By Team Corporate Laws, (firstname.lastname@example.org)
To address the stress in the financial sector caused by COVID-19, several measures have been taken by the RBI as a part of its Seventh Bi-monthly Policy. The RBI also issued a Press Release on 27th March, 2020 namely, Statement on Developmental and Regulatory Policies followed by a Notification on the same date titled COVID 19- Regulatory Package. These measures are intended to mitigate the burden on debt-servicing caused due to disruptions on account of COVID-19 pandemic such as providing moratorium on term loans, deferring interest payments on working capital and easing of working capital financing. Considering the need of the hour, we have tried to jot down the immediate actionable arising out of the said Notification as below:
|Sl. No||Sequence of Events/ Actionables|
|1||Issue notice for calling Board Meeting at a shorter notice via VC mode or circulate the draft policy along with draft resolution for seeking approval through circular resolution.
Considering the urgency of the matter, VC may be the most viable option to get the necessary approval of the Board. Notice shall be accompanied with the draft agenda and draft of the policy to be adopted by the Board as per the Notification.
Where the company intends to pass resolution by circulation, the company may consider providing lesser time to the Board to revert with their vote on the resolution, instead of seven days from the date of circulation.
|2.||Conduct of Board Meeting through VC mode/ resolution by circulation to discuss the following
a. to discuss the requirements of the RBI Press Release ‘Statement on Developmental and Regulatory Policies’ dated 27th March, 2020 and RBI Notification pertaining to COVID-19 – Regulatory Package. The significant points are:
i. Moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020 and May 31, 2020;
ii. Deferment of the recovery of interest applied in respect of all working capital facilities in the form of CC/ OD during the period from March 1, 2020 upto May 31, 2020;
iii. recalculating the ‘drawing power’ in case of working capital facilities sanctioned in the form of CC/OD by reducing the margins and/or by reassessing the working capital cycle- in case applicable
b. To adopt the draft of the Policy circulated to the Board Members. The Policy shall broadly include:
i. Eligibility of the borrowers;
ii. Restrictions/ conditions w.r.t rescheduling of payments of term loans and working capital facilities outstanding as on period from March 1, 2020 upto May 31, 2020;
iii. Restrictions/ conditions w.r.t deferment of the recovery of interest applied in respect of all working capital facilities in the form of CC/OD during the period from March 1, 2020 upto May 31, 2020
iv. Restrictions/ conditions w.r.t recalculating the ‘drawing power’ in case of working capital facilities sanctioned in the form of CC/OD; (in case applicable)
v. Manner of such re-schedulement/ recalculation/ deferment;
vi. Grounds for considering deemed acceptance by the eligible borrowers;
vii. Process to be followed in case of customers do not opt for the re-schedulement/ recalculation;
viii. Development of an MIS for exposure of INR 5 Cr. or more including the borrower-wise and credit-facility wise information regarding the nature and amount of relief granted;
ix. Maintenance of records of customers opting/ not opting for the option;
x. Process to be followed for implementation of the Policy.
c. To authorize an officer to send necessary communication to eligible customer(s);
d. To authorize an officer/ KMP to communicate the aforesaid developments at organizational level and give necessary instructions for the purpose of effective implementation thereof.
|3||Prepare minutes of the meeting and circulate to all the Directors;
|4.||Display the Policy on the website of the Company;
|5.||Authorised person to give necessary intimation to the eligible borrowers by email or the tele callers will intimate. Alternatively, the moratorium may be extended to only those borrowers who expressly seek for the same from the lender. Further instructions must be given to the respective departments/ personnel within the organisation to ensure compliance with the policy;
|6.||Maintain record of the borrower communicating their acceptance of the option/ or expressly denying the option/ deemed acceptance in the manner as provided in the Policy;
|7.||Communicate the revised repayment terms and obtain confirmation from the borrower by way or email or telecommunication or such other feasible means. The communication will have to happen immediately, in order to take benefit of the moratorium.