8May
MCA relaxations under the Companies Act, 2013: COVID-19 Impact

Due to outbreak of unprecedented novel coronavirus (COVID – 19) throughout the world including India, lockdowns and unexpected restrictions have been imposed on the public as well on the corporate sector. Companies are likely to face many problems in the timely compliances of various applicable laws. Taking into account the hardships being faced by the companies, Government of India has temporarily relaxed a number of compliances by the companies. Some of the major relaxations given by the Ministry of Corporate Affairs (MCA) under the Companies Act, 2013 are outlined below.

MCA vide its notification dated 19th March, 2020 has dispensed with the need to conduct physical board meetings till 30th June, 2020 in relation to matters which are otherwise matters not permitted to be dealt with through video conferencing or other audio visual means under the Companies Act, 2013 and the rules thereunder, including the approval of the annual financial statements, Board’s report, Prospectus, Audit Committee Meetings for consideration of Financial Statement and approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover. Consequently, such meetings may be held through video conferencing or other audio-visual means from 19th March, 2020 until 30th June, 2020.

Additionally, the MCA released a circular on 24th March, 2020 vide which the following important relief measures under the Companies Act. 2013 have been provided for supporting the functioning of companies to address the disruptions caused by spread of COVID-19.

  1. No additional fees shall be charged for late filing during a moratorium period from 1st April, 2020 to 30th September, 2020, in respect of any document, return, statement etc., required to be filed in MCA-21 registry, irrespective of its due date.
  2. The prescribed interval period for holding meetings of the board under Section 173 of the Companies Act, 2013 has been extended by a period of 60 days, i.e. from the existing 120 days to 180 days until next two quarters, i.e. till 30th September 2020. Therefore, the gap between two consecutive meeting of the board may extend up to 180 days (instead of 120 days) till the next two quarters.
  3. Companies (Auditor’s Report) Order, 2020 shall be made applicable from the financial year 2020-21 instead of being applicable from the financial year 2019-20 as notified earlier.
  4. If the independent directors of a company have not been able to hold at least one meeting without the attendance of non-independent directors and members of management in the year 2019-20, as required under Schedule IV to the Companies Act, 2013, the same shall not be viewed as a violation under the Act.
  5. Requirement under Section 73(2)(c) of the Act to create the deposit repayment reserve of 20% of deposits maturing during the financial year 2020-21 before 30th April 2020 shall be allowed to be complied with till 30th June 2020.
  6. The date for complying with the requirement to invest or deposit at least 15% of the amount of debentures maturing during a particular year as per Rule 18 of the Companies (Share Capital and Debentures) Rules, 2014 has been extended up to 30th June, 2020 instead of 30th April, 2020.
  7. Additional time of 180 days has been granted to newly incorporated companies to file a declaration for commencement of business, in addition to the existing period of 180 days.
  8. Non-compliance of minimum residency in India for a period of at least 182 days by at least one director of every company, under Section 149 of the Act, shall not be treated as a non-compliance for the financial year 2019-20.

Corporate Social Responsibility:  MCA has clarified that amount spent for various activities related to COVID-19 is eligible for CSR activity under item no. (i) and (xii) of Schedule VII relating to promotion of healthcare including preventive healthcare and sanitation and disaster management. Also, any contribution made to the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund) shall qualify as CSR expenditure under the Companies Act 2013. The Fund has been set up by the GOI to deal with any kind of emergency or distress situation such as that posed by COVID 19 pandemic.

Companies Fresh Start Scheme 2020 MCA vide its circular dated 30-03-2020 has announced ‘Companies Fresh Start Scheme 2020’ giving one-time opportunity to all the Companies to file the pending forms without additional fees upto September 30, 2020. Additionally, the scheme also provide immunity from prosecution and imposition of penalty in respect of submission of belated documents.