Company Law Updates

1. During these exceptional pandemic situation prevalent across the globe,  Ministry of Corporate Affairs (mca) has taken certain initiatives in the wake of Covid-19 such as:

• MCA has launched Companies Fresh Start Scheme, 2020 (CFSS) in order to give onetime opportunity so as to enable the companies and LLPs to complete their pending compliances by making statutory annual and other filings required to be made under the various provisions of the Companies Act, 2013 (“the Act”) from 1 April 2020 to 30 September 2020, without and additional fees. Immunity shall also be granted, subject to fulfilment of certain conditions, from the prosecutions due to delay filings.  Read more »
• The mandatory requirement of holding meetings of the Board of the companies within prescribed interval provided in the Act (120 days), 2013, has been extended by a period of 60 days till next two quarters i.e., till 30 September  2020
• As per Schedule 4 to the Act, Independent Directors are required to hold at least one meeting without the attendance of Non-independent directors and members of management. For the year 2019-20, if the Independent Directors of a company have not been able to hold even one meeting, the same shall not be viewed as a violation.
•  Newly incorporated companies are required to file a declaration for commencement of business from 180 days from the date of incorporation. An additional period of 180 days has been allowed for this compliance.
• Non-compliance of minimum residency in India for a period of at least 182 days by at least one director of every company (Resident Director), under Section 149 of the Act, shall not be treated as a violation.
• Companies can hold board meetings dealing with matters like approval of financial statements as well as books of accounts, approval of the board’s report, decisions on mergers, amalgamation and takeovers, through video conferencing upto 30 June  2020. Earlier, meetings dealing with the said subject matters were required to be held with directors physically attending the meeting.
• Requirement to create a Deposit reserve of 20 per cent of deposits maturing during the financial year 2020-21 before 30 April 2020 shall be allowed to be complied with till 30 June 2020.

You may Read more » on this topic at our website.

2. New compliance of web form car for all companies/ limited liability partnerships (llps)
 

The MCA released an advisory on 20 March  2020 with an objective to ensure and generate awareness and confidence on readiness to deal with the situation in India. The Web Form is named as CAR (Company Affirmation of Readiness towards COVID-19) and  was deployed on 23 March  2020 on the MCA portal. All Companies/ LLPs were requested to comply and file the Form CAR. The MCA has clarified that filing of the said Form is purely voluntary. Around 194,500 companies have filed Form CAR so far and counting is still on.

3. Another move proposed to amend the Companies Act, 2013 ("the act"): Companies (amendment) Bill, 2020
 

The Companies (Amendment) Bill, 2020 (‘the Bill’) proposes to insert/ amend certain sections of the Act. The Bill was introduced in the Lok Sabha (House of Parliament in India) on 17 March 2020. Once this Bill receives the assent of the President of India, it would become an Act and come into force. The overall objective of the Bill is to further decriminalise certain offences under the CA 2013, to provide ease of doing business to law abiding corporates and to foster improved corporate compliance. The key highlights of the Bill are as follows:

- It is proposed to insert a new section 129A in the Act. Under this section, certain class or classes of unlisted Companies would be required to prepare their financial results on a periodical basis, obtain the Board of Director’s approval and complete the audit or limited review of such periodical financial results and file a copy with the Registrar within 30 days of completion of the relevant period as would be prescribed.

- The Bill has inserted a proviso to section 135 (5) of the Act (Corporate Social Responsibility) which states that an amount spent in excess of the requirement under section 135 (5) may be set off against the requirement to spend for such prescribed number of succeeding financial years. Further, there would be no requirement to constitute a CSR committee where the amount to be spent towards CSR activities by the Company does not exceed INR 5 million.

- The Bill has introduced decriminalisation of offences under certain sections by either replacing penalty and imprisonment by only penalty provisions or by reducing or omitting penal provisions.

Company Secretarial (cs) compliances for Private Limited Company

Below is the summary of the compliances which needs to be adhered to in the next quarter (April-June 2020)

OTE:  In view of COVID Outbreak, no additional fees shall be charged for late filing during a moratorium period from 1 April 2020 to 30 September 2020.

Foreign Exchange Management Laws Updates

1. Reserve Bank of India (RBI) for implementation of Legal Entity Identifier (LEI) Code for implementation (Phase III) has extended the due date from 31 March 2020 to 30 September, 2020.  Read more »

2. The RBI has extended the time period for realization and repatriation of export proceeds for exports made up to or on 31 July  2020, to 15 months (originally 9 months) from the date of export.

3. RBI vide notification dated 27 March 2020, introduced several measures to address the issue of liquidity crunch in India. Key measures include:

3.1 Permission to commercial banks, other financial institutions to allow a moratorium of 3 months on payment of instalments for outstanding term loans falling due between 01 March to 31 May 2020. Interest shall however continue to accrue during the moratorium period.

3.2 For working capital facilities in form of cash credit or overdraft, banks permitted to defer recovery of interest applied in all such facilities during period of 01 March to 31 May 2020. Accumulated accrued interest shall be recovered immediately after the completion of this period.

3.3 In respect of working capital facilities sanctioned, banks may recalculate the ‘drawing power’ by reducing the margins and/or by reassessing the working capital cycle.

Employment Law Updates

1. As of 25 March, 2020, the whole Republic of India has been put in a lockdown for 21 days. Failure to comply with this order will invoke criminal proceedings including imprisonment and fine or both.

The essence of such orders across various states stipulates that all shops, commercial establishments, offices, factories to close their operations. As on date, the operations are to be remain suspended up to 14 April 2020. The orders have also suspended movement of inter-state transport, domestic/international flights, suspension of construction activities. Such restrictions would not be applicable to certain essential services (including but not limited to health, law and order offices, fair price shops, electricity, water, sanitation, food items, groceries).

2. Ministry of Labour and Employment issued a direction on 20 March 2020 , stating that on account of COVID-19 there may be incidences that employees/workers are forced to go on leave. In such situations, all employers of public and private establishments are advised to not terminate employees especially casual or contract workers/ reduce their wages. If any worker takes leave, he should be deemed to be on duty without any consequent deduction in wages for this period. If the place of employment is made non-operational due to COVID-19, the employees of such a unit will be deemed to be on duty.

3. Employees State Insurance Corporation vide notification dated 16 March 2020, has extended the time limit for payment of employees contribution to forty five days instead of fifteen days for the month of February and March 2020. The revised timelines are 15 March 2020 and 15 April 2020, respectively.

4. Ministry of Labour and Employment has vide advisory dated 20 March 2020 , extended the last date for filing of Unified Annual Return under eight Labour Laws from the date of 01 February to 30 April 2020, on account of the ongoing COVID-19 issues.

5. EPFO issues tightened norms  in relation to inquiries under section 7 A of Employees’ Provident Fund Act with a view to bring out uniformity in the procedure and to curb down the practice of initiating inquiries for insufficient grounds by EPF authorities.

Force Majeure Notification by Government of India

On 19 February  2020, the Indian Government issued Office Memorandum, stating that coronavirus shall be considered as natural calamity and Force majeure clause may be invoked wherever necessary, for example in the case of supply chain disruptions.

It is a common practice in India to add force majeure clause in commercial contracts. Therefore, businesses should evaluate all commercial contracts with force majeure clause and initiate appropriate action under the said clause if it is evident that COVID 19 situation will hamper the capacity of either of the parties to contract, to fulfil their legal obligations on time.

Extension of limitation period under all laws

The Hon’ble Supreme Court of India by an order dated 23 March  2020 extended the limitation period for all proceedings before all courts with effect from 15 March 2020 until further orders, irrespective of the limitation period prescribed under law.

This relaxation provides much needed relief to litigants who are struggling in making the requisite filings/applications on account of COVID-19. This would also allow them to stragegize on dispute management strategies.