Banks and NPA’s have a long standing bittersweet relationship and in their continuing efforts to keep themselves afloat the banks are now banking on ‘search reports.’ ‘Search report’ ….. just the sound of the term is enough to paint pictures of a ‘private investigator’ negotiating his way through shady alleys in his efforts to catch the villain red-handed. Well it’s almost the same here too except that, the ‘private investigator (PI)’ goes about the work in a suit and within the cool climes of his office while the shady alleys turn digital and become the e-portal of the Ministry of Corporate Affairs. There is no villain in this case but there is a company (borrower) whose public records the PI goes through in his effort to ascertain their credit worthiness. The PI’s client is not the heir to a fortune but instead a bank(or any lender) that wants to ensure that it doesn’t get into choppy waters. The PI in this case is not one who knows the ins and out of mystery novels and criminal laws but a professional who knows the company law like the back of his hand. A search report is used to trace the history of a company and analyse its track record (on repayments). Some of the key points included in a search report are as follows,
- Company’s name and registered office address.
- The capital structure of the company detailing the quantum of equity and preference shares, as also the breakup of authorised share capital into issued, subscribed and paid up.
- Names and Addresses of the directors of the company since its incorporation.
- List of the shareholders of the company since its incorporation.
- Charges registered by the company since its incorporation.
- Name and address of existing charge holders.
- Quantum of Loan outstanding.
- Properties that have been charged.
- Rate of Interest, terms of repayment, margin money, etc.
Generally it is the bankers or lenders who ask for a search report but there are situations where persons other than the bankers or lenders may ask for the same. Some of the users of the search report other than the bankers or lenders is as follows,
- Customers or Suppliers.
- Government Authorities.
- Prospective Investors.
At the end of it all it can be said that search reports are an all encompassing source of information that is relied upon by myriad classes of stakeholders and therefore hold much importance in the economy of today.