Introduction

The Novel Coronavirus (COVID-19) has been declared a pandemic by the World Health Organization and has affected numerous countries, including India. In response to the developing COVID-19 situation, the Ministry of Corporate Affairs ("MCA") and other regulatory authorities have granted several relaxations from regulatory compliances for the corporate sector. In our previous updates dated March 20, 2020, March 24, 2020, and April 6, 2020, we had summarised some of the key relaxations and measures which have been introduced by the MCA, Securities and Exchange Board of India ("SEBI"), Reserve Bank of India ("RBI") and other courts/tribunal across the country1. The earlier updates can be found here:

  1. Volume 1: http://www.argus-p.com/papers-publications/thought-paper/covid-19-relaxations-from-certain-regulatory-compliances-for-corporates-and-other-measures/;
  2. Volume 2: http://www.argus-p.com/papers-publications/thought-paper/covid-19-update-csr-funds-can-be-used-for-covid-19/;
  3. Volume 3: http://www.argus-p.com/papers-publications/thought-paper/covid-19-latest-relaxations-from-provisions-of-the-companies-act-2013-and-the-ibc/#_ftn1; and
  4. Volume 4: http://www.argus-p.com/papers-publications/thought-paper/covid-19-relaxations-announced-by-rbi/.

In this update, we have summarized the latest announcements, notifications and circulars that have been issued by MCA, SEBI, Competition Commission of India ("CCI") as well as certain important notifications by courts/tribunals, granting various relaxations under the Companies Act, 2013 ("Companies Act"), Competition Act, 2002 ("Competition Act"), Limited Liability Partnership Act, 2008 ("LLP Act"), and certain SEBI regulations.

Contribution to PM Cares Fund to qualify as CSR expenditure

The Government of India has set up the Prime Minister's Citizen Assistance and Relief in Emergency Situations Fund ("PM Cares Fund"). The primary objective of the PM Cares Fund is to deal with any kind of emergency or distress situation, including that posed by the COVID-19 pandemic.

Under the Companies Act, the board of every company having a net worth of Rs. 500 crore or more, or turnover of Rs. 1000 crore or more, or a net profit of Rs. 5 crore or more during any financial year, is required to ensure that the company spends, in every financial year, at least 2% (two percent) of the average net profits of the company made during the 3 (three) immediately preceding financial years, in pursuance of its corporate social responsibility ("CSR") policy. Only the projects or programs relating to activities, areas or subjects specified in schedule VII to the Companies Act qualify as CSR activities.

Item no. (viii) of the schedule VII of the Companies Act, inter alia, provides that contribution to any fund set up by the Central Government for socio-economic development and relief qualifies as CSR expenditure. In lieu of the same, MCA issued an office memorandum dated March 28, 2020 clarifying that since the PM Cares Fund has been set up to provide relief to those affected by any kind of emergency or distress situation, any contribution made to the PM Cares Fund will qualify as CSR expenditure under the Companies Act.

NCLT benches to remain closed till April 14, 2020

In view of the lockdown announced by several State Governments and Central Government, on March 22, 2020, the Registrar, National Company Law Tribunal ("NCLT") issued a notice ("Notice") stating that all benches would remain closed from March 23, 2020 to March 31, 2020 for the purpose of judicial work. In respect of unavoidable urgent matters, the Notice provides as follows:

"work, as to unavoidable urgent matters, on application by the aggrieved, through email to the registry NCLT Chennai after service of notice to the other side, Hon'ble Acting President sitting singly at Chennai will examine and pass necessary orders on Wednesday and Friday".

It was also stated that:

"The Parties/Counsels would not be provided making oral submissions and the NCLT discourages persons to arriving to NCLT Chennai. Application shall be verified by the respective counsel through affidavit by mentioning their bar enrollment number, above process should not be abused. The application/communication shall be sent to Registrar NCLT Chennai email from email of respective counsel."

It was also stated that matters under the Insolvency and Bankruptcy Code, 2016 regarding extension of time, approval of resolution plan and liquidation would not be construed as urgent matters, and would be taken up as soon as regular benches start functioning, and until such time, such applications must not be filed.

On March 28, 2020, the directions given in the Notice were extended to April 14, 2020. On March 30, 2020, another notice was issued by the Registrar, NCLT clarifying that the matters which were to be listed from March 23, 2020 to April 14, 2020 will now be listed from April 15, 2020 onwards before the respective NCLT benches.

Limitation period for filing in all courts/tribunals extended

On March 23, 2020 the Honourable Supreme Court in a suo motu writ petition (Civil) No. 03/2020 ordered that the period of limitation in all proceedings (irrespective of the limitation prescribed under general law or special laws whether condonable or not), will stand extended w.e.f. March 15, 2020, till further orders are passed by the Supreme Court. The same was accepted and recognised by National Company Law Appellate Tribunal and NCLT vide their notices dated March 24, 2020 respectively.

NCLT recommends filing of joint memo of written submissions in hearings conducted by video conferencing

On April 7, 2020, the Registrar, NCLT issued a notice, whereby, with respect to urgent hearings being conducted by NCLT during the lockdown by means of video conferencing, it made "an appeal to the users of NCLT under Companies Act 2013 and Insolvency and Bankruptcy Code 2016, to cooperate with NCLT by filing JOINT MEMO OF WRITTEN SUBMISSIONS as stated below:"

  1. As a first step towards the preparation of the joint memo of written submissions, the applicant is required to brief facts (mention the supporting material papers while narrating facts) in 5 (five) to 10 (ten) lines and the reliefs thereto and serve the same upon the opposite party along with its application.
  2. The opposite party, in turn, is required to brief its defence (mention the supporting material papers while narrating facts) in 5 (five) to 10 (ten) lines and serve the same upon the applicants within 24 (twenty four) to 48 (forty eight) hours.
  3. Upon exchange of brief facts, both the parties are required to jointly draft the points for determination by NCLT.
  4. Based on the points for determination, both the parties are required to separately set out reasons supporting their respective stands in 2 (two) to 3 (three) lines on each of the points for determination. The applicants are first required to set out their reasons in bullet points, and subsequently, the opposite party is required to set out its reasons in bullet points.
  5. Relevant or material papers for determination of the points from either side (if any), are required to be annexed to the joint memo of written submissions. The joint memo of written submissions is required to capsule the steps specified hereinabove in 2 (two) to 3 (three) pages.
  6. The joint memo of written submission prepared in accordance with the steps specified above, is required to be signed by both parties and counsel and filed with the NCLT 1 (one) day or at the least, 6 (six) hours prior to the hearing.
  7. If the opposite party does not appear even after service is affected upon him/her/them, the applicant is required to place brief facts, reliefs, relevant material papers and reasons for seeking reliefs in the form of the joint memo of written submissions before the NCLT, (one) day or 6 (six) hours prior to the hearing.
  8. It may be noted that in the event the situation demands grant of ad-interim relief by NCLT even before filing of the joint memo of written submissions, non-filing of the joint memo of written submissions will not prohibit NCLT from granting such relief.
  9. It is anticipated that the procedure specified above will avoid delays, avoid filing replies and rejoinders and further, the joint memo of written submissions will be user friendly, and will enable NCLT to arrive at decisions quickly.

Introduction of "Companies Fresh Start Scheme, 2020"

The Companies Act requires all companies to make annual statutory compliance by filing annual returns and financial statements. Apart from these, various other statements, documents, returns, etc. are required to be filed on the MCA-21 electronic registry within prescribed time limits.

The MCA has introduced a new scheme, i.e. "Companies Fresh Start Scheme, 2020" ("CFSS") vide general circular no. 12/2020, dated March 30, 2020, to condone delay in filing the aforementioned documents with the registrar of companies, insofar as it relates to charging of additional fees, and granting of immunity from launching of prosecution or proceedings for imposing penalty on account of delay associated with certain filings.

Only normal fees will be payable for filing of documents in the MCA-21 registry in such cases during the currency of CFSS as per the provisions of section 403 read with Companies (Registration Offices and Fee) Rules, 2014 ("Fee Rules") and section 460 of the Companies Act. CFSS also gives an opportunity to inactive companies to get their companies declared as 'dormant company' under section 455 of the Companies Act by filing a simple application at a normal fee. This provision enables inactive companies to remain on the register of the companies with minimal compliance requirements. The key provisions of CFSS include:

  1. CFSS will come into force on April 1, 2020 and will remain in force till September 30, 2020.
  2. CFSS is applicable to any 'defaulting company', as defined under Companies Act, which has made a default in filing of any of the documents, statement, returns, etc. including annual statutory documents on the MCA-21 registry ("Defaulting Company").
  3. Every Defaulting Company is required to pay normal fees as prescribed under the Fee Rules, on the date of filing of each belated document and no additional fee will be payable. Additionally, immunity from the launch of prosecution or proceedings for imposing penalty pertaining to any delay associated with the filings of belated documents will be provided. It is also clarified that any other consequential proceedings, including any proceedings involving interests of any shareholder or any other person qua the company or its directors or key managerial personnel will not be covered by such immunity.
  4. An application for seeking immunity in respect of belated documents filed under CFSS can be made electronically in form CFSS-2020, after closure of CFSS and after the documents are taken on file, or on record or approved by the respective registrar of companies having jurisdiction over the registered office of the company ("Designated Authority"), but the same cannot be made after the expiry of 6 (six) months from the date of closure of CFSS. Additionally, there will be no fee payable on this form. However, the CFSS states that this immunity will not be applicable in the matter of any appeal that is pending before the court of law or tribunal, and in case of management disputes of the company pending before any court of law or tribunal. Additionally, no immunity will be provided in case any court has ordered conviction in any matter and no appeal has been preferred against such order. The form CFSS-2020, basis which an immunity certificate in respect of documents filed under CFSS will be issued, is available at: http://www.mca.gov.in/Ministry/pdf/Circular12_30032020.pdf as an annexure to CFSS.
  5. Before filing an application for issue of immunity certificate under the CFSS, the applicant is required to withdraw any appeal filed against any notice issued or complaint filed or an order passed by a court or by an adjudicating authority, with respect to any statutory filing under the Companies Act, 1956 and/or the Companies Act. The applicant is also required to furnish proof of such withdrawal along with the application.
  6. After granting the immunity, the Designated Authority is required to withdraw the prosecution(s) pending, if any, and the proceedings of adjudication of penalties under section 454 of the Companies Act, other than those where a court has ordered conviction in a matter and no appeal has been preferred against such order. In respect of defaults against which immunity has been so granted will be deemed to have been completed without any further action on the part of the Designated Authority.
  7. A special measure has been introduced for all cases where due to delay associated in filing of any document in the MCA-21 registry, penalties were imposed by an adjudicating officer, but no appeal has been preferred by the concerned company before the regional director under section 454(6) of the Companies Act as on the date of the commencement of CFSS. In such cases, the following applies:
    1. where the last date for filing the appeal against the order of the adjudicating authority under section 454(6) of the Companies Act falls between March 1, 2020 to May 31, 2020 (both days included), a period of 120 (one hundred twenty) additional days will be allowed with effect from such last date to all companies and their officers for filing the appeal; and
    2. during such additional period, as provided above in (i), prosecution under section 454(8) of the Companies Act for non-compliance of the order of the adjudicating authority, insofar as it relates to delay associated in filing of any document in the MCA-21 registry, will not be initiated against such company/officers.
  8. The CFSS is not applicable to the following:
    1. to companies against which action for final notice for striking off the name under section 248 of the Companies Act has already been initiated;
    2. where an application has already been filed by the companies for action of striking off the name of the company from the register of companies;
    3. to companies which have amalgamated under a scheme of arrangement or compromise under the Companies Act;
    4. where applications have already been filed for obtaining dormant status under section 455 of the Companies Act before the CFSS;
    5. to vanishing companies; and
    6. where an increase in authorised capital is involved (form SH-7) and also charge related documents (CHG-1, CHG-4, CHG-8 and CHG-9).
  9. The CFSS permits defaulting inactive companies filing documents under CFSS to simultaneously apply to get themselves declared as dormant company under section 455 of the Companies Act by filing e-form MSC-1 or apply for striking off the name of the company by filing e-form STK-2.
  10. At the conclusion of CFSS, the Designated Authority is required to take necessary action against companies who have not availed the CFSS and are in default in filing these documents in a timely manner.

Modifications to the "LLP Settlement Scheme, 2020"

In continuation to General Circular No. 06/2020 ("LLP Circular") vide which the LLP Settlement Scheme 2020 ("LLP Scheme") was introduced for providing a one-time relaxation in additional fees to the defaulting limited liability partnerships ("LLPs") to make good their default by filing pending documents, the MCA has issued a General Circular No. 13/2020, to support and enable LLPs to reduce their compliance burden in light of COVID-19, by introducing some modifications to the said LLP Circular. These modifications include:

  1. As per the LLP Circular, the LLP Scheme was intended to remain in force till June 13, 2020. However, paragraph 8 of the LLP Scheme has been amended, and June 13, 2020 has been replaced with March 30, 2020;
  2. With effect from April 1, 2020, a new paragraph, i.e. paragraph 8A has been inserted to modify the LLP Scheme, and inter alia provides that the LLP Scheme will come into force on April 1, 2020 and remain in force till September 30, 2020. It also provides that the defaulting LLP is permitted to file belated documents which were due for filing till August 31, 2020. The defaulting LLPs can avail the LLP Scheme for filing documents which have not been filed or registered in time without any levy of additional fees, and only the fee payable for filing such documents needs to be paid. It also provides that the defaulting LLPs which have filed their belated documents till September 30, 2020 and made good the default, will not be subjected to prosecution by the registrar for such defaults. Lastly, the LLP Scheme will not apply to LLPs which have made applications to the registrar for striking off their name from the register as per provisions of rule 37(1) of the Limited Liability Partnership Rules, 2009.
  3. The LLP Scheme has also been modified to say that after September 30, 2020, the registrar will take necessary action under the LLP Act against LLPs which have not availed the LLP Scheme and are in default of the provisions of LLP Act regarding filing of documents in a timely manner.

To read this article in full, please click here.

Footnote

1. The updates do not deal with the administrative and public measures/ prohibitions (such as closure of shops and establishments, restrictions on travel etc) announced by the Government.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.