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, relaxations have been granted from certain regulatory compliances under the Companies Act, 2013 ("Companies Act"), Securities and Exchange Board of India ("SEBI") regulations and the Insolvency and Bankruptcy Code, 2016 ("IBC"). This update summarises some of the key relaxations and measures which have been introduced.

CSR Funds can be used for COVID-19

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.

In light of the developing COVID-19 situation, MCA has issued a circular on March 23, 2020 stating that spending of CSR funds for COVID-19 shall be an eligible CSR activity. Funds may be spent for various activities related to COVID-19 relating to promotion of healthcare, including preventive healthcare and sanitation, and disaster management.

Directors not required to be physically present at Board Meetings

As per rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014 the following matters cannot be dealt with in any meeting held through video conferencing or other audio-visual means:

  1. approval of annual financial statements
  2. approval of the Board's report
  3. approval of the prospectus
  4. audit committee meetings for consideration of financial statements; and
  5. approvals relating to amalgamations, merger, demerger, acquisition and takeover.

On March 19, 2020, MCA amended the above rules, as per which, from the date of the commencement of the Companies (Meetings of Board and its Powers) Amendment Rules, 2020 till June 30, 2020, meetings on the above-mentioned matters may also be held through video-conferencing or other audio visual means.

MCA advisory to all companies/LLPs on 'work from home'

The Secretary, MCA has issued an "Advisory on Preventive measures to contain the spread of COVID19" available on the website of the MCA ("Advisory"), stating that all companies/limited liability partnerships are expected and 'strongly advised' to put in place an immediate plan to implement the 'work from home' policy (described below) as a temporary measure till March 31, 2020 after which the position will be reviewed by appropriate authorities.

'Work from Home': As per the above Advisory, the 'work from home' policy includes the following:

  1. implementation of work from home in the headquarters and field offices to the maximum extent possible, including by conduct of meetings, though video conference or other electronic/ telephonic/computerized means;
  2. even if essential staff is on duty, staggered timings may be followed with a view to minimize physical interaction; and
  3. 'Dos and Don'ts' advised by public health authorities are to be strictly followed.

Form CAR to be filed for confirming compliance with COVID-19 measures

In the Advisory it is stated that MCA is in the process of developing and deploying a simple web form for companies/LLPs to confirm their readiness to deal with the COVID-19 threat. A web form named CAR (Company Affirmation of Readiness towards COVID-19) would be required to be filled by an authorised signatory of companies and LLPs. CAR-2020 would be deployed on March 23, 2020. All companies/LLPs have been requested to report compliance using the above mentioned web service "on the 23rd instant".

MCA has also advised the following:

"Stakeholders may please note that there is no fee applicable for FORM CAR (Companies Affirmation of Readiness Towards COVID-19). SHs may also please note that the form has been deployed as a purely confidence building measure to assess the readiness of the companies to deal with COVID-19 Threat in India. As such no penalty or enforcement related action is applicable. Stakeholders may at their convenience file this form. It is purely voluntary as part of our contribution towards joining the movement to fight against the spread of the disease. Since the portal may experience heavy load, it would indicate 'Busy' alert whenever peak traffic is reached."

Extension of timeline for filing declaration of commencement of business

Under section 10A(1)(a) of the Companies Act, any company incorporated after the commencement of the Companies Amendment Ordinance, 2019 is prohibited from commencing its business or exercising borrowing powers unless a declaration is filed with the Registrar of Companies by a director of the company within a period of 180 (one hundred eighty) days of the date of incorporation of the company. It has been announced that an additional time of 6 (six) months will be granted to newly incorporated companies to file the declaration under section 10A(1)(a) of Companies Act.

MCA 21 Registry: No late fee

During the period between April 1, 2020 to September 30, 2020, no additional fees will be charged for late filing in respect of any document, return, statement etc. required to be filed in the MCA 21 Registry irrespective of its due date.

Relaxation from requirement of conducting Board Meetings every quarter

As per section 173(1) of the Companies Act, every company is required to hold a minimum number of 4 (four) meetings of its directors every year in such a manner that not more than 120 (one hundred twenty) days shall intervene between 2 (two) consecutive meetings of the board. The prescribed interval of 120 (one hundred twenty) days) has been extended by a period of 60 (sixty) days till the next 2 (two) quarters i.e. September 30, 2020.

Minimum residency requirement done away with

Under section 149(3) of the Companies Act, every company is required to have at least 1 (one) director who stays in India for a period of not less than 182 (one hundred eighty two days) during the financial year. Non-compliance with the above minimum residency requirement of 182 days (one hundred eighty two) days, will not be treated as a violation of the Companies Act.

Applicability of Companies (Auditor's Report) Order, 2020 deferred

The Companies (Auditor's Report) Order, 2020 will be applicable from financial year 2020-2021, instead of financial year 2019-2020, as notified earlier.

Exclusive meeting of independent directors not required

Schedule IV (Code for Independent Directors) of the Companies Act provides that the independent directors of a company must hold at least 1 (one) meeting in a financial year, without the attendance of non-independent directors and members of management. In financial year 2019-2020, if the independent directors of a company have not held even 1 (one) meeting without the attendance of non-independent directors and members of management, the same will not treated as a violation of the Companies Act.

Extension of deadline to deposit the stipulated amount in the deposit repayment reserve account

The requirement under section 73(2)(c) of the Companies Act and rule 13 of the Companies (Acceptance of Deposits) Rules, 2014 to deposit an amount equivalent to 20% (twenty percent) of the deposits of a company maturing during financial year 2020-2021 in the deposit repayment reserve account before April 30, 2020 may now be complied with till June 30, 2020.

Extension of deadline to invest/ deposit 15% (fifteen percent) of maturing debentures

The requirement under rule 15 of the Companies (Share Capital and Debenture) Rules, 2014 to invest or deposit 15% (fifteen percent) of the amount of debentures of a company maturing during a particular year in specified instruments before April 30, 2020 may now be complied with till June 30, 2020.

Listed Companies - Extension of timeline for filings by listed companies

On March 19, 2020, SEBI issued a circular ("Circular") granting relaxations in the timelines in respect of the below-mentioned requirements under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("LODR").

  1. Under regulation 7(3) of the LODR, a listed entity is required to submit a certificate relating to compliance with requirements pertaining to share transfer facility within 1 (one) month of the end of each half of the financial year. For the financial year ending March 31, 2020, the period for compliance with this requirement has been extended to May 31, 2020.
  2. Under regulation 13(3) of the LODR, a listed entity is required to file a statement of investor complaints within 21 (twenty one) days from the end of each quarter. For the quarter ending March 31, 2020, the period for compliance with this requirement has been extended to May 15, 2020.
  3. Under regulation 24A of the LODR read with circular No CIR/CFD/CMD1/27/2019 dated February 8, 2019, a listed entity is required to comply with the requirement of filing the secretarial compliance report within 60 (sixty) days from the end of the financial year. For the financial year ending March 31, 2020, the period for compliance with this requirement has been extended to June 30, 2020.
  4. Under regulation 27(2) of the LODR, a listed entity is required to submit the corporate governance report within 15 (fifteen) days from the end of the quarter. For the quarter ending March 31, 2020, the period for compliance with this requirement has been extended to May 15, 2020.
  5. Under regulation 31 of the LODR, a listed entity is required to submit its shareholding pattern within 21 (twenty one) days from the end of the quarter. For the quarter ending March 31, 2020, the period for compliance with this requirement has been extended to May 15, 2020.
  6. Under regulation 33 of the LODR, a listed entity is required to submit financial results: (i) within 45 (forty five) days from the end of the quarter for quarterly results; and (ii) within 60 (sixty) days from the end of the financial year for annual financial results. For the quarter/ financial year ending March 31, 2020, the period for compliance with the above requirements has been extended to June 30, 2020.

Listed Companies - Relaxation of time gap between two board / audit committee meetings

Under regulations 17(2) and 18(2)(a) of the LODR, the board of directors and audit committee respectively, are required to meet at least 4 (four) times a year with a maximum time gap of 120 (one hundred twenty) days between any 2 (two) meetings. As per the Circular, the board of directors and audit committee of a listed entity are exempted from observing the maximum stipulated time gap between 2 (two) meetings for the meetings held or proposed to be held between the period of December 1, 2019 and June 30, 2020. However, the board of directors/ audit committee are required to ensure that they meet at least 4 (four) times a year, as stipulated under regulations 17(2) and 18(2)(a) of the LODR.

Threshold for triggering CIRP enhanced

The current threshold of Rs. 1,00,000 (Rupees one lac) to trigger insolvency proceedings under Chapter I (Insolvency Resolution and Liquidation for Corporate Persons) of the IBC has been revised to Rs. 1,00,00,000 (Rupees one crore).

Likelihood of suspension of s. 7, 8, 9 and 10 of IBC for Micro, Small and Medium Enterprises (MSMEs)

It has been announced that sections 7 (initiation of corporate insolvency resolution process by financial creditor), 8 (insolvency resolution by operational creditor), 9 (application for initiation of corporate insolvency resolution process by operational creditor) and 10 (initiation of corporate insolvency resolution process by corporate applicant) of the IBC, for MSMEs, might be suspended for a period of 6 (six) months, depending on the situation.

Relaxations for listed entities which have listed their non-convertible debentures (NCDs), non-convertible redeemable preference shares (NCRPS), municipal debt securities (MDS) and commercial papers (CPs)

Pursuant to a circular dated March 23, 2020 ("March 23 Circular"), SEBI has granted the following relaxations to listed companies which have their NCDs, NCRPS, MDS and CPs listed.

A. Extension of timeline for issuance and filings for issuers who have listed /propose to list their NCDs, NCRPS or CPs

Currently, companies proposing to make public issue of debt securities are required to give the audited financials in the offer document, which are not older than 6 (six) months from the date of prospectus. Pursuant to the March 23 Circular, compliant listed entities are allowed to disclose unaudited financials with limited review report, instead of audited financials, for the stub period.

Similarly, for issuers, which intend to list their CPs, have to submit their latest audited financials which should not be older than 6 (six) months. Pursuant to the March 23 Circular, such issuers have now been allowed to file unaudited financials with limited review for the stub period in the current financial year.

In order to enable issuers who intend/propose to list their NCD/NCRPS/CPs, following relaxations in timelines have been granted:

Particulars Available audited financials Date for issuance Extended date for issuance Period of relaxation
Cut-off date for issuance of NCDs/ NCRPS/ CPs As on September 30, 2019 On or before March 31, 2020 On or before May 31, 2020 60 days


B. Extension of timeline for filing

The timelines for certain filings as required under the provisions of the LODR and circulars specified below, have been extended, as follows:

S.N. Regulation and Associated Filing

Filing Relaxation w.r.t. the half year/ financial year ending March 31, 2020
Frequency Due within Due date Extended date Period of relaxation
1. Large corporate-initial disclosure and annual disclosure (SEBI Circular HO/DDHS/CIR/P/2018/144 dated November 26, 2018) yearly initial disclosure within 30 days from the beginning of financial year April 30, 2020 June 30, 2020 60 days
annual disclosure -within 45 days from the end of financial year May 15, 2020 June 30, 2020 45 days
Non-Convertible Debentures (NCDs) / Non-Convertible Redeemable Preference Shares (NCRPS)
2. Regulation 52(1) and (2) relating to financial results half yearly/ yearly 45 days from the end of the half year May 15, 2020 June 30 2020 45 days
60 days from the end of financial year for annual financial results May 30, 2020 June 30, 2020 30 days
3. Common obligations prescribed under Chapter III of LODR Timelines as prescribed in SEBI Circular no. SEBI/HO/CD/CMD1/ CIR/P/2020/38 dated March 19, 2020
Commercial Papers (CPs)
4. Financial results half yearly/ yearly 45 days from the end of the half year May 15, 2020 June 30, 2020 45 days
60 days from the end of financial year for annual financial results May 30, 2020 June 30, 2020 30 days


C. Extension of timeline for filings prescribed for issuers of municipal debt securities

The timelines for certain filings as required under the provisions of the SEBI (Issue and Listing of Debt Securities by Municipalities) Regulations, 2015 ("ILDM Regulations") and SEBI circular nos. CIR/IMD/DF1/60/2017 dated June 19, 2017 and SEBI/HO/DDHS/CIR/P/134/2019 dated November 13, 2019 have been extended, as follows:

S.N. Regulation and Associated Filing Filing Relaxation w.r.t. the half year/ financial year ending March 31, 2020
Frequency Due within Due date Extended date Period of relaxation
1. Investor Grievance Report as per municipal bond half yearly within 30 working days from end of half year June 30, 2020 45 days
2. Financial results half yearly 60 days from the end of financial year for annual financial results May 30, 2020 June 30, 2020 30 days
3. Accounts maintained by issuers under ILDM Regulations quarterly 45 days from end of quarter May 15, 2020 June 30, 2020 45 days


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