Exemption to PFIs specified u/s 4A of the Companies Act, 1956 from disclosing investments as required under Paragraph (1) of Note (l) of Pat-I of Schedule – VI in their balance sheet.
[Ref: Notification No. S.O. 300(E), dated 8th February 2011 and F. No. 51/12/2007-CL.III]
Before understanding this Notification, one needs to refer Notes provided at the end of Part-I, Schedule – VI (Under heading – General instructions for preparation of Balance sheet).
What Note (l) provides for – “ a statement of investments (whether shown under “investment” or under “Current Asset” as Stock-in-trade) separately classifying trade investments and other investments should be annexed to the balance sheet, showing the names of the bodies corporate (indicating separately the names of the bodies corporate under the same management) in whose shares or debentures, investments have been made (including all investments, whether existing or not made subsequent to the date as at which the previous balance sheet was made out) and the nature and extent of the investment so made in each such body corporate provided that in the case of an investment company, that is to say, a company whose principal business is the acquisition of shares, stock, debentures or other securities, it shall be sufficient if the statement shows only the investments existing on the date at which balance sheet has been made out. In regard to the investments in the capital of partnership firms (with the names of all their partners, total capital and the shares of each partner), shall be given in the statement”.
The term investment covers only such securities as are beneficially owned by the entity and not those held by it on behalf of others. Investments can be classified as “Current investments” and “Long-term investments”. A current investment is an investment that by its nature readily realizable and is intended to be held for not more than one year from the date on which particular investment was made. A long-term investment is an investment other than current investment.
For legal requirements under various enactments:
Under the Companies Act: Sections dealing with “investment” are Sections 49/108/292/293(1)(c)/372A/227(1A) and 227(4A).
 Section 49 specifically provides that all investments made by a company on its own behalf shall be made and held by its own name. It is important to mention here provisions of Section 49 do not apply to investment/s made by the company where principal business consists of buying and selling securities. In a case investment made and held in the name of any other person, the company is required to maintain a “Register of investments not held in the name of company”.
 Exemption already available to Investment companies: An investment company whose principal business is of acquisition of shares, stock, debentures, or government securities, it is sufficient if the statement shows only the investment existing on the date as on the date of balance sheet. In simple words – an investment company is exempt for giving details of all investment made during the year but disposed of. An investment company only requires giving details of investments held on the balance sheet date.
Part – I schedule VI requirement compliance –
Disclosure of investments in the Balance sheet is required as below –
1) Investment in Government and Trust Securities.
2) Investment in shares, debentures or bonds (showing separately shares fully paid up and partly paid up and also distinguishing the different classes of shares and showing also in similar details investment in shares, debentures or bonds of subsidiary companies).
3) Immoveable properties.
4) Investments in the capital of partnership firms.
Disclosure also requires disclosing nature of investment and mode of valuation. In particular information in relation with –
1) The aggregate amount of company’s quoted investments and market value thereof; and
2) The aggregate amount of company’s unquoted investments.
In addition to the above exemption now the new notification provides for exemption to “Financial Institutions” in terms of Section 4A of the Companies Act, 1956.
The exemption is available subject to the following conditions:
 The financial institution shall make the complete disclosures about investments in the balance sheet subject to fulfillment of the following conditions, namely –
a) Immoveable property;
b) Capital of partnership firms;
c) All unquoted investments; and
d) Investments in subsidiary companies.
 The public financial institution shall disclose the total value of quoted investments in each of the following respective categories, namely –
a) Government and trust securities;
d) Bonds; and
e) Other securities.
 In each of the above categories referred to in sub paragraph  and , investments, where value exceeds 2% of total value in each category or Rs. 1 Crore, whichever is lower, shall be disclosed fully provided that where disclosures do not result in disclosure of at least 50% of total value of investment in a particular category, additional disclosure of investments in descending order of value shall be made so that specific disclosures account for at least 50% of that total value of investment in that category,
 The public financial institution shall also give an undertaking to the effect that as and when any of the shareholders ask for specific particulars the same shall be provided;
 All unquoted investments shall be separately shown;
 The Company shall undertake to file with any other authorities, whenever necessary, all the relevant particulars as may be required by the government and other regulatory bodies;
 The investment is subsidiary companies or in any company such that it becomes a subsidiary, shall be fully disclosed.
Disclosure will be made via notes on accounts covering each aspect sought by the present notification.
The notification shall be applicable in respect of balance sheet and Profit and loss account prepared in respect of the financial year ending on or after 31st March 2011.