The Ministry of Corporate Affairs (MCA) has announced several relief measures under the Companies Act, 2013 in view of COVID-19 outbreak in the country. These measures are announced for ease of compliance by the companies and LLPs.
Most of these are in the nature of waiver of penalties and extension of timelines to comply with the regulatory requirements.
Here is the summary of the measures.
#1. FILING OF FORMS
a. Filing of forms without additional fees.
A lot of compliance under MCA have to be notified via various forms filed by the companies and LLPs under the applicable Acts.
Relief:
MCA has introduced a moratorium period between April 1, 2020 to September 30, 2020.
MCA has provided a relaxation that no additional fees will be charged for late filing of forms during the moratorium period in respect of any document, return, form, etc., required to be filed with MCA, irrespective of its due date.
b. Schemes by MCA for pending forms and non-compliant entities
MCA has introduced relief schemes for companies and LLPs.
These schemes are valid for period from 1st April, 2020 to 30th September, 2020.
The schemes apply to long standing non-compliant companies and LLPs, who have defaulted in filing forms / returns. All pending filings with MCA during the validity of the scheme will not attract any additional fee or penalty.
The companies can also file Form DIR-3KYC, Form DIR-3KYC-Web and e-Form ACTIVE without any filing fee.
Click here to read more about the Companies Fresh Start Scheme, 2020 applicable to companies.
Click here to read more about the LLP Settlement Scheme, 2020 applicable to LLPs.
These schemes will reduce the financial burden of the companies and LLPs and give them an opportunity to make a fresh start.
#2. BOARD MEETINGS VIA VIDEO CALL, FINALLY
MCA has relaxed requirements under the provisions of the Companies Act, 2013 related to Board Meetings.
Section 118(10) of the Companies Act, 2013 provides for mandatory observance of Secretarial Standards -1 and 2 (SS-1 and SS-2) issued by Institute of Company Secretaries of India (ICSI) by all companies.
The measures issued by MCA have in turn has also relaxed requirements under the SS-1 issued by the ICSI.
Following is the impact:
a. Gap between the meetings:
As required under the section 173 of the Companies Act, 2013, the maximum gap between the two Board Meetings should not be more than 120 days.
Relief:
This requirement has been relaxed and the gap can be now extended by additional 60 days till next two quarters. This means that a gap of 180 days is allowed between two board meetings held till 30 September 30, 2020
b. Participation through video conference (VC) in Board Meetings and committee meetings.
As per the Companies Act, 2013, there is an restriction on discussion of certain items in Board Meetings through VC. Directors cannot participate through VC for discussion on items such as approval of the annual financial statement, Board’s report, prospectus and matters relating to amalgamation, merger, demerger, acquisition and takeover.
Similarly participation in the discussion through VC is not be allowed in meetings of the Audit Committee for consideration of annual financial statement.
Relief:
MCA has relaxed the requirement of holding Board meeting with physical presence of directors for the restricted items till June 30, 2020. MCA has allowed to hold Board Meetings and committee meetings through VC or other audio-visual means.
c. Means of delivery of notice
As per SS-1, where a Director has specified a particular means of delivery of Notice, the Notice will be given to him by such means only.
Relief:
ICSI has issued a guidance that wherever, physical delivery of documents is not possible due to COVID 19 lockdown, the company may choose an expedient mode of delivery in sending Notices, including through e-mail to the concerned directors.
However, the company should ensure adequate safeguards, including delivery and retaining proof receipt of such e-mail communication.
d. Unsigned documents to be initialled by the Chairman or Company Secretary
As per SS-1, during a Board meeting, if any unsigned documents including reports or notes are tabled or presented to Board, which were not part of the Notes on Agenda and are referred to in the Minutes, such documents should be initialled by the Company Secretary or the Chairman.
Relief:
Due to relaxation of holding Board Meeting in physical, the papers for Board Meetings will now be sent via emails. Hence this requirement of initialling the documents by the Chairman or the CS is done away with till normalcy is restored.
e. Signing of Minutes of the Board Meeting
As per SS-1, a copy of the signed Minutes, certified by the Company Secretary or any Director authorised by the Board, should be circulated to all the Directors within 15 days of signing the Minutes.
Relief:
Since the Board Meetings will be held through VC, ICSI has issued a guidance that the company may record and acknowledge/sign the minutes digitally by the chairman.
In case, minutes cannot be signed digitally, the same can be physically signed and copies of the signed minutes may be circulated to all the directors once normalcy is restored.
#3. EXTENSION OF IMPLEMENTATION OF COMPANIES (AUDITOR’S REPORT) ORDERS 2020
Earlier, it was notified by MCA that the Companies (Auditor’s Report) Order, 2020 was applicable from financial year 2019-2020.
Relief:
This has now been relaxed by MCA and the Companies (Auditors Report) Order, 2020 will be applicable from financial year 2020-21.
#4. MEETINGS OF INDEPENDENT DIRECTORS (IDs)
As required under the Schedule IV of Companies Act, 2013, lDs are required to hold at least one meeting in a financial year.
Relief:
As per MCA, even if a single meeting of IDs is not held for the FY 2019-20, the same will not be considered as a violation.
#5. CREATION OF DEPOSIT PAYMENT RESERVE
As per the Companies Act, 2013, Companies have to create the deposit repayment reserve of 20% of deposits maturing during the financial year 2020-21 before 30th April 2020.
Relief:
The due date has now been extended to June 30, 2020.
#6. INVESTMENT OF DEBENTURES AMOUNT
As required under rule 18 of the Companies (Share Capital & Debentures) Rules, 2014, companies should invest or deposit at least 15% of amount of debentures maturing in specified methods of investments or deposits before 30th April 2020.
Relief:
The due date has now been extended to June 30, 2020.
#7. RELAXATION FOR NEW INCORPORATED COMPANIES
All companies incorporated after November 2, 2018 and having share capital, have to file a declaration of commencement of business in Form INC – 20A within 180 days of date of incorporation.
Click here to read more about filing the declaration.
Relief:
MCA has relaxed the requirement and granted more 180 days to file the declaration. In other words, all newly incorporated companies can file the declaration within 360 days from incorporation instead of 180 days.
However MCA has not specified the period of validity of this relaxation.
#8. MINIMUM RESIDENCY PERIOD REQUIREMENT
As required under section 149 of the Companies Act, 2013, every company should have at least one director who stays in India for a total period of not less than 182 days during a financial year.
Relief:
The requirement to be in India by a resident Indian director for at least 182 days under section 149 of the Companies Act, 2013, is relaxed by MCA and non-compliance of the same will not be treated as a violation for the F.Y 2019-2020.
These measures have been notified by MCA to support companies and LLPs and reduce compliance burden.
Companies and LLPs are expected to comply with the applicable acts, rules and regulations in letter and spirit.