The Big Bang: When Coronavirus Took Over The World In 2020
Coronavirus, otherwise known as Covid-19 or novel coronavirus, is a disease-turned pandemic which started from China’s Wuhan region and spread at a rapid pace in various parts of Asia and Europe. As it stands, the virus has virtually affected almost all parts of the world, with new cases coming in every day. The global population is leaving no stone unturned to try and slow the speed of the pandemic via a variety of measures, ranging from social distancing, experimental medication, and nation-wide lockdowns as scientists and researchers looks for a cure.
Mission Lockdown India And Its Impact
Followed by the PM’s address on 19th March 2020 to impose a “Janta Curfew” (Public Curfew) for a day, a big news came in on 24th March 2020. The PM again addressed the nation on the 24th and imposed complete lockdown of the country at least till 14th April 2020, for a period of 21 days. This lockdown ruling was followed by clarifications to ensure no mass hysteria, as well as by guidelines on how things would go on for the next 3 weeks.
Due to the imposition of lockdown in various states and then in the entire country, all factories, offices, shops, establishments etc. have been closed and wherever possible, employees have been asked to work from home. All means of transportation such as railways, flights, metro rail, cabs, auto rickshaws, etc. have been stopped as well. Even public transport buses have been deployed only for the transportation of people involved in essential services.
Due to all these steps taken by the Government, companies have been forced to temporarily cease all operation which has not only resulted in financial loss for their business but also in issues in carrying out statutory compliances such as payment of taxes, conducting board meetings, issue of statutory notices, financial statement closing, etc.
Response By The Ministry Of Corporate Affairs Towards Businesses Operating In India
Considering the above-mentioned issues and impact of Covid-19 and keeping in mind the lockdown of the entire country, the Ministry of Finance and the Ministry of Corporate affairs (“MCA” or “Ministry”) came out with various circulars and notifications pertaining to the above issues.
A. Companies To Comply With COVID Guidelines
Firstly, Form CAR (Companies Affirmation of Readiness towards Covid-19) has been asked to be filed voluntarily by all companies/LLPs to check whether all the companies/LLPs are complying with the COVID Guidelines, including work from home policy as a confidence-building measure to assess readiness. No fee / penalty / enforcement-related action is applicable on the said form.
B. Impact On Board Meetings
Further, the Ministry has relaxed the requirement of holding Board Meetings with physical presence of the directors. Prior to the mandatory lockdown, matters pertaining to approval of financial statements, board reports, mergers and restructuring, etc. were required to be taken in a board meeting with a physical presence of the company’s directors. However, on account of the lockdown, the Ministry has allowed for the meetings to be conducted with aforesaid agendas through video conferencing or other audio visual means till 30th June, 2020.
This move was much needed, especially for foreign directors who could not travel for such meetings due to travel restrictions; and this provision enables the boards of these companies to continue functioning.
The Ministry has also relieved the mandatory requirement of holding board meetings within the intervals. The previous interval of 120 days between two consecutive board meetings has now been extended to 180 days for the next 2 financial year quarters, i.e. till 30th September 2020.
C. Impact On Residency Criteria
Further, if due to the Coronavirus pandemic, where virtually all major countries are under lockdown, the resident directors of the companies are not able to comply with the requirement of minimum residency in India, i.e., to stay in India for a period of at least 182 days in a financial year, the same shall not be treated as a non-compliance for FY 2019-20.
Also, the Ministry has allowed the spending on activities related to Covid-19 as eligible CSR CSR (Corporate Social Responsibility) expenses as per the applicable provisions of the Act. Funds may be spent for various activities related to Covid-19 relating to promotion of healthcare, including preventive healthcare, sanitation, and disaster management.
Major Relief Measures Related Filing Of Documentation For Companies
Further, I believe the major step which has been taken by the Ministry due to the outbreak of Corona Virus is by announcing that no additional fee shall be charged for late filing during a moratorium period from 01st April 2020 to 30th September 2020 in respect of any document, return, statement etc. required to be filed in the MCA-21 registry, irrespective of the due date.
The motive behind this move is not only to reduce the compliance burden on companies / LLPs at large but also to enable the non-compliant companies / LLPs to make a fresh start without paying an additional fee.
Listed below are the other major reliefs provided by MCA related to regulatory matters:
- The Companies (Auditor’s Report) Order, 2020 shall be made applicable from F.Y. 2020-21 instead of being applicable from F.Y. 2019-20 notified earlier
- Independent directors required to hold at least one meeting without the attendance of non-independent directors and members of management. For FY 2019-20, if independent directors of a company have not been able to hold such a meeting, the same shall not be viewed as a violation
- Requirement to create a deposit repayment reserve of 20% of deposits maturing during FY 2020-21 before 30th April 2020 shall be allowed to be complied with till 30th June 2020
- Requirement to invest or deposit at least 15% of amount of debentures maturing in specified methods of investments or deposits before 30th April 2020 maybe complied with till 30th June 2020
- Newly incorporated companies are required to file a declaration for commencement of business within 180 days of incorporation. An additional period of 180 more days is allowed for this compliance
The above measures and steps taken by the MCA are welcome steps and will help the businesses/companies in times of crisis, while the world attempts to recover from a deadly pandemic. These steps will help the businessmen and their employees to shift their focus from statutory compliances and focus on health of their own self and others, as well.