Companies Act Related Relaxations under Atmanirbhar Bharat Abhiyan

Amid wide spread novel corona virus pandemic, the Government of India introduced a new phase of Ease of Doing Business Reforms relating to easy registration of property, fast disposal of commercial disputes and simpler tax regime for making India one of the easiest, speedy and reliable economy to do business under Atmanirbhar Bharat Abhiyan with a vision of ‘VOCAL ABOUT LOCAL’ with global outreach. To facilitate such changes, the Government has made a press note of ordinance to provide relaxations with the compliances of Companies Act and Insolvency Law.

In this article, we have brought under one roof all major relaxations announced by the government aforementioned two laws:

ANNOUNCEMENTS UNDER INSOLVENCY AND BANKRUPTCY CODE, 2016 

• Increase of Minimum Threshold limit to Rs. 1 crore from Rs. 1 lakh for initiating insolvency proceedings.
• Introduction of special insolvency resolution framework for MSMEs to be introduced.
• No new fresh insolvency proceeding for the next one year, depending on the pandemic.
• All COVID related debt to be excluded from the definition of default under the Code and no proceeding shall be allowed in this regard.
  

ANNOUNCEMENTS UNDER COMPANIES ACT, 2013

• Decriminalizing violations involving which result in minor technical and procedural defaults such as:

i. Shortcomings in CSR reporting,

ii. Inadequacies in board report,

iii. Filing defaults,

iv. Delay in holding AGM.

• Increasing the number of compoundable offences that can be tried under Internal Adjudication Mechanism which would result in less burden on Courts and National Company Law Tribunal.
• Time limit for Mandatory Board meetings extended by 60 more days till 30 September.
• Allowing Extraordinary General Meetings through Video Conferencing with e-voting/simplified voting facility.
• To include the provisions of Part IXA (Producer Companies) of Companies Act, 1956 in Companies Act, 2013.
• Private Companies which list non-convertible debentures on stock exchanges not to be regarded as listed companies.
• Direct listing of securities by Indian public Companies in permissible foreign jurisdictions.
• Lower penalties for all defaults for Small Companies, One Person Companies, Producer Companies & Start Ups.
• Setting up of additional/specialized benches for National Company Law Appellate Tribunal in order to provide of ease of doing matters and reducing unnecessary burden.

Before going further, it is pertinent to mention that that notifications under appropriate laws are yet to be issued in order to take effect of the above-mentioned amendments. 

Other relaxations introduced by the government amid the pandemic are as following:

1. Relaxations of holding Board meeting with physical presence of Directors for approval of financial statements, Board report, etc. as mentioned under section 173(2) read with rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014 has been relaxed till 30^th June, 2020 and these may be held through video conferencing or other audio visual means.

2. Inclusions of following as a part of Corporate Social Responsibility expenditure:

• Any one-time ex-gratia payment to temporary/casual workers/daily wage workers over and above the disbursement of wages, specifically for the purpose of fighting COVID 19.
• Spending funds for COVID-19 related activities such as relating to promotion of health care including preventive health care and sanitation, and disaster management.
• Contribution made to State Disaster Management Authority to combat COVID-19.
• Contribution made to ‘PM CARES Fund’.

3. Passing of ordinary and special resolutions by companies through the mechanism of postal ballot/e-voting, without holding a general meeting, other than the items of ordinary business or business where any person has a right to be heard. Further, proper procedure for convening the extra ordinary general meeting entirely through digital medium has been introduced by the Ministry of Corporate Affairs.

4. Granting a period of nine months, which is six months in the ordinary course, i.e. till 30^th September, 2020 to Companies whose financial year ends to 31^st December, 2019 to hold annual general meeting.

5. Introduction of Companies Fresh Start Settlement Scheme, 2020 and LLP Settlement Scheme, 2020 giving the non-compliant Companies and LLPs to make a fresh start. This being the biggest practical relaxations extended by the government in this sector.

6. Extension of time limit, by two months, to apply for inclusion of name of an individual in the data bank of independent Director who is already appointed as an independent director in any Company.

{The author i.e. Kajal Goyal is a Company Secretary in Practice at Kajal Goyal and Associates and founder of Alliance Professionals and can be reached at (M) +91-9999952595 and (E) cskajalgoyal@gmail.com}