Mumbai, Mar 20: Opposition from within the Sebi board has obstructed the clearance of the crucial Bhave Committee report on continuing disclosures by corporates.Even as corporates and legal experts debate on the insider-trading charges levelled against Hindustan Lever Ltd (HLL), market players have called for a speedy implementation of the report as mandatory disclosures by corporates could well be the panacea for an ailing market.According to Sebi sources, the report was taken up at the last board meeting in January, but two members on the board felt that it might be "difficult" for companies to adopt the stringent disclosure requirements. Sources added that this prompted Sebi to seek a fresh opinion from associations and stock exchanges. "We will try and take it up at the coming board meeting and push for its clearance," said a Sebi source. The Sebi board is meeting on March 27.
One thing, however, is clear. The issue is definitely not going to be given much priority as changes in the takeover codeand the extension of the BSE president's term are set to dominate the agenda. "There is no point on talking about why a company did not disclose a certain bit of information when we do not have a clear system of reporting market sensitive information as is adopted in developed markets," said a market expert.
Interestingly, the committee comprised experts from various sections of the market. It had representatives from CII, Assocham, Ficci and leading exchanges like NSE, CSE and Vadodara Stock Exchange. The panel was headed by CB Bhave, former senior executive director of Sebi and currently the managing director of National Securities Depository Ltd (NSDL).
In fact, there is virtual unanimity among all sections of the market that a clear disclosure procedure needs to be spelt out. "In the wake of the spate of takeovers, we are going to see more and more investors losing out to a few who get access to sensitive information ahead of the large majority," said a merchant banker. "We are all for disclosures",CII president N Kumar had recently told The Financial Express.
The Bhave Committee report, which was submitted to Sebi five months back, has given details of the information which is material and thus needs to be disclosed by companies to stock exchanges and investors. "The committee was of the opinion that while listing agreements require the disclosures of material events and transactions which would impact an investor's decisions, these had not been defined in the listing agreements," states the committee report. These material events have now been defined under six broad categories. These events should, according to the committee, be disclosed within 48 hours of their occurence or consideration by the board of directors, as the case may be.
The first deals with disclosing any change in the general character or nature of business. This includes an issuer entering into or proposing to enter into any manufacturing, marketing or financial tie-up or disposing of any unit or division. The secondcategory deals with disruption of operations due to natural calamity like earthquake, flood or fire. Soon after the occurence of such a disaster, an issuer would be required to keep the exchange informed of the details of the damage caused to the unit and whether the loss has been covered by insurance.
The issuer must also promptly notify the exchange about the commencement of commercial production of any of its units where revenue from the unit is estimated to be not less than 10 per cent of the revenues of the issuer for the year.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
