Company Law Updates

​Inititiatives by the Indian Ministry of Corporate Affairs (MCA)

In the wake of current pandemic situation across the world, the Indian Ministry of Corporate Affairs (MCA) has taken further initiatives in the wake of covid-19 such as:

• MCA has introduced the “Scheme for relaxation of time for filing forms related to creation or modification of charges under the Companies Act, 2013 (the Act)” for the purpose of condoning the delay in filing certain forms related to creation/ modification of charges. This comes as a major relief to companies that have created charge on their assets or undertakings in order to raise funds. As per section 77 of the Act, charges have to be registered within 30 days from the date of their creation and which could be extended to a total period of 120 days of the creation or modification of charges subject to payment of additional fees. As per this scheme charges which were created or modified on or before 1 March 2020, but the timeline for filing registration has not expired under section 77 of Act as on 1 March , 2020 and also those which were created or modified between 1 March  2020 and 30 September 2020, the period from 1 March 2020 to 30 September  2020 shall not be considered for deciding the time limit for registering these charges.
• MCA has further relaxed the requirement of holding the Board Meetings with physical presence of directors for approval of the financial statements, approval of Board’s report, decisions on merger, amalgamations and takeover. Such meetings can be held through video conferencing or other audio visual means up to 30 September, 2020.
• In continuation of the earlier General Circular No. 14/2020 regarding conduct of extraordinary general meeting (EGM) through Video Con­fer­encing (VC) or other audio visual means (OAVM), MCA issued another circular to provide greater clarity on modalities to be followed by the companies for conducting EGMs including manner of issuing of notice by electronic means etc.
• MCA has issued another circular to allow the companies whose financial year (other than first financial year)  ended as on 31 December 2019  wherein it has been clarified that if the companies whose financial year ended as on 31 December 2019, hold their Annual General Meeting (AGM) for such financial year within a period of nine months from the closure of the financial year i.e. by 30 September 2020, the same shall not viewed as a violation.
• MCA through another circular as on 5 May 2020 has also permitted companies   to hold their annual general meeting (AGM) by VC or OAVM during the calendar year 2020. The framework provided in the earlier MCA circulars for holding of extraordinary general meeting (EGM) would be applicable mutatis mutandis for conduct of AGMs during 2020, based on the classification of companies which are required to: (i) provide the facility of e-voting or have opted for the same, and (ii) those companies which are not required to provide such a facility. This is permitted subject to fulfillment of certain requirements such as only those items of special business other than ordinary business, may be transacted in such meetings which are considered to be unavoidable by the board of directors; financial statements (including Board's report, Auditor's report or other documents required to be attached therewith), are permitted to be sent only by email to the members, and to all other persons so entitled. All other compliances associated with the provisions relating to general meetings have to  be met viz.  taking of disclosures, inspection of related documents/registers by members, or authorizations for voting by bodies corporate, etc. as provided in the Act and the articles of association of the company to be made through electronic mode.

Change in Eligibilty Criteria for MSMES 

The Indian Ministry of Micro, Small and Medium Enterprises (MSME)  has issued a notification number S.O.1702 (E), dated the 1 June 2020,in order to make the change in the MSME definition in accordance with “Aatmanirbhar Bharat Package” announced by the Government of India on 13 May 2020. Subsequently the Indian Ministry of MSME also released vide notification dated 26 June 2020 regarding criteria of investment and turnover calculation is issued for classification under new definition of MSME.The newly notified definition and criteria shall come into effect as on  1 July 2020.

The recent revision in eligibility threshold is as follows:

Due to the re-classification of enterprises as micro, small or medium, registration of all the existing MSMEs made before 30 June 2020 shall only be valid till 31 March 2021. Accordingly the existing MSMEs  falling under revised criteria are required to re-register themselves at the Udyam Registration Portal on or after 1 July 2020.

Being registered as an MSME, the enterprise may avail multiple benefits, such as:
 

Charge interest on delayed payment

An enterprise registered as a micro or a small enterprise (MSE), may charge interest at the rate of three times the bank rate, on payment delayed by any buyer which has procured goods or services from such registered MSE. A delay in payment is considered from the day after the date mutually agreed on by the parties (i.e. MSE and the buyer) for the payment. However, the agreed date shall not exceed 45 days from the date the goods/services procured by the buyer. Please note that our bills are due and payable upon receipt.
 

Recovery of dues

If the buyer fails to make payment of the principle amount as well as the interest levied, the MSE may see make a reference to the Micro and Small Enterprises Facilitation Council in reference to such amount (inclusive of late payment interest). The Facilitation Council provides the MSE with alternate dispute resolution service and the award issued under arbitration is legally binding on the parties. A buyer desirous of filing an appeal against the award will have to deposit 75 per cent of the award amount before filing an appeal.

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 (July-September  2020).

Insolvency and Bankruptcy Code, 2016

1. The threshold of default under Section 4 of the IBC, 2016 has been raised to INR 10 million (from the erstwhile existing threshold of INR 100,000) vide notification dated 24 March 2020.
2. Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020

•  Accordingly in line of the above, the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 has been promulgated on 5 June 2020. The said Ordinance has inserted a new section 10A in the Insolvency and Bankruptcy Code 2016 to temporarily suspend initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7, 9 & 10 of the Code for a period of six months or such further period, not exceeding one year from such date.

Employment Law Updates

1. 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 make payment of 12 per cent of employer and 12 per cent of employee contribution towards Employees’ Provident Fund (EPF). This benefit was earlier provided in respect of salary for the months of March, April and May 2020, but this benefit has  been extended for salary payable for the months June, July and August 2020. This benefit is extended to only those establishments which are  having up to 100 workers and 90 per cent of such workers are earning below  INR 15,000/per month. Accordingly the Government of India will pay 24 per cent (i.e. 12 per centeach share of employer and employee) of the monthly salary of low earning workers.
2. Ministry of Labour and Employment vide notification dated 18 May 2020, has reduced the rate of the contributions under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act) from 12 per cent to 10 per cent per month in respect for the month of May, June , July 2020.  However this reduced rate of reduction shall not be applicable to  the establishments/ employees eligible for relief under the Pradhan Mantri Garib Kalyan Yojna guidelines issued by the Employees Provident Fund Organisation (EPFO).
3. Government of India has withdrawn order on compulsory wage payment by companies during lockdown

•  The Ministry of Home Affairs (MHA) has repealed the order dated 29 March 2020 which had talked about compulsory wage payment to workers during the lockdown without any deduction even if the establishment was closed during the lockdown period.