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1. Companies Fresh Start Scheme:

There will be a moratorium from 1st April 2020 to 30th September 2020 on levying any late/ additional fees upon filings of any returns, statements, document etc. by companies or LLPs on the MCA portal irrespective of the due date of such filings. The benefit of this moratorium will be available not only for those forms and returns which are due during the Moratorium Period but also for those which were already due prior to the Moratorium Period. The benefit of this relaxation can be availed by existing defaulting companies. This would lead to a reduction of not only in the compliance burden but also the financial burden.

2. Extension of interval between two board meetings:

As per the Companies Act 2013, a company is required to hold a minimum of 4 board meetings every year with a maximum time gap of 120 days between two consecutive board meetings. The MCA has extended this time gap of 120 days by 60 days thereby increasing the interval limit between two consecutive board meetings to a maximum of 180 days. This one-time relaxation is available for the next two quarters i.e. up to 30 September 2020. Consequently, this aims at reducing the requirement to hold board meetings during the COVID 19 pandemic in adherence with social distancing measures.

3. EGM through Video Conferencing or other audio visual means:

MCA has clarified the mode of conducting general meetings through video conferencing. The circular is for passing of resolution in GM which are of “urgent nature'. The circular is applicable on all type of companies. This is in relation to all type of extra ordinary general meeting and not Annual General Meeting. As per this circular, company Can't pass resolution for ordinary business. ordinary business can't be discussed through this circular and MGT-14 can be filed within 60 days of passing the resolution along with the declaration that provisions of circular and rules has been complied with.

4. Meetings of Independent Directors:

Schedule IV of the Companies Act 2013 mandates the independent directors (ID) of a company to hold at least one meeting in a financial year without the attendance of non-independent directors and members of management. Since the ID meeting is required to (i) review the performance of non-independent directors and the board of directors as a whole; (ii) review the performance of the chairperson taking into account the views of executive and non-executive directors; and (iii) assess the quality, quantity and timeliness of flow of information between the management and the board of directors, it is usual to hold such ID meetings towards the end of financial year. In the light of social distancing measures recommended by the Indian Government, the IDs will not be able to hold such meetings physically before 31 March 2020. In these circumstances, the MCA has clarified that if, the IDs are not able to hold at least one ID meeting during the financial year 2019-20, the MCA will not view it as a non-compliance of the statutory provisions. However, the MCA has encouraged the IDs to share their views amongst themselves through telephone, email or any other mode of communication, as they may deem fit. In the light of this relaxation, the IDs are free to decide to not hold the meeting at all and just share their views by means of a conference call or emails. The IDs may also hold the ID meeting through a video conference facility or other audio-visual means.

5. Auditor's Report:

The MCA had earlier on 25 February 2020 announced a new format of report of the statutory audits of companies, namely Companies (Auditor's Report) Order, 2020 (CARO 2020) replacing the earlier order under Companies (Auditor's Report) Order, 2016. CARO 2020 was made applicable for all statutory audits commencing on or after 1 April 2019 corresponding to the financial year 2019-20. The MCA has now postponed the applicability of CARO 2020 to the financial year 2020-21.

6. Deposit Provisions:

Exercise of borrowing powers through acceptance of deposits is quite common for public companies in India, subject to compliance under the Companies (Acceptance of Deposits) Rules, 2014. A company, having outstanding deposits, is required to deposit at least 20% of the amount of its deposits maturing during the following financial year, into a separate deposit repayment reserve on or before 30 April of each year. For the deposits maturing in the financial year 2020-21, the MCA has extended the due date for deposit into the deposit repayment reserve to 30 June 2020.

COVID-19: Summary of relaxations from MCA

7. Declaration of Commencement of Business:

A newly established company is required to file declaration for commencement of new business (Form 20-A) within 6 months of its incorporation. However, considering the hardships being faced by the newly incorporated companies, the MCA has extended the timeline for such compliance from 6 months to 1 year from the date of incorporation.

8. Residential Status of Director:

Under Companies Act 2013, every company is required to have at least one director who has stayed in India for a period of minimum 182 days during a financial year. Due to prolonged travel ban across several countries (including India), it is possible that the 'resident' director may not be able to comply with the minimum 182 days' stay in India during the financial year 2019-20. Realizing such difficulties, the MCA will not treat the non-fulfillment of the minimum stay as a non-compliance for the financial year 2019-20.

9. Debentures Maturing on 31 March 2021:

As per Rule 18 (7) of the Companies (Share Capital and Debentures Rules), 2014, all companies (other than all Indian financial institutions and banking companies) are required to invest or deposit a sum not less than 15% of the amount of debentures maturing during the year, ending on 31 March of the following year. Such amount may be invested using one or more of the methods of investments or deposits namely,

(a) deposits with any scheduled bank, free from any charge or lien;

(b) unencumbered securities of the Central Government or any State Government. Such investments/ deposits are required to be made on or before the 30 April in each year and must at no time fall below 15% of the value of the debentures maturing on the 31 of March of a particular financial year (Maturing Debentures). Further, such amounts cannot be used for any purpose other than for redemption of the Maturing Debentures. MCA has extended the last date of this deposit and investment compliance to 30 June 2020 in respect of the debentures maturing during the financial year ending on 31 March 2021.

 

10. Spending of CSR funds for COVID-19:

Item no. (viii) of the schedule VII of the companies Act 2013, which enumerates activities that may be undertaken by companies in discharge of their CSR obligations, interalia provides that contribution to any fund set up by the CG for socio-economic development and relief qualifies as CSR expenditure. Accordingly, it is clarified that any contribution made to the PM CARES Fund shall qualify as CSR expenditure under the companies ACT 2013.

• Contribution to CM Relief fund or State Relief fund shall not qualify for CSR exp.

• Contribution to State Disaster Management Authority shall qualify for CSR.

• Spending funds for COVID-19 related activities shall qualify as CSR exp.

• Payment of salary/wages during lockdown period shall not qualify as admissible CSR expenditure.

• Payment of wages made to casual workers during lockdown period shall not count towards CSR expenditure.

• Payment of ex-gratia to temporary/casual workers shall qualify as CSR expenditure as a one time exception provided there is an explicit declaration to that effect by the Board of the company which is duly certified by the Statutory Auditor.

 

11. DIR-3KYC without filing fees:

DIN holders of DINs marked as 'Deactivated' due to non-filing of DIR-3KYC/ DIR-3KYC WEB and those companies whose compliance status has been marked as 'ACTIVE non-compliant' due to non-filing of ACTIVE eform are encouraged to become compliant once again and file DIR-3KYC/ DIR-3KYC WEB /ACTIVE as the case may be between 1st april to 30th September without any filing fee of INR 5000/10000 respectively.


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Category Corporate Law, Other Articles by - CS Rashi Jain 



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