22 October 2022
A private ltd company issued 0% convertible debentures to Non Residents of an OCB with approval of RBI. The company is yet to convert. as statutory auditor what is the diclosure to be made under schedule III of the companies Act for the yer ended 31st March,2022
09 July 2024
As the statutory auditor of the private limited company, here’s the disclosure that should typically be made under Schedule III of the Companies Act, 2013 for the year ended 31st March 2022 regarding the 0% convertible debentures issued to Non-Residents of an Overseas Corporate Body (OCB):
### Notes to Financial Statements:
1. **Nature of 0% Convertible Debentures:** - Disclose in the notes to financial statements the nature of the 0% convertible debentures issued by the company. - Specify that these debentures were issued to Non-Residents of an Overseas Corporate Body (OCB) with the approval of the Reserve Bank of India (RBI).
2. **Terms of Conversion:** - Provide details regarding the terms under which the debentures are convertible. This includes information such as the conversion price, conversion ratio, conversion period, and any other significant terms.
3. **Date of Issuance:** - Mention the date when the 0% convertible debentures were issued by the company.
4. **Accounting Treatment:** - Disclose the accounting treatment applied to the 0% convertible debentures in the financial statements. Typically, such debentures are initially recognized at fair value and subsequently measured at amortized cost until conversion or maturity.
5. **Valuation:** - If applicable and material, provide information on the valuation of the debentures, especially if they are measured at fair value through profit or loss.
6. **Risk Factors:** - If significant, disclose any risks associated with the convertible debentures. This may include risks related to the conversion process, foreign exchange fluctuations (if applicable), or other risks specific to the debentures issued to Non-Residents of an OCB.
7. **RBI Approval:** - Mention explicitly that the issuance of the debentures was approved by the Reserve Bank of India (RBI), as this is an important regulatory compliance aspect.
8. **Disclosure of Non-Conversion:** - Since the debentures are yet to be converted as of the reporting date, disclose this fact in the notes to financial statements. Mention any reasons or conditions that may impact the timing or certainty of conversion.
9. **Subsequent Events:** - If there have been any developments after the reporting date (31st March 2022) regarding the conversion of the debentures, disclose these as subsequent events in accordance with accounting standards.
### Compliance and Professional Judgment:
- Ensure that the disclosures are in compliance with applicable accounting standards (Indian Accounting Standards, or Ind AS, if applicable). - Exercise professional judgment to determine the materiality of information disclosed and ensure transparency in reporting to stakeholders.
By making these disclosures in the notes to financial statements, the company provides transparency about its financial arrangements involving the 0% convertible debentures issued to Non-Residents of an OCB, in line with the requirements of Schedule III of the Companies Act, 2013.
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