Last month, the resolution to approve the accounts of Dish TV Limited, a direct-to-home service provider was defeated for the third time, leading to an impasse of sorts.
The Companies Act has a partial solution. It says that where the accounts are not adopted by the shareholders, they shall still be filed with the registrar who shall take them on record as “provisional” till the adopted accounts are filed. This suggests making the regulatory filings, stating that the financial statements have been audited and approved by the board, but not adopted by the shareholders. But this is of limited comfort.
Getting the shareholders to sign-off on the financial statements is crucial for a company’s continuing operations. These are the basis on which bankers lend, suppliers extend credit, distributors agree to carry the product and investors buy equity.
It is imperative that regulators specify the process and regulatory framework in place to deal with contingencies when accounts are not approved.
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