The Government of India (GOI), in order to control the spread of COVID-19, has announced complete lockdown in entire nation since March 24, 2020. Mostly Companies has provided ‘Work from Home’ facility. But due to difficulties faced in co-ordination and lack of office facilities, timely statutory compliance has been hindered. Keeping in mind current situation, various relaxations are introduced by the Ministry of Corporate Affairs (MCA) during COVID-19 pandemic aimed to ease statutory compliance for companies doing business in India. Below are some of the major relaxations introduced by the Ministry of Corporate Affairs (MCA)
1. Relaxation in Conducting Board Meeting:
MCA has inserted a new sub-rule under Rule 4 of the Companies (Meetings of Board and its Powers) Rule, 2014 for providing relaxation in holding board meetings with physical presence of directors under Section 173 (2) for approval of the annual financial statements, board’s report, etc. Consequently, such meetings may be held through video conferencing or other audio-visual means from March 19, 2020 until June 30, 2020.
2. Contribution to the PM-CARES Fund to be treated as CSR activity
MCA, vide general circular 10/2020 dated March 23, 2020 has clarified that the spending of CSR funds for COVID-19 and making contributions to the PM-CARES Fund is an eligible CSR activity. The fund may be spent for various activities related to COVID-19 under item nos. (i) and (xii) of Schedule VII of the Act, relating to promotion of health care, including preventive health care and sanitation, and disaster management.
3. MCA vide general circular dated March 24, 2020 released several relaxations and reduce the compliance burden on the corporate as mentioned below:
i) No additional fees shall be charged for late filing during a moratorium period from 01st April to 30th September 2020, in respect of any document, return, statement etc., required to be filed in the MCA-21 Registry, irrespective of its due date, which will not only reduce the compliance burden but also enable long-standing non-compliant companies/LLPs to make a ‘fresh start’;
ii) The mandatory requirement of holding Board meetings of the companies within prescribed interval u/s 173 of the Act, has been extended by a period of 60 days till next two quarters i.e., till 30th September, 2020;
iii) Applicability of Companies (Auditor’s Report) Order, 2020 shall be made applicable from the financial year 2020-2021 instead of from 2019-2020 notified earlier. This will significantly ease the burden on companies & their auditors for the year 2019-20.
iv) As per Schedule 4 to the Companies Act, 2013, Independent Directors are required to hold at least one meeting without the attendance of non-independent directors and members of management. For the year 2019-20, if Independent Directors fails to attend such meeting, the same shall not be viewed as a violation under the Act.
v) The requirement of transferring atleast 20% of the deposit amount which is due for maturity during the financial year 2020-21 into deposit repayment reserve account, has been extended from by 60 days i.e. from 30th April, 2020 to 30th June, 2020.
vi) The requirement to invest 15% of debentures maturing during a particular year in specified instruments before 30th April, 2020, has been extended upto 30th June, 2020.
vii) Newly incorporated companies are required to file a declaration for Commencement of Business within 6 months of incorporation. An additional time of 6 more months has been granted.
viii) Non-compliance of minimum residency in India for a period of at least 182 days by at least one director of every company, u/s 149 of the Companies Act, shall not be treated as a violation.
4. Introduction of Companies Fresh Start Scheme 2020
MCA vide General Circular no. 12 /2020 dated 30th March 2020 has introduced the Companies Fresh Start Scheme 2020 to provide a one-time waiver of additional filing fees to defaulting companies to make good any filing related defaults, irrespective of duration of default as stipulated under section 403 of the Act, and make a fresh start as a fully compliant entity with the MCA during the period starting from April 1, 2020 and ending on September 30, 2020.
5. The MCA in the General Circular No. 17/2020 dated 13th April 2020, has issued following clarification regarding:
i) Manner and mode of issue of notices to members before convening the general meeting; Requirement for voting by show of hands;
ii) Passing of certain items only through postal ballot without convening a general meeting; and Sending of e-mails by members, where a poll on any item is required for companies.
6. Holding of AGMs by companies whose financial year has ended on 31st December 2019
MCA has clarified vide its General Circular No. 18/2020 dated 21st April 2020 that if the companies whose financial year (other than first financial year) has ended on 31st December 2019, hold their AGM for such financial year within a period of nine months from the closure of the financial year (i.e. on or before 30th September 2020), the same shall not be considered as a violation.
7. Extension for Names Reserved and Resubmission of Forms
In view of the situation arising due to COVID-19 pandemic and extended lockdown period, the MCA on April 22, 2020 has provided extension for names reserved and re-submission of forms expiring between 15th March 2020 to 3rd May 2020 by at least 15 to 20 days.
8. Relaxation in filing fees of FORMS DIR-3KYC, DIR-3KYC-WEB and ACTIVE
i) Companies that are tagged as “ACTIVE- Non Complaint” due to default in filing form INC-22A can file the form without any penalty which was earlier Rs 10,000 and gain the status of “ACTIVE- Compliant.
ii) Directors whose DIN are deactivated due to non-filing of DIR-3 KYC/ DIR-3 KYC WEB can regain their status by filing the respective KYC form without any penalty which was earlier Rs. 5000.
9. Work from Home Policy
The MCA further advised the companies and LLPs to implement “Work from Home” policy and introduced a voluntary FORM CAR (Companies Affirmation of Readiness Towards COVID-19) to access the Companies’ compliance with COVID-19 related measures. Relaxations granted above will enable companies to avoid penalties on account of unavoidable delay in meeting their regulatory compliance.