Measures taken by MCA in wake of COVID-19

Measures taken by MCA in the wake of COVID-19

As many as 100 countries are affected by COVID-19 as per World Health Organisation’s report as on March 8^th, 2020. Sadly, India is also one of them. The whole nation is in total lockdown and practicing social distancing so as to fight this pandemic.

Since the Companies are shut, businesses already are undergoing huge losses and therefore understanding the position of the Companies, Ministry of Corporate Affairs has taken certain measures to facilitate Compliances in the wake of COVID-19.

Let us have a look at some of the important measures taken by MCA-

1. FORM CAR (Companies Affirmation of Readiness Towards COVID-19)

An e-form is deployed at MCA website which has to be filed voluntarily by the authorised signatory of the Company confirming that they are taking all the necessary measures in accordance with the Guidelines issued by the Central/ State Government.

This is a basic form which requires neither Digital signature nor any fees. This is just to ensure that Companies are also doing their bit in fighting with this pandemic. This is a Voluntary filing, no penalty or enforcement related action is applicable on non-filing.

2. Companies (Meetings of Board and its Powers) Amendment Rules, 2020

For the period beginning from the commencement of these rules i.e. 19^th march 2020 till 30^th June 2020 the meetings on matters in which physical presence of Board of Directors was mandatory may be held through video conferencing or other audio visual means in accordance with rule 3.

Matters on which physical presence was mandatory:-

• Approval of Financial statements
• the approval of the Board’s report;
• the approval of the prospectus;
• the Audit Committee Meetings for consideration of financial statement including
• the approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover.

As the Financial year end is round the corner, Companies may now hold their Board Meetings for Approval of Annual accounts and Board Report through Video Conferencing, physical presence of the Directors is not mandatory till 30^th June 2020.

3. Moratorium period

The Ministry has provided a Moratorium period to the Companies /LLPs from 01^st April to 30^th September 2020 under which No additional fees shall be charged for any kind of late filing for any document, return or statement etc. required to be filed at MCA 21.

This is an important step taken by the Ministry which clearly shows their idea of helping Companies /LLPs in every best possible way they can during this crisis.

Also it provides an opportunity to all such Companies /LLPs which are having long pending Compliances to complete them without any additional fees.

4. Board Meetings

The gap between two consecutive Board Meetings can be 180 days instead of 120 days till 30^th September 2020.

5. CARO 2020

The Companies (Auditor’s Report) Order,2020 shall be made applicable from the financial year 2020-2021 instead of being applicable from the financial year 2019-2020 notified earlier. This will significantly ease the burden on companies & their auditors for the financial year 2019-20.

6. Independent Director’s Meeting

As per the Companies Act 2013, all the Independent Directors of the Company need to hold atleast 1 meeting without the presence of Non-Independent Directors. The Ministry, for the year 2019-2020 has dispensed with this regulation. If the IDs are not able to hold such meeting it will not be seen as violation.

7. Extension for Declaration of Commencement of Business

An additional period of 180 days is allowed to the newly incorporated Companies for filing of declaration of Commencement of business.

8. Requirement of Section 149 (3)

Section 149 (3) of the Act requires every company to have at least one director who stays in India for a total period of not less than one hundred and eighty-two days during the financial year.

Non-compliance of this requirement will not be treated as a Non Compliance for the Financial Year 2019-20.

9. CSR funds

A clarification was provided by the Ministry stating that spending of CSR funds for COVID-19 will be treated as CSR activity. Funds may be spent under various activities related to COVID 19 under item no. (i) and (xii) of Schedule VII relating to promotion of health care including preventive health care and sanitation and disaster management.

This way the Companies can be of utmost help to the society during this tough time.

10. Requirement under section 73(2)(c) of CA-13 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.

11. Requirement under rule 18 of the Companies (Share Capital & Debentures) Rules, 2014 to invest or deposit at least 15% of amount of debentures maturing in specified methods of investments or deposits before 30th April 2020, may be complied with till 30th June 2020.

All these changes are as on 28^th March 2020. The Ministry may make any further extensions or changes in these or other rules as per the requirement.