Relaxations by SEBI and MCA under disruption scenario: Some FAQs

COVID-19 preparedness: some questions on MCA Form CAR-2020

Vinod Kothari and Company;

Updated as on 23rd March, 2020

All companies and LLPs must have, by now, got mailers from the Ministry of Company Affairs about COVID-19 preparedness, and the need to file a web based form CAR 2020 i.e. Company Affirmation of Readiness towards COVID 19.

The MCA circular is nothing but a disaster management step from the Ministry, imploring upon all companies and LLPs to get sensitised to the need for handling this colossal challenge to humanity, India included. It will be an ironical travesty if the filing of the form is taken as a compliance requirement.

Therefore, in our view, what matters is the preparedness itself, not so much the task of having the so-called policy or the filing of the form itself.

However, the country has a few lakhs of companies, and the affirmation of preparedness by filing this form will be expected from all the companies. Hence, there is understandably a barrage of questions from clients and others.

We at Vinod Kothari & Company will be happy to contribute in our own little way; hence, if companies/LLPs have questions around this Form, we have thought it apt to put them down into this small guidance. We wish and pray that all of you stay safe during this challenging time.

1.     Whether the Advisory has any statutory backing?

Let us not even think of this as emanating from some power under the law. Neither do we have to search for such a power, nor question it. As human beings, not every action of ours arises out of legal obligations. It is a simple step by the Ministry towards sensitisation of the corporate sector, towards fulfilling an urgent social and human obligation.

2.     What are the steps being suggested through the Advisory?

Companies and LLPs are being advised to put in place an immediate plan to implement a ‘work from home’ policy as a temporary measure.

3.     What is the object of having such a plan?

The object of having such a plan is to ensure social distancing as advised by WHO and other public health authorities in the recent outbreak of COVID-19 which is required for preventing the rapid spread and transmission of the disease at community level.

4.     My company does not have any permanent employees. Am I still required to adhere to this policy?

If there are no permanent employees, it is all peace as far as your company is concerned. Go and file the form and say you have taken necessary steps.

5.     Whether the companies and LLPs will have to frame a written ‘work from home’ policy?

The Advisory suggests to have a plan to implement the work from home policy for the employees. In our view, the same is not required to be a written or formal policy. The word “policy” here should mean the steps to be taken by the organisation to provide the facility of working from home to its employees and the manner/ procedure to be followed to ensure the same. If there is a policy, typically, the policy is applied to all employees covered by it without discrimination. Further, the process and manner to be followed shall be different from organisation to organisation. Accordingly, in case of companies, the decision may be taken at management level, while in case of others, by the head of the organisation.

6.     What all does a work from home policy include?

As we said above, we are not envisaging this to be a formal document. However, please do consider the following:

  • Who all can be permitted to work from home – for those who have to be present, whether there is rotational or staggered presence?
  • What will be the weekly and daily working hours?
  • Whether necessary equipment or software is in place for working from home?
  • Whether there will be any revision in compensation and benefits paid to the employees?
  • Whether employees have adequate internet connection required for the job?
  • What level of dedication and concentration is expected from employees during working hours?
  • What will be the method of marking attendance or absence?
  • Who will review work of whom and how?
  • Revision in employees code of conduct
  • How to maintain and ensure confidentiality of information
  • Installation of necessary software for group discussions or meetings
  • To educate remote employees on basic security policies as for example use of VPN is a secure channel and better than public network
  • Establishment of virtual employee allowance or reimbursements for expenses such as internet, phone, electricity and other utilities
  • Strict adherence to do’s and don’ts issued by public health authorities from time to time
  • Date of implementation of this policy- with immediate effect till 31st March, 2020 (tentative date, maybe extended depending upon the situation)

7.     The circulars are being addressed to CEOs/directors. Is the action required to be taken at board/CEO level?

First of all, the actions expected are urgent – therefore, please do not wait for any formal processes or board resolutions. Whoever is in charge of putting administrative allocations may take such steps. Looking at the seriousness, it is expected that senior management is involved. However, it does not matter if there is any formal ratification or issue of circular, unless the organisation expects such formal internal documents.

8.     Till what time the work from home policy to be adopted?

Till 31st March, 2020. The same shall be reviewed by the appropriate authorities based on the evolving situation.

9.     What is the form CAR all about?

It is a web form deployed on 23rd March, 2020 by the Ministry. The same is a simple web based form requiring only an OTP based verification and does not require any digital signature for affirming or denying the adoption of work from home policy.

10. Is there a fee for filing form CAR?

There is no fee for filing the form. Seriously, we don’t even imagine there can be a fee.

11. Who will require to file the said form?

All companies and LLPs are expected to file the said form. There is no exclusion or exemption for OPCs, private companies or small companies. However, looking at the language of the applicability, partnership firms and proprietorship concerns have been kept outside the purview of filing CAR, 2020.

12. What is the timeline to file?

The web form CAR, 2020 is deployed on the MCA portal on 23rd March, 2020. Initially, the advice suggested to file it on the same day, however, later it was clarified that the same can be filed till 30th March, 2020.

13. What kind of information/ data to be reported?

As per the twitter handle of the Hon’ble Minister of Finance and Corporate Affairs the possible format of the form shall contain the following:

  2. Name of the company/ foreign company/ LLP/ Foreign LLP
  3. Whether the company/ LLP is in compliance of COVID 19 Guidelines?
  4. Authorised Signatory of the company/ LLP
  5. DIN/ PAN/ Membership No. of the Authorised Signatory
  6. Mobile No.
  7. OTP

The step to step guide on filing CAR 2020 has been issued by MCA on 22nd March, 2020. The same can be viewed here.

14. Whether foreign company/ LLPs are also required to follow the Advisory?

The Advisory suggests all companies/ LLPs to file the form. The intent seems to include all the companies/ LLPs incorporated in India or companies/ LLPs not incorporated in India but having operations/ physical presence in India. The contents of the Form as provided in Query 9 above suggest the same.

15. What do the COVID 19 Guidelines mean?

There is no definition as such. However, it should mean the Advisory itself issued by the Govt. from time to time. One may refer to pages such as

16. Who is the Authorised Signatory of the company/ LLP for authenticating the form?

As referred to above, it seems that the authorised signatory may be a director, CS, CFO or any other person authorised to file the form. However, who is eligible to give such authority is not clear. In our view, in case of companies which have given general authority to the CS/ any director/ CFO to file necessary forms with the regulatory authorities from time to time, such authorised persons may file the form. In case of others, the same may be filed by the MD/ head of the organisation who looks after the day to day affairs or any person authorised by such MD/ head of the organisation.  Once again, we suggest there need not be a formal flow of authorisation, such as a resolution, for filing the form.

17. Whether the mobile no. has to be a registered mobile no.?

Since the form is an OTP verified form, the OTP is sent on the mobile no of the person who is authenticating the form and the same is prefilled on providing details of the authorised person.

18. What are the consequences of non- filing?

There is no penalty for non-filing of the form. Further the Advisory is not coming from any statutory requirement but out of a social obligation only, non- filing of the same may not lead to any penal consequences.

19. The Authorised Signatory may be the compliance officer. But how does the compliance officer certify the preparedness across the company, with so many locations?

The authorised signatory is not taking the burden upon himself. The signatory may, in turn, get confirmations from those who are involved, say, the HR head or similar positions.

20. In view of the lockdown/ shutdowns announced by the state governments for various places in India, does it mean lockout of operations by the corporate houses and giving leaves altogether?

Please note that shutdown does not mean shutdown of operation. Therefore, it still means work from home. The whole intent of shutdown is to control movement and not to control work.

21. Are the companies mandatorily required to file form CAR?

As per the information uploaded on MCA’s website, the filing of the form is on voluntary basis. Therefore, the company/ LLP (s) may take a call on filing. However, if one throws a question on whether they are required to take steps to combat COVID-19 by following government guidelines, please note that we have no doubt on answering this is positive. Everyone including the companies and LLPs are mandatorily required to take steps during this health emergency.

Comparative Analysis of provisions enabling majority shareholders to squeeze out minorities

Harshil Matalia, Executive, Vinod Kothari & Company


Squeezing out minority shareholders has gradually become an area of intense interest and scrutiny. With the recent set of notifications, Ministry of Corporate Affairs (MCA) has opened yet another way of squeezing out minority shareholders. The MCA has recently notified[1] sub section (11) and (12) of section 230 of the Companies Act, 2013 (‘Act’) on 3rd February, 2020 (effective from the date of notification itself), whereby power has been given to the majority shareholders holding atleast 3/4th of the share capital of the target company to enter into arrangement for acquisition of any part of the remaining shares of the target company.

While section 236 of the Act specifically provides for squeezing out of minority shareholders, the prerequisite of holding atleast 90% of the share capital is a challenge to implement. Whereas, with the notification, those holding atleast 75% can move ahead with the proposal before the NCLT via Scheme and can acquire the balance by offering a fair price determined  by the Registered valuer.

The term ‘squeeze out’ reflects a situation whereby controller shareholders undertakes a transaction to forcibly acquire remaining shares of a company. There are number of methods provided in the Act through which minorities can be squeeze out by majorities, viz. reduction of share capital, consolidation of shares etc.

This write up is an attempt to analyse the implementation of the recently notified provisions and a brief comparison of the same with the existing options of squeezing out minority shareholders.

An Overview of Section 230

Section 230 of the Act provides for any compromise and arrangement between shareholders or creditors of a company with the company pursuant to a scheme. The company or any shareholder or creditor or liquidator (in case the company is under liquidation) can file application before the National Company Law Tribunal (NCLT) for the approval of the scheme of compromise or arrangement along with the documents as provided under rule 3 of the Companies (Compromises, Arrangements and Amalgamations ) Rule, 2016.

Approval from at least 90% of shareholder and creditors of applicant companies will enable the companies to get dispensation from the NCLT convened meeting, otherwise, dual approval as per section 230 (6) of the Act  will be required, which is ‘majority of persons representing 3/4th in value.

Further, the Act also provides for sending of a copy of application to all the regulatory authorities, such as Registrar of Companies, Central Government (power delegated to Regional Director), Official Liquidator, Income Tax Authorities, Securities and exchange board of India (in case of listed companies), CCI and Reserve bank of India (in case of NBFC, for inviting their objection, if any on the proposed scheme. In consideration of all the respective Tribunal can allow the scheme. The scheme, once approved by the Tribunal, shall be binding on the company, all the shareholders, creditors, and in case of company being wound up, on the liquidator and the contributories of the company.

Proviso to section 230 (4) provides for right to object to the shareholder holding 10% of the share capital of company either individually or together with other shareholders; and the creditors holding 5% of the outstanding debt either individually or together with other creditors.

The enabling notifications[2] provides for ‘takeover offer’ by the shareholders holding at least 3/4th of the shares of a company to the remaining shareholders, which means shareholders holding 75% or more of the issued share capital of the a company can now enter into an arrangement with the target company to acquire remaining shares by offering them the price determined by the registered valuers. While the other compliance as set out in section 230 of the Act will remain same for the scheme involving takeover offer, the applicant shall additionally be required to deposit 50% of the offer price in a separate bank account after getting requisite approval from the shareholders and creditors but before getting approval from the Tribunal.

In addition to the right to object u/s 230 (4), further liberty has been given to the aggrieved party, other than listed companies, to make application before the NCLT in case of any grievances with the said takeover.

Analysis of acquisition of minority shareholding in terms of section 236

Section 236 empowers the registered holders holding at least 90% of the issued share capital of a company, either individually or along with person acting in concert, by virtue of:

  • an amalgamation,
  • share exchange,
  • conversion of securities or
  • for any other reason

to first intimate the company regarding their intention to buy the remaining shares or part thereof, then to make offer to the minority shareholders at a price determined by the registered valuer and finally getting the possession of the shares by depositing the amount equal to the value of shares to be acquired in a separate bank account. Alternatively, the minority shareholders may also offer the shares to the acquirer at a price determined on the basis of valuation by a registered valuer in accordance with prescribed rules.

However, in the practical scenario, the section fails to achieve its objective of releasing the minority shareholders as the section does not clarify whether upon receiving such an offer the minority shareholders or the Acquirer is obligated to sell or buy the shares, and no specific timelines have been prescribed for acceptance of such an offer or for the tender of shares.  Further, the instance where the shares are held in demat form, has also not been considered.

The process under section 236 can be seen below:

Other methods of acquiring minority shares under the Act

Apart from the transactions mentioned above, there are several other methods available to implement squeeze out minority shareholders within the Act, such as consolidation of shares, reductions of share capital etc. out of which, most commonly used method is reduction of share capital. However, all the provisions have their own benefits and lacuna’s. The brief overview of the said transactions are as follows:

Consolidation of shares:

Consolidation of shares means consolidating nominal value of shares that results into decrease in the number of shares with increase in nominal value of each share. For example 100 shares of face value of Rs. 10 each may be consolidated into 1 share of face value of Rs 1000 each. Consolidation is also known as reverse stock split, which is the effective tool by which a company can restructure its capital and can eliminate minority holding with the approval of Tribunal in terms of section 61 (1) (b) of the Act and Rule 71 of the NCLT Rules, 2016.

Reduction of share capital:

A company limited by shares can reduce its share capital through: (a) reducing/extinguishing its liabilities on unpaid share capital; (b) with or without extinguishing or reducing its liabilities on any shares which is lost or is unrepresented by its existing assets; or (c) with or without extinguishing or reducing its liabilities on any shares which is in excess of its requirement. Section 66 of the Act provides for the reduction of capital by a company with the approval of Tribunal, only if it is not defaulted in repayment of any deposit accepted by it or interest thereon.

Acquiring Minority shareholding in terms of section 235:

An Acquirer/Transferee Company can acquire the shares of Transferor Company under a scheme or contract subject to the approval of holders of minimum 90% of value of shares other than shares already held by Transferee Company or its nominee or its subsidiary companies. Such approval is required to be obtained by Transferee Company within 4 months after making such offer. Upon receipt of the said approval, within 2 months from the expiry of the offer period, the Transferee Company shall give notice to dissenting shareholders by conveying its intention to acquire their shares and the dissenting shareholders may then approach NCLT for seeking remedy within one month from the date of such notice.

The entire process of acquiring the shares from the dissenting shareholders is extensive and time consuming for the acquirer. This makes the process of squeezing out dissenting shareholders unreasonably lengthy.


In conclusion, the notified section has added a way for unlisted companies to eliminate minorities smoothly vide scheme of arrangement which will further boost the dominance of majority over minority. On prima-facie view, one can say that the section seems to have covered the lacuna’s of other squeezing out provisions of the Act, however, the supervisory role of the respective regulatory authorities and the views to be taken by respective Tribunals will decide the materialisation of the notification.

Links to related write ups –

Takeover under Companies Act, 2013-



Condonation of delay provisions now extended to LLPs

Megha Saraf, Manager | Corporate Law Division

Ministry of Corporate Affairs (“MCA”) vide its recent Notification[1] dated 30th January, 2020 has given a relaxation to all Limited Liability Partnerships (LLPs) by extending the scope of condoning the delay to them in filing applications/ documents to the Central Government/ Registrar. As per the powers conferred upon the Central Government under Section 67 of the Limited Liability Partnership Act, 2008 (“LLP Act”), Section 460 of the Companies Act, 2013 (“Act, 2013”) which provides for condonation of delay has now been extended to LLPs with effect from 30th January, 2020.

A brief of the amendment is provided below:

Existing scope of Section 460 of the Act, 2013

Section 460 of the Act, 2013 refers to condonation of delay of offences in certain cases which provides for the following:

  1. delay in filing application to the Central Government
  2. delay in filing any document to the Registrar

In the aforesaid cases, the Central Government may condone the delay after recording the reasons in writing. Accordingly, companies can file e-Form CG-1 accompanied by an application with the Registrar of Companies (RoC) in order to condone the delay that has happened.

Revised scope of Section 460 of the Act, 2013

MCA vide its recent Notification has now extended the provisions of Section 460 to LLPs which would mean that now LLPs also have the option of proceeding before the Central Government on account of any delay in filing an application/ document with the Central Government or Registrar respectively. In absence of any particular section providing for condonation of delay, LLPs may file such application for condonation in e-Form 22 with the Registrar.

It can be said that with such extension of the provisions, the LLPs may now have a chance to rectify and condone the offence committed by them instead of opting for compounding as provided under section 39 of the LLP Act.