Mitigation measures for corporates by SEBI and MCA

The COVID-19 epidemic which has affected almost entire world has been declared as 'Pandemic' by theWorld Health Organization (WHO). The effect of Covid-19 is so severe that almost entire world is now facing lockdown and everywhere it is encouraged to stay at home and avoid travelling and social distancing is the only known way to avoid the pandemic known to world as of now.

Even Government of India and local authorities have been continuously initiating measures to contain the pandemic such as the prohibition on large gatherings, the imposition of a ban on travel, closure of certain outlets with large footfalls, asking establishments to have their employees work from home, setting up quarantine facilities etc. Continuing the efforts, Prime Minister Narendra Modi announced 21 days lockdown in entire India with effect from March 24, 2020.

This has clearly resulted in disruption of many business processes. Keeping in view that covid-19 has resulted in many restrictions including travel restrictions and various other logistical challenges thereby hampering businesses and day to day functioning of the Companies, SEBI and MCA has decided to relax the deadlines of certain compliance requirements which will provide a sigh of relief to the corporates amidst the increasing tensions.

Addressing the concern amid coronavirus pandemic, following are some of the initiatives taken and relaxations provided by Ministry of Corporate Affairs (MCA):

1. Requirement to hold physical Board Meeting in respect of the matters laid down in Rule 4(1) of the Companies (Meeting of Board and its powers) Rules, 2014 has been dispensed with till June 30, 2020. MCA vide its notification dated March 19, 2020 amended Rule 4(1) of the Companies (Meeting of Board and its powers) Rules, 2014 to allow companies to hold the Board Meeting on the matters listed in the said rule through video conferencing or other audio visual means in accordance with rule 3 of the said rules.

2. The Companies (Auditor's Report) Order,2020 shall be made applicable from the financial year 2O2O-2O21 instead of being applicable from the financial year2019-2020 notified earlier.

3. Schedule IV of the Companies Act, 2013 mandates for the independent directors to hold atleast one meeting in a financial year without the attendance of non-independent directors and members of management. This requirement has been temporarily omitted thereby allowing the independent directors to share their views and opinions over telephone or through email or any other mode of communication. Hence, For the financial year 2019-20, if the lDs of a company have not been able to hold such a meeting, the same shall not be viewed as a violation.

4. Section149(3) stipulates a minimum residency period in India of 182 days of atleast one director in every company. Non compliance with this provision shall not be treated as non-compliance for the FY 2019-20.

5. Implementation of 'Work from Home' Policy: To encourage social distancing, the MCA has strongly advised all companies and limited liability partnerships (LLP) to immediately implement a work from home policy with respect to their employees until 31 March 2020. Such policies shall be implemented in the headquarters and field offices and meetings may be conducted via electronic methods during this period. Further, the Advisory encourages the implementation of staggered timings for essential staff and compliance with all other measures recommended by the public health authorities.

6. An additional period of 180 days is allowed to the newly incorporated companies for filing Declaration for Commencement of Business under Section 10A of Companies Act, 2013.

7. MCA has once again provided an opportunity to the Directors with deactivated DIN's to file DIR-3KYC/DIR-3KYC-Web on or before September 30, 2020 without any filing fees of INR 5000/-.

8. 'ACTIVE non-compliant' companies can now become 'ACTIVE Compliant' Companies by filing Active Company Tagging Identities and Verification(ACTIVE) e-form with ROC without any filing fees of INR 10,000/-.

9. MCA has clarified that amount spent for various activities related to COVID-19 is eligible for CSR activity under item no. (i) and (xii) of Schedule VII relating to promotion of healthcare including preventive healthcare and sanitation and disaster management. Also, any contribution made to the Prime Minister's Citizen Assistance andRelief in Emergency Situations Fund(PMCARES Fund) shall qualify as CSR expenditure under the Companies Act 2013. The Fund has been set up by the GOI to deal with any kind of emergency or distress situation such as that posed by COVID19 pandemic.

10. Companies Fresh Start Scheme 2020 is announced giving one time opportunity to all the Companies to file the pending forms without additional fees upto September 30, 2020.

11. In addition to the Companies, even LLPs have one time opportunity to file pending forms on or before September 30, 2020 under LLP Settlement Scheme 2020.

The differentiating feature of both the schemes is that no additional fees shall be levied for delayed filing of any document/return etc. with the Registrar of Companies during the moratorium period from April 01, 2020 to September 30, 2020. This will not only reduce the compliance and financial burden of the companies/LLP's during this adversity but will also significantly encourage compliance especially by those companies/LLP's which have long standing defaults thereby enabling them to make a fresh start.

Some of the deadlines eased by SEBI are as follows:

I. Relaxations under SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015.

A. The timelines for the following filings as required under the provisions of the LODR are extended:

B. Relaxation in holding the Board and Committee Meetings

C. Exemption from publishing of advertisements in newspapers:

Regulation 47 of SEBI LODR Regulations mandates the publication of certain information in the newspaper such as notice of meeting of the board of directors where financial results shall be discussed, financial results, statement of deviation(s) or variation(s) etc.

SEBI has been decided to exempt publication of advertisements in newspapers as required under regulation 47 for all events scheduled till May 15, 2020.

II. Relaxations under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011:

SEBI has decided to extend the due date of filing disclosures, in terms of Regulations 30(1), 30(2) and 31(4) of the SAST Regulations also for the financial year ending March 31, 2020 to June 01, 2020. Regulation 30 and 31 requires the shareholders/promoters to disclose within 7 working days from the end of the financial year, the details of their aggregate shareholding and voting rights as on March 31 and details of shares encumbered by him or by PAC's in the target company.

III. Relaxations under SEBI(Depositories and Participants) Regulations, 2018:

The timeline for submission of quarterly Reconciliation of Share Capital Audit Report under Regulation 76 of SEBI (Depositories and Participants) Regulations, 2018 is also extended by SEBI for an equivalent period of lock down declared by Government of India i.e. 21 days over and above the prescribed time limits. Earlier, the same was supposed to be submitted within 30 days for the end of the quarter.

IV. Relaxations for RTAs / Issuer companies:

Considering the lockdown extension and minimal staff strength at RTAs and issuer companies, SEBI has issued another circular for providing an extension of 21 days over and above the prescribed time limits to Registrars to the Issue and Share Transfer Agents / Issuer Companies for making compliance and disclosures under various SEBI Regulations and circulars and for processing investor requests pertaining to physical securities.

V. Regulations for which no relaxation are granted but due date is falling within on or before June 30, 2020

1. Timeline with respect to intimation for closure of trading window is not extended andthe due date for trading window closure intimation remains the same i.e. April 01, 2020.

The trading window is closed at the end of every quarter to prohibit all Designated Persons and their Immediate Relatives from dealing in securities of the Company which ends48 hours after the declaration of audited/unaudited financial results of the Company for the relevant quarter. However, seeing the covid-19 crisis and ongoing lockdown and in order to prevent the misuse of price sensitive information by insiders, promoters and management, SEBI has prohibited promoters and insiders from trading till June 30, 2020.

2. No relaxation has been provided in the timeline for the disclosure of related party transactions on a consolidated basis under Regulation 23(9) of SEBI LODR Regulations, 2015. Listed entities shall submit the same within 30 days from the date of publication of itsstandalone and consolidated financial results for the half year ended March 31, 2020.

The world is fighting the pandemic which is having impact like never before and these smaller but significant relaxations from regulatory is clearly the first step towards the fighting the pandemic.