Broadened Disclosures Requirements for the Companies By Mehul Solanki and Ishita Samani


Disclosure is the process of making facts or information known to the public. Proper disclosure by corporations is the act of making its customers, investors, and any person involved in doing business with the company aware of pertinent information. In the financial world, disclosure refers to the timely release of all information about a company that may influence an investor's decision. It reveals both positive and negative news, data, and operational details that impact its business and also includes information on company officers, directors, and certain shareholders including salary, various fringe benefits, and transactions between the company and management. The financial condition of the business including financial statements audited by an independent certified public accountant.

Also, all the Companies whether listed or certain unlisted have to make disclosures about Remuneration, Deposits and other disclosures in the Board’s Report in accordance with the Companies Act,2013 and SEBI (LODR) Regulations, 2015.

Benefits of making Disclosures.


New Disclosure Rules introduced by Ministry of Corporate Affairs

With the ever-increasing stringency in the regulatory framework and requirements of disclosures under various provisions of law, MCA, vide notification dated March 24, 2021, has further prescribed a list of additional disclosure required in the financial statements by amending schedule III to the Companies Act, 2013 and Companies (Audit and Auditors) Amendment Rules, 2014 which shall be applicable from FY 2021-22.

The amendments so introduced will bring more transparency by providing for various disclosures including loans and advances to promoters, directors, key managerial persons (KMP) & related parties, details of benami property, dealing with struck off companies, Investments in Crypto currency, undisclosed income etc.  

Disclosure related to loans and advances to promoters, directors, key managerial persons (KMP) & related parties

The company making any loan and advances to the promoters, directors, KMPs and other related parties either jointly or severally. Such loan / advances so given are considered either in the nature of a loan or advance repayable on demand or without any specific terms or period of repayment. The related parties are those parties as director or a key managerial person or their relatives or a firm, private company in which the partner, director/ manager or his relative is a partner or private company or a public company in which a director or manager is a director and holds along with his relatives, more than 2% of its paid-up share capital.  

The details of such loans shall be disclosed separately in the financial statements along with the amount of loan and % to total loans and advances and also mention that transaction entered into by the Company is at Arm’s length price basis.

Disclosure to be made accordingly:

Type of Borrower

Amount of loan or advance in the nature of loan outstanding

Percentage to the total Loans and Advances in the nature of loans










Related Parties



Reasons for such disclosure:

The disclosure is important as it may affect assessments and evaluation of an entity's operations and the entity's risks and opportunities by users of financial statements. And also, for an understanding of the potential effect of the transaction with the relationship on the financial statements.

It is relevant to note here that while related party disclosures are already required under applicable accounting standards, this may, to some extent, be an overlapping of disclosures.

Disclosures related to details of Benami Property held by the Company.

As the name indicates Benami property means a property without a name. In such kind of a transaction, the person who pays for the property does not buy it under his/her own name and motive behind such a transaction of this nature is to evade payment of tax. Where any proceedings have been initiated or pending against the company for holding any benami property, the company shall make various disclosures.

Disclosure to be made accordingly:

a. Details of such property, including year of acquisition,

b. Amount thereof,

c. Details of Beneficiaries,

d. If property is in the books, then reference to the item in the Balance Sheet,

e. If property is not in the books, then the fact shall be stated with reasons,

f. Where there are proceedings against the company under this law as an abetter of the transaction or as the g. Nature of proceedings, status of same and company’s view on

Reasons for such disclosure:

The disclosure is important in order to curb money laundering and take measures to avoid and prevent Tax evasion.

Disclosure with respect to relation with the Struck off Companies.

Where the company has any transaction with companies struck off under section 248 of the Act, or under section 560 of the Companies Act, 1956, which indicates the Power of Registrar to remove name of company from register of companies then the Company shall make various disclosures.

Disclosure to be made accordingly:

Name of the Struck off Company

Nature of transaction with struck-off Company

Balance outstanding

Relationship with the Struck off company, if any, to be disclosed


Investments in securities








Shares held by stuck off company




Other outstanding balances (to be specified)



Reasons for such disclosure:

This disclosure is important in order to bring transparency and accountability on the reliance of Financial statements and further take measures to curb money laundering.

Disclosures with respect to Wilful defaulter.

A wilful defaulter is an entity or a person that has not paid the loan back despite the ability to repay it. A company categorized as a wilful defaulter by any bank or financial institution in accordance with the guidelines on wilful defaulters issued by the Reserve Bank of India., will be required to make various disclosures

Disclosure to be made accordingly

a. Date of declaration as wilful defaulter,

b. Details of defaults (amount and nature of defaults),

Reasons for such disclosure:

The disclosure is important to create an awareness about the company being a wilful defaulter amongst the financial institutions and other banks granting loan to the entities and about the inability of the Company to repay the loan amount in spite of having sufficient funds.

Disclosures with regards to investment in Crypto currency or Virtual Currency

Cryptocurrencies like bitcoin are considered to be a part of the virtual currency group. Virtual currency is a type of unregulated digital currency that is only available in electronic form. It is stored and transacted only through designated software, mobile or computer applications, or through dedicated digital wallets, and the transactions occur over the internet through secure, dedicated networks.  

Cryptocurrency uses cryptography technology that keeps the transactions secure and authentic, and also helps to manage and control the creation of new currency units. Cryptocurrencies exist and are transacted over dedicated blockchain-based networks that are open to the common public. Anyone can join and start transacting in cryptocurrencies. Cryptocurrency, while not banned in India, is also not regulated. Where the company has traded or invested in Crypto Currency or Virtual Currency during the financial year, various disclosures have to be made by the company.

Disclosure to be made accordingly

(a) profit or loss on transactions involving Crypto currency or Virtual Currency

(b) amount of currency held as at the reporting date,

(c) deposits or advances from any person for the purpose of trading or investing in Crypto Currency or virtual currency.

Reasons for such disclosure

The disclosure has now mandated the companies to prepare a separate set of accounts for all their transaction involving Crypto Currency or Virtual Currency. Experts noted that the requirement of disclosures of cryptocurrency transactions and holdings could indicate the government is willing to permit the use of cryptocurrencies and regulate them, which is what the industry has been eagerly anticipating. Besides assisting in transparency for the system it will enhance the confidence of investors both retail and institutional. RBI may be open to regulating cryptocurrencies instead of banning their use.

Other Disclosures to be made in the Notes of the Balance sheet.

It must include disclosures relating to following:

  • Statement on changes in equity;

  • Shareholding of all promoters;

  • Schedule of trade payables and trade receivables;

  • Funds borrowed from banks and financial institutions;

  • Revaluation of property;

  • Ratios of the Company;

  • Conduit lending and borrowing;

  • Title deeds of property not held in the company’s own name.

Other Disclosures to be given in the Profit and Loss statements:

It must include disclosures relating to following:

  • Details related to CSR;

  • Details related to Undisclosed Income;

  • Mandated companies to record audit trails of their accounts, a system that traces the detailed transactions relating to any item in an accounting record for more transparency and better compliance;

  • Firms using accounting software to maintain their books need to use features that can record the audit trail of each transaction and create an edit log, including the date of such changes;

  • Companies to round off figures in the financial statements.


As discussed above, the intent of law seems to bring more transparency in reporting by corporates. Though certain disclosures may lead to repetition of information in various places, to avoid the same cross referencing may be done. Surely, the amendments will reduce the problem of inadequacy of information in the books of accounts of the company.

Lex comply

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