MCA taken Various Measures to remove difficulties faced due to COVID-19 pandemic

The laws of the Companies Act, 2013 (the Act), the Limited Liability Partnership Act, 2008, and the Insolvency and Bankruptcy Code, 2016 are administered by the Ministry of Corporate Affairs (MCA). MCA does not keep event database data. This was said by Shri Rao Inderjit Singh, Union Minister of State for Corporate Affairs, in response to a question in the Lok Sabha today.

However, according to the Minister, the total number of new firms registered from 1.04.2016 to 31.3.2021 and to date is as shown in Annexure A.

In addition, the Minister claimed that the word “closed firm” is not defined in the Act. However, under the provisions of Section 248 (1) of the Act, where the Registrar has reasonable cause to believe that companies that have not carried on any business or operation for the two immediately preceding fiscal years and have not made any application for the status of a dormant company under Section 455, shall be struck off the Register of Companies after following due process of law.

The Minister went on to say that companies are also dissolved with the approval of the Hon’ble courts, whether by merging or otherwise. As a result, Annexure B contains information on the number of such companies from 1.04.2016 to 31.3.2021 and to date.

The Minister went on to describe the MCA’s efforts to alleviate the difficulties caused by the COVID-19 pandemic:

1. The Companies Fresh Start Scheme, 2020 was launched to give companies a fresh start in being completely compliant by allowing them to register late documents in the MCA 21 registry without paying any additional fees from April 1st to December 31st, 2020. The aforementioned programme has also granted immunity from prosecution and actions for the imposition of penalties that may occur as a result of such late filing of documents. According to data, 473131 Indian companies and 1065 foreign companies have benefited from the CFSS, 2020 plan for filing pending documents.

2. The MCA implemented the LLP Settlement Scheme, 2020 to grant a one-time waiver of further fees to defaulting Limited Liability Partnerships (‘LLPs’) in order for them to make good their defaults by filing pending paperwork with the Registrar of Companies (‘ROC’ or ‘Registrar’). The scheme was initially implemented for specific LLP files from 16.03.2020 to 31.03.2020. However, due to the COVID 19 pandemic, a modified approach covering all e forms was implemented from April 1, 2020 to December 31, 2020. Under the aforementioned scheme, failing LLPs were allowed to file late paperwork, and the LLPs were not prosecuted for such defaults. According to data, 105643 LLPs have benefited from the LLP settlement programme 2020 by filing their pending documents.

3. In light of the second COVID wave and the challenges that have emerged as a result of the reappearance of the COVID-19 pandemic, the Ministry has given a relaxation in the levy of additional fees for firms / LLPs in filing certain documents (other than a CHG-1 Form, CHG-4 Form, and CHG-9 Form). As a result, no additional costs will be assessed up to the 31st of July 2021 for the late filing of forms (other than the charge-related forms mentioned above) that were / would be due for filing between the 1st of April, 2021 and the 31st of May, 2021. Only standard fees will be charged for such late files up to the 31st of July 2021. By General Circular No.11/2021 dated 30.06.2021, the time limit has been extended until August 31, 2021.

4. In the aftermath of COVID 19, and to provide relief to law-abiding businesses, a programme was created to extend the time for completing forms connected to the introduction or change of charges under the Companies Act, 2013 from March 1st to December 31st, 2020.

5. Given the difficulties that have arisen as a result of the resurgence of the COVID-19 pandemic, the Ministry has granted a relaxation of timelines and condoned the delay in filing forms related to the creation / modification of charges (CHG-1 Form and CHG-9 Form) by a company or charge holder where the date of creation / modification of charge is I before 1.4.2021, but the time line for filing such form has not expired under section (both dates inclusive). The abovementioned circular specified the details of the time extension and relevant costs for filling the aforementioned documents. The Ministry further extended the previously mentioned relaxation in the time for filing forms related to the creation or modification of charges under the Companies Act, 2013 by replacing the figures “31.05.2021” and “01.06.2021” in General Circular No. 07/2021 dated 03.05.2021 with the figures “31.07.2021” and “01.08.2021” respectively.

6. Under Section 252 of the Companies Act, 2013, the MCA has announced a Condonation of Delay Scheme for Companies restored by NCLT between the 1st and 31st of December, 2020. The Scheme allows for the forgiveness of late submission of forms with the Registrar, as well as the avoidance of additional expenses. This Scheme was in effect from the 1st of February 2021 and allowed such companies to file any overdue e-forms until the 31st of March 2021.

7. Companies have been allowed to conduct Board Meetings through Video Conference (VC) or other audio-visual means for passing resolutions in respect of matters which were previously required to be passed in meetings which required physical presence of directors by amending the Companies (Meetings of Board and its Powers) Rules 2014 from time to time during the COVID-19 pandemic. Such a facility for businesses was permitted till June 30th, 2021. (Initially, it was valid through 30.06.2020, but it was later extended to 30.09.2020 and 31.12.2020.) Following that, in light of the second COVID wave, Rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014 was omitted via notification dated 15.06.2021 to provide that all matters can be deliberated and resolutions passed by the Board of Directors via video conferencing or other audio visual means. The reform will provide company boards more flexibility in conducting business and will help the government’s Ease of Doing Business goal.

8. Companies are permitted to convene Extraordinary General Meetings (EGMs) via Video Conferencing (VC) or other audio-visual means (OAVM) supplemented with e-Voting/simplified voting via registered emails until June 30, 2021. Given the second wave of COVID-19, the Ministry has extended the time restriction to December 31, 2021.

9. Companies whose AGMs were scheduled to be held in the year 2020 or became due in the year 2021 were permitted to have their AGMs through Video Conferencing (VC) or other audio-visual means (OAVM) on or before December 31, 2021. Due to the problems in delivering physical copies of the financial statements, corporations are also permitted to provide the financial statements, along with the Board’s reports, Auditor’s reports, and other documents that must be attached thereto, simply via email.

10. On the advice of the Ministry, the Registrar of Companies extended the time for having the Annual General Meeting for the fiscal year ending March 31, 2020 until December 31, 2020. (The maximum period which can be extended by the Registrar of Companies under section 96 of the Act).

11. The quality of disclosures has been improved through changes to financial statement formats, the Companies (Accounts) Rules, the Companies (Audit and Auditor’s) Rules, and the Companies (Auditor’s Report) Order, 2020. The Companies (Auditor’s Report) Order, 2020 has now been made applicable beginning with the audit of financial statements for the fiscal year 2021-22 in order to reduce the compliance burden on auditors and companies.

12. The Companies (Indian Accounting Standards) Rules, 2015 have been revised by notification dated 18.06.2021, among other things, to prolong the advantages of the COVID-19 associated rent discount, which were established last year, from 30th June, 2021 to 30th June, 2022.

13. The necessary necessity of convening meetings of the Board of Directors of businesses within the intervals specified in section 173 of the Companies Act, 2013 (CA-13) (120 days) has been extended by 60 days to the next two quarters, i.e., until September 30, 2020. In light of the second COVID wave, the Ministry extended the aforementioned relaxation for the year 2021-22, and the time gap between two consecutive Board meetings may be extended to 180 days during the quarters of April to June 2021 and July to September 2021, instead of 120 days as required by the Companies Act, 2013.

14. Independent Directors (IDs) of a firm have been given a waiver from holding at least one mandatory meeting, and for the fiscal year 2019-20, if the lDs of a company are unable to hold such a meeting, it is not considered a violation.

15. The Ministry extended the deadline from 1st December, 2019 to thirteen months for existing independent directors to apply online for inclusion of their names in the databank for independent directors by modifications to the Companies (Appointment & Qualification of Directors) Rules, 2014. Furthermore, the Companies (Creation and Maintenance of Databank of Independent Directors) Rules, 2019 have been amended by notification dated 18.06.2021 to provide that if an individual delays in applying to the Institute for inclusion of his name in the data bank of Independent Directors, or in renewing thereof, the Institute shall allow such inclusion or renewal, as the case may be, after charging a fee of one thousand rupees on account of the delay. Requests from a large number of stakeholders for additional time for delayed applications due to the Covid-19 epidemic have been addressed by this modification.

16. The deadline for establishing a deposit repayment reserve of 20% under section 73(2)(c) of CA-13 and investing or depositing 15% of the amount of debentures under rule 18 of the Companies (Share Capital and Debentures) Rules, 2014 has been extended until December 31, 2020.

17. A 180-day extension has been granted for newly incorporated corporations to comply with the obligation of filing a statement for Commencement of Business.

18. Non-compliance with the minimum residency requirement in India for at least 182 days by at least one director of each business under Section 149 of the CA-13 shall not be considered a non-compliance for the fiscal years 2019-20 and 2020-21.

19. The inability of listed companies to dispatch notices for Rights Issues to their shareholders via registered post, speed post, or courier would not be viewed as a violation of section 62(2) of the Act until 31st December, 2020, provided these companies comply with the SEBI Circulars dated 6th May, 2020 and 24th July, 2020, which provide, inter alia, the mode/manner of issuance of notice by electronic transmission by listed companies.

20. The requirement for Listed firms and NBFCs to invest 15% of the amount of debentures maturing in a specific year in specified instruments has been removed when such debentures are offered on a private placement basis.

21. Due to the problems encountered during the COVID-19-related disruption, the time provided to Auditors and Audit Firms for filing NFRA-2 forms with the NFRA has been extended to a total of 270 days.

22. Companies’ CSR expenditure has included operations connected to Central Armed Police Forces (CAPF) and Central Para Military Forces (CPMF) Veterans and their relatives, including widows.

23. The deadline for submitting the Cost Audit Report to the company’s management has been extended until December 31, 2020, and the filing fee for the CRA-4 (form for filing the cost audit report) for fiscal year 2019-2020 has been reduced. MCA, in circular no. 15/2021 dated 27.09.2021, extended the deadline for submitting Cost Audit Reports for the fiscal year 2020-21 to the 31st of October, 2021, and further extended it to the 30th of November, 2021, in circular no. 18/2021 dated 29.10.2021.

24. MCA, in General Circular No.17/2021 dated 29.10.2021, has relaxed the assessment of additional costs in the filing of e-forms AOC-4, AOC-4 (CFS), AOC-4, AOC-4 XBRL, AOC-4 Non-XBRL, and MGT-7/MGT-7A under the Companies Act, 2013.