A tendency towards increasing corporate transparency is encouraged by modern developments on the statutory front – the regulatory authorities in many countries are continuously tightening the corporate security laws to compel corporations to exercise greater responsibility towards their shareholders. Corporate transparency is the main reason for the widespread trust that the public companies enjoy – such companies are well known in the business world, their suppliers are ready to provide goods and services on favourable terms, banks and financial institutions stand willing to provide financial resources.
From the viewpoint of the outside investors, and the international equity investors in particular, corporate transparency means:
- Clear and logical ownership structure of the business. An equity investor wants to know who is offering him/her to become the co-owner of the business and who is going to remain a majority shareholder post-offering
- Accounting (including management accounts) and financial reporting. The accounting practices, financial reporting procedures and scope of disclosure must be compliant with the International Accounting & Financial Reporting Standards (IAS/IFRS) or the U.S. GAAP.
- Internal control and audit procedures. Internal control is crucial because it convinces the outside investor in the adequacy of the management control.
- Regular external independent audits. Public investors need to be assured that the company’s management does not mislead them about the state of the business, financial position and the prospects.
- Corporate governance practices. When a company wishes to demonstrate the openness and transparency of the business, the crucial task is to guarantee the shareholders’ rights via implementation of the coherent management procedures.
ALL THESE ARE INVESTMENTS IN BUSINESS
When a company meets these strict requirements, it receives in exchange the trust of partners, and, most importantly, shareholders.