Measures Taken by MCA and SEBI in Light of the COVID-19 Outbreak
A. Measures Introduced by the Ministry of Corporate Affairs
1. Relaxation on requirement of physical board meeting in respect of matters: The Ministry of Corporate Affairs (‘MCA’) has, on March 19, 2020, amended the Companies (Meetings of Board and its Powers) Rules, 2014 (‘Meeting Rules’) to allow companies to hold meetings on the matters listed below by way of video conferencing or other audio visual means till June 30, 2020 (which are otherwise permitted to be held only with physical presence of the requisite quorum):
(a) approval of annual financial statements;
(b) approval of the report of the board of the company;
(c) approval of prospectus;
(d) audit committee meetings for consideration of financial statement including consolidated financial statement if any, to be approved by the board; and
(e) approval of amalgamation, merger, demerger, acquisition and takeover.
Companies are required to follow the same procedure for holding meetings in relation to the above matters by way of video conferencing or other audio visual means as is prescribed under the Meeting Rules.
2. Implementation of ‘Work from Home’ Policy: To encourage social distancing, all companies are expected and advised by the MCA to put in place an immediate plan to implement a ‘Work from Home’ policy in their head and field offices, and to conduct meetings though video / audio and other electronic / telephonic / computerized means. This has been introduced as a temporary measure until March 31, 2020, after which the position will be reviewed.
3. Introduction of Form CAR-2020: The MCA is in the process of issuing a web-based form CAR-2020 (Company Affirmation of Readiness towards COVID-19) for companies and LLPs to confirm their readiness to deal with the COVID-19 pandemic. This form is expected to be deployed by the MCA on Monday, March 23, 2020 and companies and LLPs (through authorized signatories) are expected to report compliance using this form on the same day.
B. Relaxation from Compliance with Certain Provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
The Securities and Exchange Board of India (‘SEBI’), by its circular dated March 19, 2020, has decided to grant relaxations with immediate effect from certain compliance requirements in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’) for listed entities. These relaxations are set out below:
1. Extension of timelines: SEBI has provided an extension of timelines in respect of the following compliance requirements:
(a) 1 month extension in respect of the compliance certificate on share transfer facility, secretarial compliance report and the corporate governance report;
(b) 3 week extension in respect of the statement of investor complaints and quarterly shareholding patterns; and
(c) 45 day extension in respect of quarterly financial results and 1 month extension for annual financial results.
2. Relaxation of time gap between board and audit committee meetings: Under the Listing Regulations, a maximum time gap of 120 days has been prescribed in respect of any two meetings of the board of directors and the audit committee of a listed entity. SEBI has now exempted listed entities from this obligation in respect of meetings held or proposed to be held between December 1, 2019 and June 30, 2020.