In view of the prevailing threat due to the Covid-19 outbreak, the Ministry of Corporate Affairs (the "MCA") has taken the following steps to help corporates adapt to the prevailing restrictions issued by the central and state governments.
Relaxation of the norms relating to the meeting of the board of directors (the "Board"). On March 19, 2020, by way of a notification (the "Notification"), the MCA has relaxed the requirement of holding Board meetings with physical presence of directors, in relation to matters specified under Rule 4 of Companies (Meetings of Board and its Powers) Rules, 2014 ("Rules"). The said relaxation is available till June 30, 2020.
Advisory on work from home. On March 20, 2020, the MCA issued a preventive advisory (the "Advisory") to all the companies and the limited liability partnerships (the "LLPs") to implement a "work from home" policy till March 31, 2020. MCA is also in the process of deploying a web-based form named CAR (Company Affirmation of Readiness towards COVID-19) which the companies and the LLPS will be required to be submit.
2. KEY FACTORS LEADING TO THE RELAXATION OF BOARD MEETING NORMS
Section 173(2) of the Companies Act, 2013 (the "Act") allows directors to participate through video conferencing or other audio-visual means in the meetings of the board. The proviso to Section 173(2) of the Act provides that the central government can restrict matters which can be passed in meetings of the board conducted through video conferencing or other audio-visual means. Rule 4 of the said Rules states that following matters cannot be dealt with or approved through video conferencing or other audio-visual means: (i) annual financial statements; (ii) board's report; (iii) prospectus; (iv) audit committee meeting for approval of financial statements; and (v) amalgamation, merger, demerger, acquisition and takeover.
Pursuant to the Notification, the MCA has allowed companies to hold meetings of their Board, for the matters restricted under Rule 4 through video conferencing or other audio-visual means. The said relaxation is currently available till June 30, 2020. All Board meetings conducted through video conferencing or other audio-visual means have to be conducted in accordance with the procedure prescribed under Rule 3 of the said Rules.
3. PREVENTIVE ADVISORY AND REPORTING REQUIREMENTS
Through the Advisory, the MCA has urged companies and the LLPs to implement a "work from home" policy until March 31, 2020. The Advisory also states that the said period for "work from home" can be extended further by the appropriate authorities as per the evolving situation. Further, the companies and the LLPs are also required to strictly adhere to dos and don'ts advised by public health authorities.
In addition to the above, the Advisory states that the MCA will soon come up with a simple web-based form CAR (Company Affirmation of Readiness towards COVID-19) which will have to be filled by the authorized signatory of a company or an LLP. The said CAR form will be available on the MCA portal from March 23, 2020 and it appears that this form will have to be filled by the companies and the LLPs on the same day.
4. INDUSLAW VIEW
With the introduction of web-based form CAR the government is looking for the companies and the LLPs to strengthen and confirm their readiness to deal with Covid-19 threat. Though the Advisory states that the CAR form will be a simple form, the actual contents and requirements of the CAR form will be something to look out for.
The relaxation by the MCA in the conduct of Board meetings will help companies to undertake actions at the Board level without being affected by the restrictions imposed by the relevant governments to minimize social and corporate gathering. The weeks ahead will tell whether the MCA would have to extend this relaxation period beyond June 30, 2020.
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