Vinu: Hey Manu, last year in a company’s financial statement, the current account was reported on the asset side, and it resulted in a negative tangible net worth. This year, they reported the current account on the liability side and also mentioned a capital infusion, which improved their tangible net worth. As a banker, how can I verify that the capital infusion actually took place and confirm the transaction?

Manu: That’s a good question, Vinu. To verify the capital infusion, you can start by reviewing the company’s bank statements for the period when the infusion was reported. Look for any large credit entries that match the claimed amount of capital injection.

Vinu: Should I just take the bank statement at face value, or is there more I should do?

Manu: Definitely don’t stop there. You should also trace the origin of these funds. Make sure they weren’t borrowed from elsewhere and that they truly represent fresh capital injected by the owners or shareholders.

Vinu: Got it. What about the company’s records—are there specific documents I should ask for?

Manu: Yes, you should ask for the company’s share capital register or any similar documentation that shows new shares were issued or that existing shareholders increased their stake. A board resolution approving the capital infusion would also be helpful.

Vinu: That makes sense. Should I also look at their financial statements?

Manu: Absolutely. Compare the equity section of the balance sheet from last year to this year. You should see an increase in equity that corresponds to the capital infusion. Also, check the auditor’s report—sometimes they’ll mention whether they’ve verified the capital infusion.

Vinu: What if the infusion was done through new investors? Is there anything specific I should ask for?

Manu: If new investors were involved, ask for investment agreements or any formal documents outlining the terms of the capital injection. Also, verifying their tax filings could give you more confidence that the infusion was legitimate.

Vinu: Are there any regulatory filings I can check?

Manu: Yes, you should definitely check the company’s filings with the Registrar of Companies or any similar regulatory body. This is where they’re required to report changes in share capital. You can also review other compliance documents where the capital infusion might be mentioned.

Vinu: If they claim the infusion was used to buy assets, should I verify that too?

Manu: If the infusion was used for physical assets, like new machinery or buildings, a site visit could be useful to verify their presence. You can also look for any operational improvements that align with the capital injection, like increased production capacity or new projects.

Vinu: Thanks, Manu. That gives me a clear plan to verify the capital infusion.

Manu: Glad I could help, Vinu. Just be thorough, and you’ll be able to confirm whether the capital infusion is genuine.