaneous filing with stock exchanges.
5. Approval of AIM
AIM shall be approved by Board of Directors at their meeting prior to dissemination.
6. Annual updation
AIM will be required to be updated every year. While, updating the AIM, the companies may update the quantitative as well as qualitative information by replacing the details pertaining to most distant year with details pertaining to most recent year where such information is required to be furnished for multiple years. Further, all the information (qualitative as well as quantitative)
shall be reviewed for accuracy, sufficiency and relevance.
7. Implementation timelines Category Proposed Time Frame
Top two hundred listed companies based on market capitalization at BSE or NSE as on
March 31, 2014 – Financial year beginning on or after April 1, 2014
All other listed companies Financial year beginning on or after April 1, 2015

For companies which are planning IPOs (Initial Public Offers), the requirement of AIM would commence with the IPO. This would require that the disclosures made by the companies at the IPO stage be updated on an annual basis so as to ensure that at any point of time, updated information about them is available in public domain.

8. Auditor’s Examination Report
The companies desirous of using AIM as draft offer document for future capital raisings shall be required to submit an Auditor’s Examination Report along with AIM.

The list of disclosures in the AIM is very exhaustive and runs into some 22 paragraphs so I guess that process of collation/ updation of data could also be time consuming. 

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