The global outbreak of coronavirus (COVID-19) is an unprecedented event that has led to lockdowns and unexpected restrictions on the public as well as the corporate sector across the world. In order to control its spread, the Government of India (GoI) has inter alia ordered all establishments, except organizations providing essential goods and services, to temporarily close their physical offices. Employees are working remotely, but due to difficulties faced in coordination and lack of office facilities, companies are likely to face difficulties in undertaking timely compliances of various applicable laws. Keeping in mind the aforesaid, the GoI has temporarily relaxed a number of compliance requirements for the corporate sector. 

Measures Introduced by the Ministry of Corporate Affairs

The Ministry of Corporate Affairs issued a notification on March 19, 20201 to ease the burden of compliances for corporate entities and pointed out the need to conduct physical board meetings till June 30, 2020, in relation to matters which are the matters not permitted to be dealt with through video conferencing or other audiovisual means under the Companies Act, 2013. The rules that are thereunder which includes the approval of the annual financial statements, approval of the Board's report, approval of the prospectus, the audit committee meetings for consideration of accounts, and the approval of matters related to amalgamation, merger, demerger, acquisition, and takeover.

Additionally, the MCA released a circular on March 24, 2020, specifying special measures under the Act for supporting the functioning of companies and LLPs to address the disruptions caused by the spread of COVID-19, The key measures introduced were as follows:

1. The requirement of holding board meetings within the intervals provided in Section 173 of the Act has been extended by a period of 60 days and as one-time relaxation, the gap between two consecutive meetings has been increased to 180 (days instead of 120 days till September 30, 2020.
2. Under the Act, Independent Directors are required to hold at least one meeting without the non-independent directors and members of management. In the event Independent Directors have not been able to hold such meetings for the financial year 2019-20, the same will not be viewed as a violation.
3. An additional time period of 180 days has been granted for newly incorporated companies to file a declaration for the commencement of business.
4. The time period for certain other compliances under the Act has been extended to June 30, 2020.
5. There will be a moratorium from 1 April 2020 to 30 September 2020 (Moratorium Period) on levying any late/ additional fees upon filings of any returns, statements, document, etc. by companies or LLPs on the MCA portal irrespective of the due date of such filings. The benefit of this moratorium will be available not only for those forms and returns which are due during the Moratorium Period but also for those which were already due prior to the Moratorium Period. The benefit of this relaxation can be availed by existing defaulting companies. This would lead to a reduction of not only the compliance burden but also the financial burden.
6. The MCA had earlier on 25 February 2020 announced a new format of the report of the statutory audits of companies, namely Companies (Auditor's Report) Order, 2020 (CARO 2020) replacing the earlier order under Companies (Auditor's Report) Order, 2016. CARO 2020 was made applicable for all statutory audits commencing on or after 1 April 2019 corresponding to the financial year 2019-20. The MCA has now postponed the applicability of CARO 2020 to the financial year 2020-21. This will significantly reduce the burden on the companies and its auditors to deal with more than 25 additional checks introduced under CARO 2020.
7. Exercise of borrowing powers through acceptance of deposits is quite common for public companies in India, subject to compliance under the Companies (Acceptance of Deposits) Rules, 2014. A company, having outstanding deposits, is required to deposit at least 20% of the number of its deposits maturing during the following financial year, into a separate deposit repayment reserve on or before 30 April of each year. For the deposits maturing in the financial year 2020-21, the MCA has extended the due date for deposit into the deposit repayment reserve to 30 June 2020. In the current market scenario, this extension will facilitate the liquidity crunch situation faced by many companies, who have accepted deposits.
8. Under CA 2013, every company is required to have at least one director who has stayed in India for a period of a minimum of 182 days during a financial year. Due to a prolonged travel ban across several countries (including India), it is possible that the 'resident' director may not be able to comply with the minimum 182 days' stay in India during the financial year 2019-20. Realizing such difficulties, the MCA will not treat the non-fulfillment of the minimum stay as a non-compliance for the financial year 2019-20.
9. As per Rule 18 (7) of the Companies (Share Capital and Debentures Rules), 2014, all companies (other than all Indian financial institutions and banking companies) are required to invest or deposit a sum not less than 15% of the number of debentures maturing during the year, ending on 31 March of the following year. Such amount may be invested using one or more of the methods of investments or deposits namely, (a) deposits with any scheduled bank, free from any charge or lien; (b) unencumbered securities of the Central Government or any State Government; (c) unencumbered securities mentioned in sub-clause (a) to (d) and (ee) of section 20 of the Indian Trusts Act, 1882; and (d) unencumbered bonds issued by any other company which is notified under sub-clause (f) of section 20 of the Indian Trusts Act, 1882.
10. Such investments/ deposits are required to be made on or before the 30 April in each year and must at no time fall below 15% of the value of the debentures maturing on the 31 of March of a particular financial year (Maturing Debentures). Further, such amounts cannot be used for any purpose other than for redemption of the Maturing Debentures.

MCA has extended the last date of this deposit and investment compliance to 30 June 2020 in respect of the debentures maturing during the financial year ending on 31 March 2021. This is a welcome move. The relaxation on the timeline shall provide companies the much-needed flexibility in this turbulent period and the liquidity crisis arising from this unprecedented situation.

The MCA is expected to issue necessary circulars and notifications regarding the above relaxations in due course.

On heels of the same, the MCA issued a further press release on March 30, 20203 and introduced the "Companies Fresh Start Scheme, 2020" and revised the "LLP Settlement Scheme, 2020" which enables both companies as well as LLPs to rectify any defaults with regard to any necessary filings, notwithstanding the period of default. Both the above schemes allow a one-time waiver of additional filing fees for delayed filings by companies or LLPs with the Registrar of Companies during the currency of the Scheme, i.e. during the period between April 1, 2020, and September 30, 2020. Additionally, the schemes also provide immunity from prosecution of penalty and imposition of penalty in respect of submission of belated documents.