The Limits of Contractual Disclosure: Why Indian Corporate Law Needs a Baseline for Large Private Companies

This paper argues that Indian corporate law has a critical regulatory gap in the financial transparency of large unlisted private companies, a failure starkly exposed by the collapse of Byju's. Current law exempts these entities from continuous disclosure mandates like those applicable to listed companies, assuming that private investors can secure adequate transparency through contractual devices (e.g., shareholder agreements and debt covenants). The paper contends that this assumption is flawed because contractual mechanisms have structural limits: they suffer from a lack of foresight (inability to anticipate all material events), are hindered by costly and time-consuming enforcement, and create a collective action problem that leads to fragmented and unequal access to information among stakeholders. The Byju's case, with its prolonged delay in financial filings, auditor resignation due to non-cooperation, and subsequent fragmented creditor disputes, is presented as empirical proof of these failures. The core policy proposal is that Indian corporate law must establish a calibrated statutory baseline for disclosure for large private companies exceeding defined thresholds (e.g., revenue or borrowings). This reform would mandate timely publication of audited financials, disclosure of auditor resignations, and reporting of material defaults, thus providing minimum parity and continuous transparency where private contracts have proven inadequate.