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Simplified Schedule VI and SARAL Schedule VI for small and medium sized companies

As you aware that the launching of MCA-21, a national mission mode project by the Ministry of Corporate Affairs has positioned the brave India on the global path of e-governance benchmarked with best global practices. The new era of corporate governance has certainly paved the way for a more transparent, stakeholder friendly and accountable corporate regime. The Ministry deserves appreciation for the revolutionary effort for conceiving, planning and successfully implementing the MCA 21 Project. Appreciating the emerging global scenario and aiming at making India globally competitive in attracting investments from abroad, by suggesting systems in the Indian corporate environment which are transparent, simple and globally acceptable, the Government of India had constituted an Expert Committee on Company Law, 2005. In pursuance to the recommendations of this Committee, a new Company Law regime is under formulation.
The Committee in its report admitted the right of shareholders to be informed through simple disclosure which should not be in excessively technical format. This will enhance the credibility of the company and will help the shareholders to take an informed and conscious decision in respect of their investments. The Committee visualizes a regime of stringent disclosure norms in case of companies accessing funds through public offers. The Committee observed that proper and accurate compilation of financial information of a corporate and its disclosures, in a manner that is standardized and understood by stakeholders, is central to the credibility of the corporates and soundness of investment decisions by the investors.
The Committee was also of the view that Small companies need not be subject to the costs of a regime suited to large companies with a wide stakeholder base. Relaxations to small companies with regard to the format of accounts to be prescribed in the Act/Rules may also be considered. If necessary, a separate format for small companies may be devised. Exemptions from certain disclosures may also be considered and relaxations, if any required, in respect of compliance with Accounting Standards may be provided for while notifying the Accounting Standards. If necessary, a separate Accounting Standard may be framed for small companies.
Accordingly, the Ministry of Corporate Affairs had requested the Institute to review its earlier suggestions on Schedule VI to simplify the same appreciating the best global practices as well as the emerging Indian practices. The Institute was also requested to prescribe a SARAL Schedule VI for small and medium sized companies.
To carry out the exercise, the Institute had constituted a Study Group to formulate the suggestions on Schedule VI and for prescribing SARAL Schedule VI for small and medium sized companies.
The VISION CONCEPT PAPER to carry out the exercise was as follows: -
(i) Simplification of presentation.
(ii) To evaluate existing format with respect to unwanted and outdated disclosures which have lost relevance over the years.
(iii) To synchronize & harmonize the disclosure requirements with Accounting Standards by including cross references.
(iv) To harmonize and converge with global disclosure requirements.
(v) To minimize disclosure requirements for Small and Micro Companies through the Principle of Abridgement by creating a “Saral” document. All companies to be identified and categorized in to three levels for differential disclosure requirements.
(vi) To incorporate inherent flexibility in the format (to facilitate time to time amendments).
(vii) To incorporate the disclosure requirements under other statutes only after strict merit evaluation and where extremely justified.
(viii) The abstract in form 23AC and 23ACA for e-filing of the financial statements to be reviewed and made more comprehensive.
(ix) The format should ensure adequacy and sufficiency of disclosures in financial statements to give a true & fair view of:
  • the state of affairs as at the end of the financial year,
  • the profit or loss for the accounting period
  • the cash flows for the accounting period
(x) Financial statements to have a Balance Sheet and an Income statement. The format should be determined only by a single regulatory agency i.e. Companies Act through Schedule-VI only. Multi-regulatory agencies should not determine the format
(xi) All additional disclosures of information under the Indian Accounting Standards to be included in a separate statement to be appended to the financial statements and not in the main format of the financial statements.
(i) To study the requirements under IFRS & US GAAP.
(ii) To study the other models eg. the Australian Model.
(iii) To study all disclosure requirements which are mandated under the Indian Accounting Standards to be disclosed on the face of Balance Sheet or Profit & Loss Account.
(iv) To Study the categorization of companies into different levels as per accounting standards/CARO/any other criteria
While appreciating the best global practices and the industry specific requirements as well as the disclosure requirements under IFRS, the Study Group examined the position across the world and carried out indepth research to formulate the drafts. The study group recommended the drafts of simplified Schedule VI and SARAL Schedule VI for small and medium sized companies. The Corporate Laws Committee of the Institute considered the drafts of both the Schedules and finalized the same. The drafts are being sent to the Ministry of Corporate Affairs and other Specified Bodies for comments.



As desired by CA. Vinod Jain, Chairman, Corporate Laws Committee, Members are requested to give their views/comments on both the Schedules at the earliest and latest by 31st March, 2008. Comments may be sent by e-mail with the subject line “VIEWS/SUGGESTIONS ON SCHEDULE VI and SARAL SCHEDULE VI FOR SMEs” to the following: -
Corporate Laws Committee
The Institute of Chartered Accountants of India
Contact no. (011) 30110471
Mobile no. 9350799924

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