We firstly ignore negative news going to effects us. Secondly, we undermine the impact. Third, we start fighting. Humanity since 2017 knew and ignored about 73 corona viruses waiting to affect humanity. It is changing our life and law. I wrote a post on initial restrictions going to impact corporate compliances on 13th March 2020 which I considered now outdated. Here are measures the Ministry of Corporate Affairs announced:
Protecting Corona Default
Even before Corona, there as a justifiable demand to increase the minimum amount of default under Section 4 of the Insolvency and Bankruptcy Code, 2016 from One Lakh Rupees to One Crore Rupees. The Notification S.O. 1205(E) dated 24th March 2020 accepted the demand, however in the name of protecting the MSME sector. Keeping in mind the cost of insolvency resolution in India, this amount to my calculation is justified. I do not hope any reversal of this threshold opposes to my readers’ wishes.
Board Meeting through Video Conferencing
In temporary but welcome measure, Notification G.S.R. 186(E) permit companies to hold their Board Meetings even on the matters referred to in sub-rule 4(1) {Rule 4 till the date of this notification} through video conferencing or other audiovisual means in accordance with rule 3. This permission is valid from 19th March 2020 till 30th June 2020.
Please note, no such permission is granted for the purpose of General Meetings. In the case of companies with a large shareholding base, it is not possible except to do a webcast – mostly a one-way communication.
CARO 2020
The CARO 2020 shall not be applicable with effect from 1st April 2019 but from 1st April 2020.
Other Special Measures
The Government announced several short terms measures for companies and LLPs. The Government issued a General Circular dated 24th March 2020. It seems this general circular is issued for general information. These measures shall require amendment in relevant rules which may be notified soon as the Ministry is also under work from the home mandate.
Fee Moratorium
No additional fee shall be charged for late filing during the period of 1st April 2020 to 30th September 2020 on MCA 21 system. This moratorium shall be applicable to companies as well as LLPs.
If a form is already in the late filing period, file it immediately with the late filing fee. In case the late filing fee meter started on or before 31st March 2020, it will not stop during the said moratorium.
Fresh Start for non-compliant companies and LLPs
The present circular says that a separate circular shall be issued to enable long-standing non-complaint companies and LLPs. As Ministry closed its offices for the Lockdown, this circular may be issued thereafter.
Board Meeting Gap
The gap between two consecutive meetings may now be 180 days till the next two quarters. Accordingly, in case a company have to hold its last board meeting on 15th December 2020, the next board meeting may be held on or before 12th June 2020.
However, Companies must ensure that they had 4 meetings each during financial years 2019-20 and 2020-21. Holding only board meetings in a year still is a non compliance. Please use Video Conferencing or audio Conferencing for board meeting during the lockdown period and keep the record of the meeting.
Relaxation on Independent Directors Meeting
For the financial year 2019 -20, if the Independent Directors of the company have not held the meeting without the attendance of non- independent directors and members of the management, the same shall not be viewed as a violation.
Independent Directors may meet or share views among themselves through telephonic or email communication and may record the same.
Deposit Repayment Reserve
The companies which have deposits maturing during the financial year 2020-21, now may comply with the requirement to create the deposit repayment reserve of 20% of deposits so maturing till 30th June 2020. In normal circumstances, such deposit repayment reserve should be created before 30th April 2020.
Investment or Deposit in relation to Debenture
There is a requirement for companies which have issued Debentures to invest or deposit at least 15% of the amount of debenture during the next financial year. Such investment or deposit may be made till 30th June 2020 in place of 30th April 2020.
Declaration of Commencement of Business
Newly incorporated companies may file a declaration of commencement of business within 360 days from the date of incorporation. The period earlier was 180 days.
Minimum Residence for director
The Companies Act, 2013 require that at last one director of the company shall comply with a minimum residency period of at least 182days in India. In the case of the financial year 2019-20, this requirement is being relaxed.
In my view, this relaxation should be granted for the year 2020-21. For the year 2019-20 reduction of this period to 120 days might have served the purpose.
Aishwarya Mohan Gahrana
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