Keeping in view of this COVID 19 Pandemic situation and Distressed economy, MCA has come up with Various relaxations and schemes for the rescue to companies and LLP’s and reduce various compliance & other burdens, Some of the Key & Important measures are as follows-
- Relax the requirement of holding Board meetings with physical presence of directors under section 173 (2) r/w rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014 for approval of the annual financial statements, Board’s report, etc. Such meetings may till 30th June, 2020 be held through video conferencing or other audio-visual means by duly ensuring compliance of rule 3 of the said rules.
- The MCA has extended this time gap of 120 days by 60 days thereby increasing the interval limit between two consecutive board meetings to a maximum of 180 days, accordingly, as a one-time relaxation the gap between two consecutive meetings of the Board may extend to 180 days till the next two quarters, this one-time relaxation is available for the next two quarters i.e. up to 30 September 2020.
- Companies Affirmation of Readiness towards COVID-19 (CAR) form was issued by MCA to judge the readiness of the companies to combat COVID-19 crises in India. which is a simple web form with minimum fields and which can be filed from anywhere. There is no requirement of DSC and does not involve payment of any fee & Penalty.
- Every company is required to have at least one director who has stayed in India for a period of minimum 182 days during a financial year (Resident Status of Director), the MCA will not treat the non-fulfillment of the minimum stay as a non-compliance for the financial year 2019-20.
- The Companies (Auditor’s Report) Order, 2020 (CARO 2020), which was earlier introduced on 25th February to be applicable from the financial year 2019-20, now got postponed and shall be made applicable from the financial year 2020-2021. This will significantly reduce the burden on the companies and its auditors to deal with more than 25 additional checks introduced under CARO 2020.
- MCA has clarified that the companies contributing towards recently formed Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (‘PM CARES Fund’) shall also qualify as CSR expenditure under item (viii) of Schedule VII of Companies Act, 2013, particularly, substantial CSR money remains unspent, very often for want of appropriate CSR projects, many companies have to explain the same by finding some reason or the other. Currently the country is passing through an epidemic that has affected the whole world, hence, companies may come forward and spend their unspent CSR budgets.
- MCA has come up with “Companies Fresh Start Scheme, 2020 (CFSS 2020)” and “LLP Settlement Scheme, 2020-Modification”, there will be a moratorium from 1st April 20 to 30th September 20 (Moratorium Period) on levying any late/ additional fees upon filings of returns, statements, document etc., by companies or LLPs on the MCA portal irrespective of the due date of such filings, the benefit of this moratorium will be available not only for those forms and returns which are due during the Moratorium Period but also for those which were already due prior to the Moratorium Period, the benefit of this relaxation can be availed by existing defaulting companies, this would lead to a reduction of not only in the compliance burden including financial burden, but also enable long-standing non-compliant companies/ LLPs to make a ‘fresh start’.
- The MCA allowed companies whose financial year has ended on December 31st, 2019, to hold their Annual General meeting (AGM) within the first nine months of their current fiscal or before September 30 and allowed companies to hold their AGM by video conferencing or other audio-visual means during the calendar year 2020.
- MCA issues the details of extension for reserved names and resubmission forms timeline in days or period with descriptions and applicable dates & MCA has hosted revised details of period/days of extension for names reserved and re-submission of forms on its website.
- The Act mandates the independent directors (ID) of a company to hold at least one meeting in a financial year without the attendance of non-independent directors and members of management, for the financial year 2019-20, if the ID’s of a company have not been able to hold such a meeting, the same shall not be viewed as a violation, however, the MCA has encouraged the IDs to share their views amongst themselves through telephone, email or any other mode of communication, as they may deem fit.
- Newly incorporated companies are required to file a declaration for Commencement of Business (Form INC-20A) within ‘180 days of incorporation, an additional period of 180 more days is allowed for this compliance.
- A company, having outstanding deposits, is required to deposit at least 20% of the amount of its deposits maturing during the following financial year, into a separate deposit repayment reserve on or before 30th April of each year. For the deposits maturing in the financial year 2020-21, the MCA has extended the due date for deposit into the deposit repayment reserve to 30th June 2020.
In the current lockdown scenario, the relaxations granted by MCA from a few of the compliance requirements will definitely ease the burden on the management of the companies and LLPs for a few months. In particular, the waiver of additional fees will help long-standing non-compliant companies and LLPs to make a fresh start.
For further details please refer to the source notifications/circulars and MCA official website.