Just like any other countries economy, due to the pandemic Coronavirus, the Indian economy has also been worse affected. Due to the quick spread of the disease, the government has called for an urgent lockdown of the country. As an expected result of lockdown, the revenue of the corporate sector fell at a great pace. With a major decline in the revenue, the corporate sector was also under the stress of the compliances.
To help the corporate sector focus on their resumption of business once the lockdown ends, the Finance minister came up with reliefs in several corporate compliances. Here is a list of key takeaways from the Finance Minister speech proposing relief for the corporate sector.
- Moratorium Relief
FM during her speech stated for a Moratorium period to be held from 1st April 2020 to 30th September 2020 where no additional fees or late filing charges would be charged in respect of any document, return or statement to be filed with MCA- 21 registry. This will no doubt work to reduce financial charges on companies & LLP and will help the corporate sector to resume their business amidst this epidemic situation.
- Measures for Company Regulatory Meetings
As per section 173 of Companies Act, 2013 there is a mandatory requirement of holding a minimum of 4 board meetings in a company, which is usually held in between a prescribed interval of 120 days. Due to lockdown called in the country, FM has now extended this period with 60 additional days till the next two quarters i.e. till 30th September 2020. For independent directors also there is a mandatory requirement to hold at least one meeting in every year as prescribed under Schedule IV of the Companies Act, 2013. If due to lockdown, an independent director becomes incapable of holding even one meeting, the same should not be considered as a violation under the law for the time being.
- Extension to Applicability of New Company Audit Orders
The Companies (Auditor’s report) Orders, 2020 was to be made applicable to companies from the financial year 2019-20. These orders were proposed to add more audit requirements on the companies. But with the lockdown specified, the applicability of these rules has been shifted to the financial year 2020-21.
- Extension to some deposit and investment rules
The company rules prescribe for the creation of a deposit reserve by certain companies for about 20% of deposits maturing during the financial year 2020-21. The due date for this compliance was earlier 30th April 2020. Now, FM has proposed for an extension of this date for companies till 30th June 2020.
There is a mandatory requirement over companies to make an investment in specified instruments for up to 15% of their debentures maturing during the specified year. This was to be done by companies by 30th April 2020. Now an extension to this has also been proposed for 30th June 2020.
- Relief through assuming a violation as non -violation:
The requirement of a minimum resident ship of India by at least one director of the company as per Section 149 shall not count the period of a lockdown or shall not be treated as a violation for the specified period.
- Extension for newly incorporated companies
For newly incorporated companies there is a mandatory requirement for the filing of a declaration for the commencement of business in form INC-20A within 6 months from the date of incorporation. But due to lockdown, an extension to this period has been given with an additional 6 months for submission of such declaration by companies.
- Relaxation in insolvency proceedings
Companies faced distressed growth in the last year due to economic slowdown. This led the companies to face insolvency issues and several proceedings under the IBC Code, 2016. To revive business out of this and simplify their complications even for lockdown, FM decided to raise the threshold of default stated under Section 4 of IBC, 2016 from Rs 1 lakh to Rs 1 crore.
This will prevent large numbers of upcoming proceedings under IBC, which might occur due to lockdown in the corporate sector. FM also assured the corporate sector to strengthen their businesses, if the situation continues beyond 30th April 2020 by relaxing some more norms of the Insolvency Code.
In addition to the above, FM also relaxed the due date for filing of Income Tax Return for the financial year 2018-19 to 30th June 2020 which was stated for 31st March 2020.
As per an official “the proposed extension of deadlines and relaxation in norms will bring great relief to the taxpayers and the entrepreneurs of the country “.
It is expected that more measures from other government authorities also would be undertaken. The primary focus of the government is now on low-income groups which have been worst hit due to the lockdown.
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