By: Sharanya Ranga & Sarjana Pandey
India announced an unprecedented 21 day nationwide lockdown, resulting in tremendous business disruption across sectors. As was expected, the Government also announced measures to relax certain tax and statutory compliance obligations. We take a look at some of the key measures announced till date.
Board meetings
Indian company law allows directors to participate in board meetings through video-conferencing or audio-visual means to deal with various matters except the following: (a) approval of the annual financial statements; (b) the approval of the Board’s report; (c) the approval of the prospectus; (d) the audit committee meetings for consideration of accounts; and (e) the approval of matters relating to amalgamation, merger, demerger, acquisition and takeover. This requirement for physical presence has been relaxed with the Ministry of Corporate Affairs (MCA) amending the Companies (Meetings of Board and its Powers) Amendment Rules, 2014. This amendment is with effect from March 19, 2020 till June 30, 2020. The requirement to record and store the proceedings, adequate notice, etc. will continue to apply.
A company has to hold at least four board meetings every year, with the gap between two consecutive board meetings not more than 120 days. This stands extended by a period of 60 days, i.e., till September 30, 2020.
Waiver of late filing fees
No additional fees shall be charged by the MCA for late filing during the period April 1, 2020 to September 30, 2020.
Auditor’s Report
The Companies (Auditor’s Report) Order, 2020 issued by the MCA in February 2020 rolled out a new format of statutory audits of companies. This will now commence only from the financial year 2020-2021 and significantly ease the burden on companies & their auditors for this year.
Relaxation of minimum residency requirements of directors
Every company has to have at least 1 director who resides in India for at least 182 days in a year. Non-compliance of this minimum residency requirement in India will not be treated as a violation.
Exclusive meeting of independent directors
The requirement of independent directors in public limited companies to hold at least one meeting without non-independent directors and members of the management has been relaxed and non-compliance of this provision will not be viewed as a violation for the financial year 2019-20.
Extended timelines for other compliances
As per the Companies (Share Capital and Debentures) Rules, 2014, companies with outstanding deposits are required to create a deposit repayment reserve of 20% of deposits maturing during the financial year 2020-21 before April 2020. This deadline now stands extended to June 30, 2020.
As per the Companies (Share Capital and Debentures) Rules, 2014, certain companies required to create a debenture redemption reserve have to invest or deposit at least 15% of the amount of debentures maturing during the year in specified methods of investment or deposit such as in deposits with a scheduled bank , in unencumbered securities of the Central Government or of any State Government or other permitted unencumbered securities or bonds. As these investments/deposits are required to be made on or before April 30 every year, the MCA has relaxed this deadline and extended this date to June 30, 2020.
Newly incorporated companies are required to file a declaration for commencement of business within 180 days of incorporation. An additional period of 180 days has been provided for this compliance.
Reporting requirements:
MCA has advised companies and limited liability partnerships (LLPs) to file the e-form CAR (Company Affirmation of Readiness towards COVID-19) to confirm their readiness to deal with COVID-19. This is a simple online form to confirm whether the entity has adopted ‘work from home’ policies. There is no filing fee or digital signature required for this filing as it is merely to a data-gathering exercise on the preparedness of the corporates to tackle COVID-19 in India.
Conclusion
Besides corporate compliances, the government of India has also extended the timelines for filing income tax and GST returns to June 30, 2020 besides providing a host of other interim relief measures and moratorium on loan repayments. The lockdown comes at a particularly crucial time for corporates in India with the financial year ending on March 31, 2020. The thrust of these measures is essentially to relax the timelines for a host of corporate compliances and help ease the compliance burden and the liquidity situation.