The sweeping and unprecedented pandemic that is the novel coronavirus ("COVID – 19") has impacted businesses and their operations globally. These circumstances are unique and the future is unquantifiable. Governments all over the world are attempting to contain it by implementing lockdowns, India itself having effected a complete lockdown for 21 (twenty one) days. In light of the same, the Government has realised the importance of offering relief to not only employees but also employers.

In furtherance of the above, various regulators have started extending relaxations in compliance norms to businesses as a response to the complete lockdown.

Measures introduced by the MCA

The Ministry of Corporate Affairs ("MCA") issued a notification on March 19, 20201 to ease the burden of compliances for corporate entities and dispensed with the need to conduct physical board meetings till June 30, 2020 in relation to matters which are otherwise matters not permitted to be dealt with through video conferencing or other audio visual means under the Companies Act, 2013 ("Act") and the rules there under, including 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, 20202 specifying special measures under the Act for supporting the functioning of companies and LLPs to address the disruptions caused by 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 (sixty) days and as one time relaxation, the gap between two consecutive meetings has been increased to 180 (one hundred and eighty) days instead of 120 (one hundred and twenty) 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 meeting for financial year 2019-20, the same will not be viewed as a violation.
  3. An additional time period of 180 (one hundred and eighty) days has been granted for newly incorporated companies to file declaration for commencement of business.
  4. The time period for certain other compliances under the Act has been extended to June 30, 2020.

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 documents4.

Measures introduced by SEBI

Following suit, the Securities and Exchange Board of India ("SEBI") vide circular dated March 19, 20205, decided to grant temporary relaxation to listed entities with regard to integral compliance regulations under the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015 ("LODR"). Highlighted below are some of the crucial relaxations offered by SEBI via the above circular:

  1. Regulation 33 of the LODR requires a listed company to submit its quarterly financial results within 45 (forty five) days from the end of the quarter, and annual financial statements within 60 (sixty) days from the end of financial year. For the financial year ended March 31, 2020, the deadline for both submissions have been extended till June 30, 2020.
  2. Regulation 17(2) and Regulation 18(2) of the LODR requires the board of directors and the audit committee of a company to meet at least 4 (four) times a year, with a maximum period of of 120 (one hundred and twenty days) days between any two meetings. The board of directors and audit committee have been exempted from observing the maximum stipulated time gap between two meetings held or proposed to be held between December 01, 2019 and June 30, 2020. The requirement for meeting 4 (four) times a year remains unchanged.
  3. Regulation 31 of the LODR requires a listed company to submit its shareholding pattern within 21 (twenty one) days from the end of every quarter. For the quarter ending March 31, 2020, SEBI has extended this deadline till May 15, 2020.
  4. Regulation 13(3) of the LODR requires a listed company to file a statement of investor complaints within 21 (twenty one) days from the end of every quarter. For the quarter ending March 31, 2020, SEBI has extended this deadline till May 15, 2020.
  5. Regulation 7(3) of the LODR requires a listed company to submit a compliance certificate on share transfers within 1 (one) month from the end of every half-year of a financial year. For the half-year period ending March 31, 2020, the relevant reporting deadline has been extended till May 31, 2020.
  6. Regulation 24A and Regulation 27(2) of the LODR requires a listed company to annually file a secretarial compliance report within 60 (sixty) days of the end of a financial year and a quarterly corporate governance report within 15 (fifteen) days of the end of a quarter. For the financial year ending March 31, 2020, the deadlines for both have been extended by a month.

It remains to be seen whether the Government will notify further compliance relaxations to enable businesses to overcome the extant challenges posed due to COVID19.

Footnotes

1 http://www.mca.gov.in/Ministry/pdf/Circular12_30032020.pdf

2 http://www.mca.gov.in/Ministry/pdf/Circular_25032020.pdf

3 http://www.mca.gov.in/Ministry/pdf/Circular12_30032020.pdf

4 http://www.mca.gov.in/Ministry/pdf/Circular12_30032020.pdf

5 https://www.sebi.gov.in/legal/circulars/mar-2020/relaxation-from-compliance-with-certain-provisions-of-the-sebi-listing-obligations-and-disclosure-requirements-regulations-2015-due-to-the-covid-19-virus-pandemic_46360.html

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