Amendments within the Companies Act, 2013 and MCA relaxations Because of COVID-19

Amendments within the Companies Act

1) General Circular 10/2020 and 15/2020 – Regarding explanation on spending for CSR Funds for COVID-19

The Ministry of Corporate Affairs via General circular number 10/2020, clarified that the quantity spends on account of CSR funds for COVID-19 is eligible CSR activity.

The funds could also be spent for various activities which are mentioned under item number (i) which incorporates activities concerning and eradicating hunger, poverty, malnutrition, promoting healthcare including preventive healthcare, sanitation, making available safe beverage and (xii) which relates to disaster management including relief, rehabilitation & reconstruction activities of Schedule VII of the Act.

It is further clarified via FAQs which expenditure are going to be considered as eligible expenditure for CSR activities associated with COVID-19., ( this is often only an illustrative list for better understanding) :

2) General Circular 11/2020 – Regarding Special measures under Companies Act, 2013 and LLP Act, 2008.

The following measures are implemented by The Ministry of Corporate Affairs to scale back the compliance burden :

1) No additional fees to be purchased delay in filing any document, return, statement, etc during moratorium period from 1st April 2020 to 30th September 2020, within the MCA-21 Registry regardless of the due dates.

Also, Companies clean slate Scheme, 2020 has been introduced via circular 12/2020 and a few modifications are made within the LLP Settlement Scheme, 2020 via circular 13/2020, which can not only reduce the compliance burden but also enable longstanding noncompliant Companies/LLPs to form a clean slate.

2) Section 173 of the businesses Act, 2013 requires that each company shall hold minimum 4 meetings of the board of directors and therefore the gap between 2 meetings shall not exceed 120 days, here looking into the present situation thanks to COVID-19, an extended period of additional 60 days is provided till 30th September 2020, which suggests the gap between two consecutive meetings of the board may reach 180 days till next 2 quarters, rather than 120 days. this is often a one-time relaxation provided by the govt.

3) the businesses (Auditor’s Report ) Order, 2020 shall be applicable from F.Y 2020-21 rather than F.Y 2019-20 to ease the burden on companies and auditors.

4) The independent chiefs of a company have to attend a minimum of one meeting during a year without the attendance of non-independent directors & executives and individuals from the executives, according to Schedule IV of the businesses Act, 2013.

For, the F.Y 2019-20, if independent directors weren’t ready to hold even 1 meeting, then it’ll not be considered as a violation.

5)The necessity of section 73(2)(c) of the companies Act 2013 for depositing a minimum of 20% of the number of deposits maturing during F.Y 2020-21, in deposit repayment reserve before 30th April 2020 is usually compiled till 30th June 2020.

6)The requirement of Rule 18 of Companies (Share Capital & Debenture) Rules 2014, to invest/deposit a minimum of 15% of the number of debentures maturing during the year in specified investment methods, before 30th April 2020 can comply till 30th June 2020.

7) For complying with the need of filing the declaration in MCA Registry, u/s 10A of Companies Act, 2013 by newly incorporated companies within 180 days of incorporation, a further period of 180 days is allowed.

8) As per section 149 of the act, every company shall have a minimum of 1 director who has stayed in India for a minimum of 182 days within the previous civil year, non-compliance of this minimum residency requirement for F.Y 2019-20 won’t be considered as a violation.

3) General Circular 14/2020 and 17/2020 – Clarification on passing General and Special Resolutions by Companies.

Looking into the present situation and circumstances, companies are requested to require all urgent decisions requiring approval of members, aside from items of extraordinary business or business where a person features a right to be heard, through postal ballot/e-voting mechanism, in accordance with the provisions of the Act and rules thereunder. (without holding a general meeting which needs the physical presence of members at a standard venue).The procedure for conducting such a gathering is prescribed within the circular intimately in Circular 14/2020.

Further to resolve certain issues faced by the stakeholders in receiving and serving notices/ responses by post within the current circumstances the govt has provided some measures which include use of electronic means for conducting an equivalent like emails, video conferencing, OAVM (Other Audio-Visual Method) and therefore the procedure for an equivalent is prescribed in Circular 17/2020.

4) General Circular 16/2020 – Relaxation is given a reference to filings to be made u/s 124 and 125 of the businesses Act, 2013 read with IEPFA( Accounting, Audit, Transfer, and Refund) Rules, 2016.

the govt via circular 11/2020 has already as long as no additional fees should be levied in case of delay in filing forms, statements, etc in MCA-21 till 30th September 2020, an equivalent applies to filings required under section 124 and 125 of the Act read with rules, also other forms like IEPF 1, IEPF-1A, IEPF-2, IEPF-3, IEPF-4, IEPF-7, and e-verification form IEPF-5 shall even be covered under the said relaxation.

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