Regulatory relaxations by MCA & SEBI amid COVID -19 Outbreak

As the number of Coronavirus cases are continuously growing in India which forced the Indian Government to announce a ‘Lockdown’ for 21 days starting from 00:00 Hours of March 25, 2020. This Lockdown will definitely disrupt the businesses activities of all sectors as the Nation comes to pause.

By understanding the disruption of the business activities, the Government of India has announced certain relaxations with relation to the statutory compliances under various laws, which will help the business organizations in India to focus on necessary measures to address the threat that is COVID-19. This article covers the relaxations provided by the Ministry of Corporate Affairs [MCA] & the Securities and Exchange Board of India [SEBI].

# RELAXATIONS GRANTED BY MCA:

Due to extensive spread of the Corona Virus in the world and more specifically in India, which has called for relaxations in statutory compliances by the Companies. In light of the same, the Ministry of Corporate Affairs (MCA) through its General Circular No. 11/2020 dated 24^th March, 2020 has taken following measures in order to reduce the compliance burden of the Companies.

1. No Additional Fees:

• MCA has introduced moratorium period commencing from 1^st April, 2020 to 30^th September, 2020. During such moratorium period, MCA will not charge any additional fees for any documents, return, statement etc. which are required to be filed in the MCA 21 registry, irrespective of its due date.

2. Extension of time interval between two consecutive Board meetings:

• As per Section 173 of the Companies Act, 2013, Company shall hold atleast 4 Board meetings every year with a maximum gap of 120 days between two consecutive Board meetings.
• MCA has extended such gap of 120 days by additional 60 days. Therefore, the gap between two consecutive Board meetings can be a maximum of 180 days. It shall be noted that such relaxation to companies is available for the next two quarters i.e. till 30^th September, 2020.

3. Applicability of the Companies (Auditor’s Report) Order, 2020:

• Earlier, MCA has issued the Companies (Auditor’s Report) Order, 2020 [CARO, 2020] on 25^th February, 2020 and was applicable for reporting on financial statements of companies whose financial year commences on or after 1^st April, 2019.
• With a view to reduce the burden on companies & their auditors for the financial year 2019-2020, MCA has postponed the applicability of CARO, 2020 to financial year 2020-21.

4. Meeting of Independent Directors:

• As per the Schedule IV of the Companies Act, 2013, Independent Directors of the Company shall hold at least one meeting without the attendance of Non-independent directors and members of management.
• Considering the existing public health situation in India, MCA clarified that if the Independent directors of a company have not been able to hold such meeting, the same shall not be viewed as a violation.
• Although, MCA has recommended Independent directors to share their views amongst themselves through telephone or e-mail or any other mode of communication, if they deem it to be necessary.

5. Extension of due date for deposits into the Repayment Reserve:

• As per Section 73(2)(c) of the Companies Act, 2013, the Companies are required to deposit at least 20% of the amount of its deposits maturing during the following financial year into deposits repayment reserve account on or before 30^th April each year.
• MCA has extended the above mentioned due date for deposit into deposit repayment reserve account to 30^th June, 2020.

6. Extension of due date for deposit of debentures:

• Under Rule 18 of the Companies (Share Capital & Debentures) Rules, 2014 all companies (other than all Indian financial institutions and banking companies) shall on or before 30^th April invest or deposit a sum not less than 15% of the amount of their debentures maturing during the year ending on March 31 of the next year.
• MCA has extended the above mentioned due date of such investments/deposits to 30^th June, 2020.

7. Declaration for commencement of business [e-form INC-20A]:

• As per Section 10A of the Companies Act, 2013, every company incorporated after the commencement of the Companies (Amendment) Act, 2019 shall file a declaration for commencement of business within 180 days from the date of incorporation of company in e-form INC-20A.
• In order to reduce the compliance burden on the companies, MCA has allowed additional period of 180 days for the above mentioned compliance.
• Thus, companies can now file the declaration for commencement of business in form INC-20A within a period of 360 days from the date of incorporation.

8. Resident status of Director:

• As per Section 149 of the Companies Act, 2013, every company shall have at least one director who stays in India for a total period of not less than 182 days during the financial year.
• MCA has clarified that non-compliance of above mentioned provision of Section 149 of the Companies Act, 2013 shall not be treated as a non-compliance for the financial year 2019-20.

9. Amendment to the Companies (Meetings of Board and its Powers) Rules, 2014:

• MCA through it notification dated 19^th March, 2020, has amended the Companies (Meetings of Board and its Powers) Rules, 2014 and allowed the companies to hold the board meetings through video conferencing or other audio visual means for the matters which were not allowed earlier under Rule 4 of the Companies (Meetings of Board and its Power) Rules, 2014.
• Due to such amendment, now Companies can hold the board meetings through video conferencing or other audio visual means for the following matters also;

√ Approval of the Annual Financial Statements;

√ Approval of the Board’s Report;

√ Approval of the Prospectus;

√ Audit Committee Meetings for consideration of Financial Statement including Consolidated Financial Statement if any, to be approved by the board and

√ Approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover.

• It is important to note that the validity of such amendment is only for the period commencing of the Companies (Meetings of Board and its Powers) Amendment Rules, 2020 and ending on 30^th June, 2020.

# RELAXATIONS GRANTED BY SEBI:                                                                                           

The Corona Virus has hit populations around the world and has resulted in many restrictions,including free movement of people, thereby hampering businesses and day to day functioningof companies. It is obvious that Developments arising due to the spread of the virus warrant the need for temporary relaxationsin compliance requirements for listed entities.

Accordingly the regulator of the securities and commodity market i.e. SEBI has granted following relaxations in compliance requirements for listed entities.

♦ Relaxations under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015:

SEBI through it Circulars dated 19^th March, 2020, 23^rd March, 2020 & 26^th March, 2020 has granted the following relaxations from compliance stipulations:

A. Extension of timeline for filings:

Sr. No.	Regulation associated filing	Relaxation w.r.t. the quarter/ financial year ending 31st March, 2020
		Due date	Exte- nded date	Period of relax-ation
1.	Regulation 7(3) relating to compliance certificate on share transfer facility;	April 30,2020	May 31,2020	1 Month
2.	Regulation 13(3)relating to Statement of Investor complaints	April 21,2020	May 15,2020	3 Weeks (appx.)
3.	Regulation 24A read with circular No. CIR/CFD/CMD1/27/201 dated February 8,2019 relating to Secretarial Compliance Report	May 30,2020	June 30,2020	1 Month
4.	Regulation 27(2)relating to Corporate Governance Report	April 15,2020	May 15,2020	1 Month
5.	Regulation 31 relating to Shareholding Pattern	April 21,2020	May 15,2020	3 Weeks (appx.)
6.	Regulation 33 relating to Financial Results	May 15,2020 [Due within 45 days from the end of the Quarter for quarterly results]	June 30,2020	45 Days
		May 30,2020 [Due within 60 days from the end of Financial Year for Annual Financial Results]	June 30,2020	1 Month
7.	Regulation 40(9) relating to Certificate from Practicing Company Secretary on timely issue of share certificates	April 30, 2020	May 31, 2020	1 Month
8.	Regulation 44(5) relating to holding of AGM by top 100 listed entities by market capitalization for FY 19-20	August 31, 2020	September 30, 2020	1 Month
Non-Convertible Debentures (NCDs) / Non-Convertible Redeemable Preference Shares (NCRPS)
1.	Regulation 52 (1) and (2) relating to Financial Results	May 15, 2020 [Due within 45 days from the end of the Half Year]	June 30, 2020	45 Days
		May 30, 2020 [Due within 60 days from the end of Financial Year for Annual Financial Results]	June 30, 2020	30 Days
2.	Common obligations prescribed under Chapter-III of SEBI (LODR) Regulations, 2015	Timelines as prescribed in SEBI Circular No. SEBI/HO/CD/CMD1/CIR/P/2020/38 dated March 19, 2020
Commercial Papers (CPs)
1.	Financial Results	May 15, 2020 [Due within 45 days from the end of the Half Year]	June 30, 2020	45 Days
		May 30, 2020 [Due within 60 days from the end of Financial Year for Annual Financial Results]	June 30, 2020	30 Days
1.	Large Corporate – Initial Disclosure and Annual Disclosure (SEBI Circular No. HO/DDHS/CIR/P/2018/144 dated November 26, 2018)	April 30, 2020 [Initial Disclosure – within 30 days from the beginning of Financial year]	June 30, 2020	60 Days
		May 15, 2020 [Annual Disclosure – within 45 days from the end of Financial year]	June 30, 2020	45 Days

B. Relaxation of time gap between two Board meetings / Audit Committee meetings:

Sr. No.	Regulatory provision	Relaxation
1.	Regulation 17(2): The board of directors shall meet at least four times a year, with a maximum time gap of one hundred and twenty days between any two meetings.	The Board of Directors and Audit Committee of the listed entity are exempted from observing the maximum stipulated time gap between two meetings for the meetings held or proposed to be held between the period December 1, 2019 and June 30, 2020. However the Board of Directors / Audit Committee shall ensure that they meet at least four times a year, as stipulated under regulations 17(2) and 18(2)(a) of the SEBI (LODR) Regulations, 2015.
2.	Regulation 18(2)(a): The audit committee shall meet at least four times in a year and not more than one hundred and twenty days shall elapse between two meetings.

C. Conduct of Committee meetings – Nomination and Remuneration Committee, Stakeholders Relationship Committee and Risk Management Committee:

Sr. No.	Regulation	Requirement	Due date	Extended date	Period of relaxation
1.	Regulation 19(3A)	The Nomination and Remuneration Committee shall meetat least once in a year.	March 31, 2020	June 30, 2020	3 Months
2.	Regulation 20(3A)	The Stakeholders Relationship Committee shall meetat least once in a year.
3.	Regulation 21(3A)	The Risk Management Committee shall meetat least once in a year.

D. Exemption for publication of advertisements in the newspapers:

• • Regulation 47 of the SEBI (LODR) Regulations, 2015 requires publishing, in the newspapers, information such as notice of the Board Meeting, financial results as specified in Regulation 33 of the SEBI (LODR) Regulations, 2015 etc.
  • Due to the spread of the Corona Virus, some of the newspapers are not bringing their print versions for a limited period where some of the newspapers that are still printing are not accepting a ‘e-copy’ of the information to be published which acts as a challenge in ensuring compliance with Regulation 47 of the SEBI (LODR) Regulations, 2015.
  • Considering such circumstances, SEBI has granted exemption for publication of advertisements in newspapers as required under Regulation 47 of the SEBI (LODR) Regulations, 2015 for all events scheduled till May 15, 2020.

♦ Relaxations under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011:

Regulations	Relaxation
Regulations 30(1), 30 Such Regulations r(2) and 31(4): equire the shareholders to compile, collate, and disseminate information of their consolidated shareholding as on March 31, 2020, to the company and the stock exchanges within seven working days from the end of the financial year.Therefore, the same are required to be filed by April 15, 2020.	SEBI has extended the due date of filing disclosures, in terms of Regulations 30(1), 30(2) and 31(4) for the financial year ending March 31, 2020 to June 01, 2020.

♦ Relaxations under other SEBI Regulations and/or SEBI Circulars:

A. Extension of timeline for issuance and filings for issuers who have listed /propose to list their Non-Convertible Debentures (NCDs) / Non-Convertible Redeemable Preference Shares (NCRPS)/ Commercial Paper(s):

[SEBI Circular No. SEBI/HO/DDHS/ON/P/2020/41 dated March 23, 2020]

Sr. No.	Earlier	Now
1.	SEBI vide its circular no. CIR/IMD/DF/18/2013 dated October 29, 2013 provides that 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 months from the date of prospectus.	Now, the compliant listed entities are allowed to disclose unaudited financials with limited review report, instead of audited financials, for the stub period.
2.	Similarly, for issuers, which intend to list their CPs, SEBI has vide circular SEBI/HO/DDHS/CIR/P/2019/115 dated October 22, 2019 and SEBI/HO/DDHS/CIR/P/2019/167 dated December 24, 2019 provided that issuer has to submit its latest audited financials which should not be older than six month.	Now, the same are allowed to file unaudited financial with limited review for the stub period in the current financial year.

B. Relaxation in timelines to enable issuers who intend/propose to list their NCD/NCRPS/CPs:

[SEBI Circular No. SEBI/HO/DDHS/ON/P/2020/41 dated March 23, 2020]

Particulars	Available Audited financials	Date for issuance	Extended date for issuance	Period of relaxation
Cutoff date forissuance of NCDs/NCRPS/CPs	As on September 30, 2019	On or before March 31, 2020	On or before May 31, 2020	60 Days

C. Extension of timeline for filings prescribed for Issuers of Municipal Debt Securities:

[SEBI Circular No. SEBI/HO/DDHS/ON/P/2020/41 dated March 23, 2020]

Sr. No.	Regulation and associated filing	Relaxation w.r.t. the Half Year / Financial Year ending March 31, 2020
		Due Date	Extended date	Period of relaxation
1.	Investor Grievance Report as per Municipal Bond	within 30 working days from end of Half Year	June 30, 2020	45 Days
2.	Financial Results	May 30, 2020	June 30, 2020	30 Days
3.	Accounts maintained by Issuers under ILDM Regulations	May 15, 2020	June 30, 2020	45 Days

D. Relaxation from compliance to REITs and InvITs:

[SEBI Circular No. SEBI/HO/DDHS/CIR/P/2020/42 dated March 23, 2020]

SEBI has extended the due date for regulatory filings and compliances for REIT and InvIT for the period ending March 31, 2020 by one month over and above the timelines, prescribed under SEBI (Infrastructure Investment Trusts) Regulations, 2014 (InvIT Regulations) and SEBI (Real estate Investment Trusts) Regulations, 2014 (REIT Regulations) and circulars issued thereunder.

E. Relaxation in compliance with requirements pertaining to Mutual Funds:

[SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2020/47 dated March 23, 2020]

SEBI has granted the following relaxations specifiedin SEBI (Mutual Funds) Regulations, 1996 and circulars issued thereunder:

• • All schemes (NFO) where observation letter was issued by SEBI and yet to be launched shall have a validity period of one year from the date of SEBI letter. All new schemes (NFO) where final observation letter will be issued shall have validity period of one year from the date of SEBI letter.
  • Extension of timelines for certain disclosures:

Sr. No.	Regulation / Circular and associated disclosure	Timelines
		Due Date	Extended Date
1.	Half yearly disclosures of unaudited financial results as required under Regulation 59 of SEBI (Mutual Funds)Regulations, 1996	April 30,2020	May 31,2020
2.	Disclosure of commission paid to distributors as required underPoint 2 (a) of SEBI circular No.SEBI/HO/IMD/DF2/CIR/P/2016/42dated March 18, 2016	April 10,2020	May 10,2020
3.	Yearly disclosure of invest or complaints with respect to Mutual Funds as required under Point 4 (b) of SEBI circular No.Cir / IMD / DF / 2 / 2010 dated May 13, 2010	May 31,2020	June 30,2020

• Extension of effective date of implementation of certain policy initiatives:

Sr. No.	Circular Name	Particulars	Due Date	Exte-nded Date
1.	Risk management frame work for liquid and overnight funds and norms governing investment in short term deposits dated September 20, 2019	Liquid funds shall hold at least 20%of its net assets in liquid assets.	April 1, 2020	May 1,2020
2.	Review of investment norms for mutual funds for investment in Debt and Money Market Instruments dated October 1,2019	Existing open ended mutual fund schemes shall comply with the revised limits for sector exposure.	April 1, 2020	May 1,2020
3.	Review of investment norms for mutual funds for investment in Debt and Money Market Instruments dated October 1,2019	Maximum investment in unlisted NCDs as% of the debt portfolio of the scheme.	15% – March 31, 2020	15% – April 30, 2020
4.	Valuation of money market an debt securities dated September 24, 2019	Amortization based valuation shall be dispensed with and irrespective of residual maturity,all money market and debt securities shall be valued in terms of paragraph 1.1.2.2 of the Circular	April 1, 2020	May 1,2020

• • Further, the access control presently exercised in the AMC’s dealing room including call recording of deals is temporarily relaxed subject to checks and balances including electronic confirmation by way of email or other system having audit trail are in place.

F. Relaxation on Standard Operating Procedure:

[SEBI Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/48 dated March 26, 2020]

• • SEBI vide circular no. SEBI/HO/CFD/CMD/CIR/P/2020/12 dated January 22, 2020 issued the Standard Operating Procedure (SoP) on imposition of fines and other enforcement actions for non-compliances with provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the effective date of the same is for compliance periods ending on or after March 31, 2020.
  • SEBI has postponed the effective date of such circular, therefore now such circular shall come into force with effect from compliance periods ending on or after June 30, 2020.However, it shall be noted that the SoP circular dated May 03, 2018 would be applicable till such date.

G. Relaxation in compliance with requirements pertaining to Portfolio Managers:

[SEBI Circular No. SEBI/HO/IMD/DF1/CIR/P/2020/57 dated March 30, 2020]

• • SEBI has extended the timelines for the following, by two months;

√ Monthly reporting to SEBI by Portfolio Managers for the periods ending March 31, 2020 and April 30, 2020.

√ Applicability of SEBI Circular SEBI/HO/IMD/DF1/CIR/P/2020/26 dated February 13, 2020 on ‘Guidelines for Portfolio Managers’.

H. Relaxation in compliance with requirements pertaining to AIFs and VCFs:

[SEBI Circular No. SEBI/HO/IMD/DF1/CIR/P/2020/58 dated March 30, 2020]

SEBI has extended the due date for regulatory filings for AIFs and VCFs for the periods ending March 31, 2020 and April 30, 2020 by two months, over and above the timelines prescribed under SEBI (Alternative Investment Funds) Regulations, 2012 and circulars issued thereunder.

Thus, in the current nationwide lockdown scenario, the relaxations which are granted by MCA& SEBI from a few of the compliance requirements will definitely ease the burden on the management of the companies for a few months. The relaxations are a welcome move by MCA & SEBI considering the current economic and health conundrum.

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