SPECIAL RELAXATIONS UNDER COVID-19 BY MCA

In view of addressing the disruptions caused by the outbreak of COVID-19, the Ministry of Corporate Affairs (MCA), on March 24, 2020 has notified certain relaxations to combat the burden on the Companies and Limited Liability Partnerships (LLPs) registered in India. These measures, among other, gives an opportunity to the defaulting Companies and LLPs to start afresh in terms of being compliant with the applicable provisions of the respective Acts. These measures are as summarised below:
1. No Additional Fees:
The MCA has relaxed the levy of additional fees for late filing of any document, return, statement etc., required to be filed in the MCA-21 Registry except for Form SH-7 or any charge related form, during a moratorium period from 01st April 2020 to 30th September 2020, irrespective of its due date, which will not only reduce the compliance burden, including financial burden of companies/ LLPs at large, but also enable long-standing non-compliant companies/ LLPs to make a ‘fresh start’.
2. Board Meetings:
Section 173 of the Companies Act, 201 prescribes that every company shall hold a minimum of four (4) meetings of its Board of Directors every year in such a manner that not more than one hundred and twenty days (120) shall intervene between two consecutive meetings of the Board. The MCA has relaxed the provisions of the said Section according to which it stands extended by a period of 60 days till next two quarters i.e., till 30th September. In nutshell, as a one-time relaxation the gap between two consecutive meetings of the Board may extend to one hundred and eighty (180) days till the next two quarters instead of one hundred and twenty days (120).
3. Applicability of the Companies (Auditor’s Report) Order, 2020
The MCA had replaced the earlier Companies (Auditor’s Report) Order, 2016 with the new format of Statutory Audits of the Company through notification of the Companies (Auditor’s Report) Order, 2020 (CARO 2020) on February 25, 2020 applicable from the Financial Year 2019-20. The MCA has now postponed the applicability of the said CARO 2020 to the financial year 2020-21 instead of 2019-20.
4. Meeting of the Independent Directors
The Code for the Independent Directors specified by the Companies Act, 2013 has mandated the at least one meeting of the Independent Director to be held in each financial year without the presence of Non-Independent Director. The said requirement of meeting has been waived of by the MCA in case any Company was not able to convene such meeting for year 2019-20. Accordingly, non-convening of the meeting of Independent Director shall not be deemed a violation of the law. Moreover, it is recommended that, if the need be, the Independent Directors, may communicate through audio-visual means, emails or telephone.
5. Deposit Repayment Reserve
The timeline for the creation of the Deposit Repayment Reserve, in line with Section 73(2)(c), of 20% of deposits maturing during the Financial Year 2020-21 before April 30, 2020 has been extended till June 30, 2020.
6. Investment or Deposit of Debentures maturing
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 now be complied with till 30th June 2020.
7. Declaration for Commencement of Business
Filing of declaration of Commencement of Business has been made compulsory, by introduction of Section 10A to the Companies Act, 2013, for the Companies incorporated on or after November 2, 2018 in Form INC 20A within 180 days of incorporation of the company. The MCA has now granted another period of 180 days to meet the aforesaid compliance.
8. Residency in India
Every Company incorporated under the provisions of Companies Act, 2013 shall have at least one director on Board who has resided in India for a minimum of 182 days in each year. This compliance has been done away with for year 2019-20 and subsequently, this shall not be categorized as the non-compliance of Section 149 of the Companies Act, 2013.
9. Expenses for Corporate Social Responsibility
Looking at the outbreak of the rapidly spreading Novel Corona Virus Disease (COVID-19), the Ministry of Corporate Affairs, Government of India vide it’s General Circular No. 10/2020 No. 05/01/2019-CSR dated 23rd March 2020 has provided certain clarification on the spending of CSR funds for COVID-19. This circular says that under the present circumstances when the World Health Organization (WHO), has declared COVID-19 as a pandemic, the Government of India has taken a decision to treat this pandemic as a notified disaster. By declaring so any expenditure made on account of COVID- 19 will be treated as an eligible expense under CSR activities.