Listed firms must disclose Covid-19's material impact on businesses

In an advisory, which comes into immediate effect, the Securities and Exchange Board of India (Sebi) has asked listed entities to give details of the impact on the companies, both qualitatively and quantitatively, to the extent possible and disseminate the same.

Sebi has pointed out that while such a lockdown and disruption is unforeseen and beyond the control of the entities, such events can lead to distortions in the market due to the gaps in information available about the operations of a listed entity.

The market regulator has observed that many listed entities have made disclosures under LODR Regulations, primarily intimating shutdown of operations owing to the pandemic and the resultant lockdown.

Some listed entities have provided information ralated to actions taken towards sanitation, safety etc.; the number of entities which have disclosed the financial impact of Covid-19, however, is small.

Citing the global experience, Sebi said that listed entities around the world have been making disclosures regarding the impact of the pandemic, including that on financial conditions and results of operations, future operations, capital and financial resources, liquidity, assets, internal financial control over financial reporting and disclosure controls and procedures, demand for products/services etc.

Regulators have encouraged timely reporting as well as complete and accurate disclosure of the impact, as far as possible.

Sebi has given an illustrative list of information that listed entities may consider for disclosing the impact of the Covid-19 pandemic on their businesses.

It has also asked for disclosure of existing contracts/agreements where non-fulfilment of the obligations by any party will have significant impact on the listed entity's business.

Additionally, while submitting the financial statements under Regulation 33 of the LODR, listed entities may specify/include the impact of the pandemic on their financial statements, to the extent possible, Sebi said.

"When listed entities disclose material information related to the impact of Covid-19, they should not resort to selective disclosures, keeping in mind the principles governing disclosures and obligations of a listed entity as prescribed in the LODR Regulations," Sebi warned.