Vinod Kothari & Company
Team Vinod Kothari & Company
firstname.lastname@example.org | updated as on 14th April, 2020
“If necessity is the mother of invention, then adversity must be the father of re-invention”, says Johnny Flora. It is a pity that an urgency of such colossal scale should have been needed for the lawmakers for companies to realise that in an age where all businesses are working day and night with meetings and conferences on the internet, and even courts are hearing matters using VC, the ability of a company to conduct general meetings by using VC should have come as a concession, or a limited period dispensation. The MCA Circular of 8th April, 2020 (‘MCA Circular’), if it is a precursor to a larger rethinking, is certainly welcome.
Nitu Poddar and Ambika Mehrotra
As one maybe aware that during this period of disruptions caused by COVID 19, several relaxations have ben provided by the Ministry of Corporate Affairs (MCA) vide its Notifications dated 19th March, 2020 and March 24, 2020 and the Securities and Exchange Board of India (SEBI) vide its Circular dated March 19, 2020. Further the Institute of Company Secretaries of India has also issued its Guidance dated April 4, 2020 on the applicability of Secretarial Standards on board and general meetings.
A snapshot of the relaxations granted by the above authorities wrt board meetings are:-
|S. No||MCA for Companies Act, 2013||SEBI for LODR|
|1.||Time gap for conducting board meetings relaxed to 180 days from present 120 days – for the first two quarters of FY 2020-2021
i.e BM from 24th March 2020 till 30th September 2020 can be conducted with a larger gap of 180 days
|Time gap for conducting board and audit committee meeting has been relaxed without any upper limit – for meetings held / proposed to be held between December 1, 2019 and June 30, 2020.
However, it is to be ensured that there are 4 meeting of board and audit committee held during the FY.
|2.||Board meetings can be held through video conferencing or other audio visual means for all matters including the otherwise restricted matters mentioned in Rule 4 of the MBP Rules.
|The time limit for submitting the annual financial results with the stock exchange has also been extended to June 30 from May 15 (for unaudited results) and May 30 (for audited results)|
|3.||For the FY 2019-20, a ID meeting per se as per Schedule VI has been relaxed. If the IDs so deem necessary, the views may be shared through telephone / email or any other mode of communication
On close perusal of the relaxations granted by MCA and SEBI, it is understood that the relaxations are different for a listed and an unlisted company and the quarter for which the meeting pertains to. The major points to be kept in mind with respect to board meetings are:
Mostly, listed companies might have had their last board meeting held in the month of Feb, 2020. In that case, the next meeting can be held within 180 days but before 30th June, 2020 since that is the last date of filing financial results for Q4 of FY 2019-20 for both equity and debt listed companies.
It is to be noted that the debt listed companies are required to make half-yearly intimation of financial result u/r 52 of LODR. However, where a debt-listed company is a subsidiary / joint venture or associate of an equity listed company, it needs to prepare and gets its results approved quarterly for the purpose of consolidation.
For unlisted company, the maximum time gap of 180 days is extended till all board meeting to be held before September 30, 2020.
In view of the same, we have put together the timelines wrt listed and unlisted companies in the table below:-
|BMs to be held/held during the quarter||MCA Relaxation||SEBI Relaxation||Equity Listed||Debt Listed||Unlisted|
|FY 2019-20 – Q4
|Maximum time gap between two meetings can be 180 days||Results of Q4 to be approved latest by June 30, 2020
|BM to be held within June 30, 2020||BM to be held within June 30, 2020||Maximum time gap between two meetings can be 180 days|
|FY 2020-21 – Q1
|Maximum time gap between two meetings can be 180 days||No relaxation currently for approving results of Q1
|BM to be held within August 14, 2020||If the financial results are consolidated with an equity listed company – BM to be held within August 14, 2020
If the financial results are not consolidated with an equity listed company – will have to ensure that the gap between two board meeting is not more than 180 days
|FY 2020-21 – Q2
|Maximum time gap between two meetings can be 180 days||No relaxation currently for approving results of Q2
|BM to be held within November 14, 2020|
A quick analysis of the Scheme is available at- https://youtu.be/lXUb4l8srM8
By Team Corporate Laws, (email@example.com)
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.
By CS Vinita Nair, Senior Partner| Vinod Kothari & Company
–Megha Mittal & Shreya Jain
Frivolous initiation of insolvency process, merely for recovery of dues has been a persistent concern- catalyst being the seemingly low threshold of Rs.1,00,000/-.While murmurs about raising the threshold limit for initiating insolvency process have long been in the picture, the notification comes in the wake of recent outbreak of the novel COVID – 19 – the minimum default requirement now stands increased hundred times; from Rs. 1,00,000/- to Rs. 1,00,00,000.
Applicable from 24.03.2020, the Government, in exercise of its powers under section 4 of the Insolvency and Bankruptcy Code, 2016 (“Code”) has specified Rs. 1,00,00,000 (Rupees One Crore) as the minimum amount of default for the purposes of triggering insolvency. Note that Rs. 1 Crore is the maximum threshold which the Central Government can prescribe under section 4.
The step has been widely touted as a relief for MSMEs in this time of crisis, however, this might have multiple implications. The authors have made a humble attempt to analyse its implications from a broader perspective, and if at such increase would be welcomed in absence of the ongoing crisis.