prpri Role of Corporate Compliances During Covid-19 & Possible Impacts In Future Role of Corporate Compliances During Covid-19 & Possible Impacts In Future

In response to the spread of the Covid-19 virus, various business support measures have been put in place by Central Government, State Governments, RBI, SEBI, CBEC, Ministry of Corporate Affairs (MCA), ICSI and ROC.

With an objective to ensure and generate awareness and confidence on readiness of Indian Companies to deal with the situation, MCA through its advisory has deployed a Web Form for Companies/ Limited Liability Partnerships. The Web Form is named as CAR (Company Affirmation of Readiness towards COVID-19) and was deployed on March 23, 2020 on the portal of MCA.

There is a transformation in the traditional way of carrying out compliances and conducting day to day activities among the businesses due to the pandemic. When the pandemic strikes, the first thing which hampered all at once was nationwide lockdown from March 25th, 2020. It has made the compliances difficult for business and at the same time, it has made things convenient and advanced also.

Corporate Compliances

Now we can proudly claim that digitilization is not all bad and it is the present and future of doing businesses. If we were not already equipped with digitalization, then we might suffer more. The only option is to adopt digitalization or no compliance till everything comes back to normal and it will probably never return to what was once “normal.”

Below are the instances mentioning what should be the normal course of compliances and what are the changes due to COVID-19:

A. Payment Of  Employees’ Provident Fund Contribution By The Indian For Low Earning Workers For The  Next 3 (Three) Months

Indian Government as a part of its relief package under “Pradhan Mantri Garib Kalyan Yojana” has announced as on 26, March 2020 that it shall pay for both employer and employee’s contribution towards Employees’ Provident Fund (EPF) for the next 3 (three) months. This benefit is extended to only those establishments which are having up to 100 workers and 90% of such workers are earning below INR 15,000/per month. Accordingly the Government of India will pay 24% (i.e. 12% each share of employer and employee) of the monthly salary of low earning workers. However, EPF department has further announced that in order to avail this benefit, all the establishments have to ensure payment of monthly salaries to their workers and make a  timely submission of ECR. This is introduced with a view to ensure continued employment of these low earning workers who are at risk of losing their employment and also to provide financial  benefit to the organized sectors due to economic disruption caused by Coronavirus pandemic.

B. Acceptance Of Digitally Signed Documents:

There is better understanding of use of Digital Signature among the Courts and authorities as nowadays they are lenient in accepting digitally signed Agreements and legal documentations to some extent.

C. MCA & ROC Actions

Particular Actions in Normal Course Change due to COVID -19
BOARD MEETINGS One meeting in a year had to be held in Physical Mode All the meeting can be conducted through virtual medium
FINANCIALS AND BOARD REPORT ETC. Can be approved in physical meeting only. Can be approved though virtual medium
AGM/ EGM Held only in Physical Mode Can be held through virtual medium
ROC FILINGS Has to be filed on their due date Moratorium up to Sep 30, 2020 has been given for 76 e-forms.

CHG-1 & CHG-9

Within 30 days of creation of charge. If the form is filed on or before 30th September, the fees payable as on 29.02.2020 for the said form shall be charged and if the form is filed thereafter, the applicable fees shall be charged after adding the number of days beginning from 1st October 2020 and ending on the date of filing plus the time period lapsed from the date of the creation of charge till 29.02.2020.
AGM Tentative last date of Conducting AGM for all companies is Sep 30, 2020 Extended up to Dec 31, 2020.
CSR There were no recognition for COVID-19 research and PM Cares fund prior to Corona virus. Scope of CSR Spending has been enhanced to COVID-19 and several amendments have been made to recognize PM Cares Fund, Companies working on CSR Vaccine and donations to medical authorities involved in finding the vaccine as CSR activities.
IDs DATA BANK Last date of enrolment of Independent Directors in Data Bank was 30th April, 2020. It has been extended to 30th September, 2020.
CARO 2020 Earlier it was effective from April 01, 2019. Now it is effective from April 01, 2020.

D. CBIC Ordinance, Circulars & Notifications Issued In Order To Provide Relief To Taxpayers Due To Covid-19 Pandemic

> The time limit for filing of appeal, furnishing of return, or any other compliance under the GST Act has been extended as per the Ordinance issued.

>  Extension of due date for furnishing FORM GSTR-3B for supply made in the month of May, 2020

>  Extension of due date of compliance which falls during the period from “20.03.2020 to 29.06.2020” till 30.06.2020 and to extend validity of e-way bills

>  Extension of due date of furnishing FORM GST CMP-08 for the quarter ending March, 2020 till 07.07.2020 and filing FORM GSTR-4 for FY 2020-21 till 15.07.2020

>  Conditional waiver of late fee for delay in furnishing outward statement in FORM GSTR-1 for tax periods of February, 2020 to April, 2020.

>  Conditional waiver of late fee for delay in furnishing returns in FORM GSTR-3B for tax periods of February, 2020 to April, 2020.

>  Conditional lowering of interest rate for tax periods of February, 2020 to April, 2020

>  Amendment in CGST Rules (Fourth Amendment) in order to allow opting Composition Scheme for FY 2020-21 till 30.06.2020 and to allow cumulative application of condition in rule 36(4)

>  Special GST Refund Disposal Drive – Implementation of decision to expedite pending GST and IGST refund claims

>  Conduct of Personal hearing in respect of any proceeding under Customs Act, 1962 through video conferencing with a view to ensure social distancing and reduce physical presence.

>  Various measures taken to combat COVID-19 and ensure smooth Customs Clearances

a) 24*7 Customs clearance

b) Novel Corona virus Help Desk for EXIM Trade

c) Nodal officers from CBIC Customs Zones for facilitating Customs clearances amidst the Covid-19 crisis

d) Implementation of automated clearance on All-India basis

e) Requirement of different types of customs bond has been dispensed with.

f) Exemption of customs duty on ventilators, personal protection equipment, covid-19 testing kits and inputs for these good.

g) Clearance of goods under India’s Trade Agreements without original Certificate of Origin.

h) Paperless Customs – Electronic Communication of PDF based Gate-pass and OOC Copy of Bill of Entry to Custom Brokers/Importers.

i) Special refund and drawback disposal drive.

E. SEBI Relaxation Of Various Provisions Of Lodr Due To Covid-19

The Securities and Exchange Board of India (“SEBI”), in view of the restrictions imposed on business and companies due to the outbreak of COVID-19, has issued circulars pertaining inter alia to relaxation of certain provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”) and the SEBI (Issue and Listing of Municipal Debt Securities) Regulations, 2015.

Further, SEBI in light of the relaxations issued by the MCA for conducting EGM and AGM” through electronic mode has issued further relaxations regarding LODR provisions. The above mentioned circulars issued by SEBI, inter alia provide the following relaxations:

> Extension of timelines for filing of documents such as compliance certificate on share transfer facility, statements of investor’s complaints, secretarial compliance reports, corporate governance reports, shareholding pattern and financial results. Accordingly, the timeline for submission of financial results under Regulation 33 and 52 of the LODR had initially been extended till 30thJune, 2020. With respect to the year ending 31st March, 2020, SEBI vide the aforesaid circular dated 24thJune, 2020 had extended the timeline for submission of financial results for the quarter, under Regulation 33 of the LODR, till 31st July, 2020. Thereafter, vide the aforementioned circular dated 29th July, 2020, SEBI has further extended the timeline for submission of the financial results for the quarter/half year/financial year ending 30th June, 2020 by listed entities under Regulation 33 of the LODR till 15th September, 2020.

> Additionally, for entities who have listed their non-convertible debentures, non-convertible redeemable preference shares, commercial papers, and municipal debt securities, SEBI has also further extended the timeline for submission half yearly and/or annual financial results under Regulation 52 of the LODR, with respect to the period ending 31stMarch, 2020, till 31stJuly, 2020. Similarly, the timeline for submission of the annual secretarial compliance report for the year 2019-2020, for listed entities has been further extended till 31st July, 2020 from the initial extension which was granted until 30th June, 2020. Previously, listed entities were required to submit the annual secretarial compliance report for the year 2019-2020 by 31st May, 2020.

> The board of directors and audit committees of listed entities are exempted from observing the maximum stipulated time gap between two meetings held or proposed to be held between the period of 1stDecember, 2019 and 30th June, 2020.

> Extension upto 31stMay, 2020 which was granted earlier has been further relaxed upto 30th June, 2020 for issuance and filings for listed issuers who listed their non-convertible debentures, non-convertible redeemable preference shares, municipal debt securities and commercial papers on or before 31st March, 2020.

> Regulations 19(3A), 20(3A) and 21(3A) of the LODR which require the nomination and remuneration committee, the stakeholders’ relationship committee and the risk committee to meet at least once in a year, respectively, by 31stMarch, 2020, this date has now been extended to 30th June, 2020.

> Regulation 40(9) of the LODR requires a listed entity to produce a certificate from a practicing company secretary certifying timely issue of share certificates within 1 month of the end of each half of the financial year (by 30thApril, 2020), this date has now been extended to 31st May, 2020.

> Regulation 44(5) of the LODR requires the top 100 listed entities by market capitalization (whose financial year ends on 31stMarch, 2020), to hold an annual general meeting, within 5 months from the date of closing of the financial year (by 31st August, 2020), this date has now been extended to 30th September, 2020. Further, in line with the clarification issued by the Ministry of Corporate Affairs, Government of India (“MCA”) dated 21st April 2020, SEBI has relaxed the aforesaid regulation with respect to the top 100 listed entities by market capitalization whose financial year ended on 31st December, 2019 as well, by providing that such entities may hold their annual general meeting within 9 months from the closure of the financial year , by 30th September 2020.

> Regulation 47 of the LODR which requires a listed entity to publish in the newspapers information such as notice of the board meeting, financial results etc, has been relaxed and listed entities are now exempted from the publication of advertisements as required under the aforesaid regulation for all events scheduled till 15thMay, 2020. A similar requirement that exists in regulation 52(8) of the LODR and applies to entities which have listed their non-convertible debentures and non-convertible redeemable preference shares, is also exempted till 15th May, 2020Vide circular dated 12th May, 2020, the aforesaid date has been extended till 30th June, 2020.

> The revised Standard Operating Procedure dated 22ndJanuary, 2020 on imposition of fines and other enforcement actions for non-compliances with provisions of the LODR, is now applicable from compliance periods ending on or after 30th June, 2020. However, it should be noted that Standard Operating Procedure circular dated 3rd May 2018 would be applicable till such date.

> Regulation 29 (2) of the LODR requires prior intimation, by listed companies, to stock exchanges about board meetings (excluding the date of intimation and date of meeting), within 5 days (if financial results are to be considered) and within 2 working days in other cases. This requirement has been reduced to 2 days, for the board meetings to be held till 31stJuly, 2020.

> Regulation 39 (3) of the LODR which requires listed entities to submit information of loss of share certificates and issue of duplicate certificates to the stock exchange within 2 days of the obtaining such information, has been relaxed for intimations to be made between 1stMarch, 2020 to 31st May, 2020. Any delay beyond the stipulated time will not attract penalty as per the penal provisions laid down under SEBI circular dated 3rd May, 2018 Regulation 39 (3) of the LODR which requires listed entities to submit information of loss of share certificates and issue of duplicate certificates to the stock exchange within 2 days of the obtaining such information, has been relaxed for intimations to be made between 1st March, 2020 to 31st May, 2020. Any delay beyond the stipulated time will not attract penalty as per the penal provisions laid down under SEBI circular dated 3rd May, 2018.

> It has been clarified that authentication/certification of any filing/submission made to stock exchanges under LODR may be done using digital signature certifications until 30thJune, 2020. Vide circular dated 31st July, 2020, SEBI has extended this relaxation till 31st December, 2020.

> Regulation 36 (1)(b) and (c) of the LODR provides that a listed entity is required to send a hard copy of the statement containing salient features of all the documents, as prescribed in section 136 of the Companies Act, 2013 (i.e. financial statement, auditor’s report and other documents annexed to them as required by law), to the shareholders who have not registered their email addresses as well as hard copies of full annual reports to those shareholders, who have not registered their email addresses or who make a request for the same. Regulation 58 (1)(b) and (c) of the LODR extends similar requirements to entities which have listed their non-convertible debentures and non-convertible redeemable preference shares. The aforesaid requirements are dispensed with, for listed entities which conduct their annual general meeting (“AGM”) before 31st December, 2020.

> The listed entities conducting their AGMs for the FY 2019-2020 through electronic mode before 31stDecember, 2020 have been exempted temporarily from sending proxy forms to security holders which is generally a mandatory requirement under regulation 44(4) of the LODR.

> Regulation 12 of the LODR prescribes issuance of ‘payable-at-par’ warrants or cheques, in case it is not possible to use electronic modes of payment for dividends, interest and redemption or repayment amounts. Further, in case the amount payable as dividend exceeds INR 1500, the ‘payable-at-par’ warrants or cheques are required to be sent by speed post. It has now been clarified that the requirements of this regulation will apply only upon normalization of postal services. However, in cases where email addresses of shareholders are available, listed entities are required to endeavour to obtain their bank account details and use the electronic modes of payment including electronic clearing services, direct credit, real time gross settlement, national electronic funds transfer etc. as specified in Schedule I of the LODR.

> Listed entities which are banking and/or insurance companies or having subsidiaries which are banking and/or insurance companies for the quarter ending on 30thJune, 2020 may submit their quarterly or year-to-date consolidated financial results under Regulation 33(3)(b) of the LODR  on a voluntary basis (as opposed to the mandatory requirement) and if it chooses to do so, they are required to provide reason for the same along with publishing their quarterly and year-to-date standalone financial results under regulation 33(3)(a) of the LODR which they submitted to the stock exchange within forty-five days of end of each quarter, other than the last quarter.

> The timeline for submissions of investor grievance reports, financial results and accounts maintained by issuers of Municipal Debt Securities under the SEBI (Issue and Listing of Municipal Debt Securities) Regulations, 2015 has been further extended till 31stJuly 2020 (from 30th June 2020 which was granted by SEBI vide circular dated 23rd March 2020).

 Where And How To Focus Now:

With COVID-19 being declared a pandemic, various companies have found themselves facing challenges in complying with the Companies Act compliances due to disruptions in their operations. If we have not been prepared and business were not efficient enough to understand the technology then there will be a great threat to the organisations as this will halt still the decision making procedure of companies and pose a great threat to the term “going concern” which entrust the stakeholders in the Business.

While companies and their compliance programs range in size, resources, and maturity, there are following areas that are worth examining or reexamining, in order to ensure that compliance programs are effectively identifying, understanding, and mitigating pre-pandemic as well as new compliance risks in light of changed circumstances:

> Risk assessment and planning;

> Tone at the top and middle;

> Policies and procedures;

> Training;

> Investigations;

> Third-party risk; and

> Monitoring

Organizations need to proactively monitor the latest regulatory requirements, assess organizational exposure and adjust operational activities where necessary. For example, review travel policies and rapidly communicate with business travelers.

This is not an easy task as the situation changes quickly, with new regulations and restrictions everyday—and especially for those organizations operating in multiple geographic locations. A robust compliance framework with up-to-date information can enables organizations to assess the impact of rules and regulations on business operations. Management can then draw on this assessment when making decisions and taking actions that may include stringent office access controls and hygiene measures, alternative work arrangements, and updates to company policies, etc.


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July 2021