Compliance News

​Initiatives by the Indian Ministry of Corporate Affairs (MCA)

In the continuous efforts to provide ease of doing business in wake of the pandemic situation of covid-19, the Ministry of Corporate Affairs (MCA) has provided extension of time/ relaxation for various compliances and introduced amendments such as:

• The ‘Companies Fresh Start Scheme, 2020’ (CFSS-2020) introduced by MCA and which was valid from 1 April 2020 to 30 September 2020, has now been extended to 31 December 2020. The CFSS-2020 is an opportunity for companies to file such belated returns and forms enlisted under the ambit of the scheme, with the Registrar without any additional fees and only normal fees will be payable during the currency of the Scheme (up till 31 December 2020). The CFSS-2020 also grants immunity from launching of prosecution or proceedings for imposing penalty on account of delayed filings of such forms. The Form DIR-3 KYC/ DIR-3 KYC WEB falls under the ambit of CFSS-2020 and accordingly the individuals who have been allotted Director Identification Number (DIN) on or before 31 March 2020 and have not filed Form DIR-3 KYC/ DIR-3 KYC WEB on or before 30 September 2020 (due date), can complete the filing till 31 December 2020 under CFSS-2020. 
• Similarly, the LLP Settlement Scheme, 2020, which is an amnesty scheme for LLPs and provides for filing belated forms without additional fees, has been extended up till 31 December 2020.
• The scheme for relaxation of time for filing forms related to creation or modification of charges under the Companies Act, 2013 has been extended up till 31 December 2020. The scheme benefit is available to a company or charge holder for charge created or modified before 1 March 2020 but where the due date for filing such forms for charge creation/modification has not expired in accordance with the Companies Act, 2013, as on 1 March 2020 or if the due date for filing such forms falls on any date between 1 March 2020 and 31 December 2020.
• The companies are allowed to conduct Extraordinary General Meeting through video conference or other audio visual means for items other than ordinary business up to 31 December 2020 and within the framework and modalities provided in the previous circulars of the MCA dated 8 April 2020 and 13 April 2020.
• The MCA has further allowed board meetings to be held for the approval of annual financial statements, Board’s report, prospectus, matters relating to amalgamation, merger, demerger, acquisition and takeover to be carried out through video conferencing or other audio visual means up till 31 December 2020.
• The Registrar of Companies (RoC) of 25 (twenty-five) jurisdictions have issued orders wherein it has suo-moto granted an extension by a period of three months from the due date for holding Annual General Meeting (AGM) for companies whose financial year ends on 31 March 2020. The RoCs have also clarified vide the order that order grants extension to companies which have filed applications in the requisite form (viz. Form GNL-1) for extension of AGM and which are yet to be approved as well as companies which have filed applications in the requisite form for extension of AGM and which were rejected. The MCA had vide circular dated 17 August 2020 stated that companies which are unable to hold their AGM for financial year ending 31 March 2020 are required to file an application in the requisite form (viz. Form GNL-1) and advised RoCs to take a liberal view of the hardships faced by stakeholders granting extension of time (up to 3 months) for holding AGM in such applications made. However, MCA subsequently vide Press Release dated 8 September 2020 stated that directions were issued to RoCs to issue such orders for extension of AGM without any formal application or fees paid in this regard.
• The MCA vide notification dated 24 August 2020, introduced the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2020 amending the CSR Rules, 2014. The amendment allows any company engaged in research and development activity of new vaccine, drugs and medical devices in their normal course of business to undertake research and development activity of new vaccine, drugs and medical devices related to covid-19 for financial years 2020-21, 2021-22 and 2022-23 subject to certain conditions laid down and such activity could be part of the CSR Policy of the company.

Company Secretarial (CS) compliances for Private Limited Company

Below is the summary of the compliances which need to be adhered to in the next quarter (October-December 2020)

Foreign Direct Investment (FDI) Policy

The Ministry of Commerce & Industry, vide Press Note No. 3 (2020 Series) dated 17 April 2020 reviewed the extant FDI Policy. As per the Press Note, a citizen of or an entity incorporated in any country which shares land borders with India (i.e. China, Nepal, Bhutan, Bangladesh, Myanmar, Pakistan and Afghanistan or the “Neighboring Countries”), or where the beneficial owner of an investment into India is situated in, may invest in India only under the Government Route, i.e. with a prior approval from the Government of India.

Further, vide Press Note, incase of any transfer of ownership of any existing or future FDI in an entity in India, which may, directly or indirectly, result in beneficial ownership to be situated in the Neighboring Countries, such subsequent change in beneficial ownership also requires a prior Government Approval.
This Amendment is effective from 22 April 2020, vide notification S.O. 1278 (E) dated 22 April 2020 by Ministry of Finance.

Insolvency and Bankruptcy Code (Second Amendment) Act, 2020

The Insolvency and Bankruptcy Code (Second Amendment) Act, 2020 has been effective from 5 June 2020. The said Amendment has inserted a new section 10A in the Insolvency and Bankruptcy Code 2016 to temporarily suspend initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7, 9 & 10 of the Code for a period of six months from 25 March 2020.

Further, Ministry of Corporate Affairs, vide Notification S.O. 3265(E) dated 24 September 2020, has further extended the temporary suspension on initiation of CIRP for another three months i.e. uptill 25  December 2020.  No application for initiation of CIRP under section 7, 9, and 10 of the Code shall be filed for any defaults taking place from 25 March 2020 to 25 December 2020.

Consumer Protection Law

The Ministry of Consumer Affairs, Food and Public Distribution has introduced Consumer Protection Act 2019, which has been notified vide notification number S.O. 2351(E) dated 15 July 2020 to come in force as from 20 July 2020. Under the Consumer Protection Act 2019, the Ministry has introduced the following:

• Prohibiting misleading endorsements/advertisement of any Products
• Prohibiting any unfair contracts entered into between a manufacturer/trader/service provider and a consumer.
• Codied Product Liability which may be imposed on a manufacturer or seller of a product that has caused harm upon usage, due to no fault of the consumer, for reasons like defect in manufacturing or inadequacy or inaccuracy in instructions of the product.
• Established a Consumer Mediation Cell at the District, State and National level, for consumers.
• Increased the jurisdiction of the District State and National Consumer Dispute Redressal Commission, which widens the ambit of the complaints that are eligible to be addressed by each Commission.

In addition to the above mentioned, the Ministry, vide notification G.S.R. 462(E) dated 23 July 2020 has also introduced Consumer Protection (e-commerce) Rules 2020 to include commercial activities, and prevent its misuse from the consumer’s point of view. Under the Rules, the Ministry has placed various obligations and duties on the Marketplace and Inventory e-commerce entities.

Employment Law Updates

Ministry of Labour and Employment vide notification G.S.R 432 (E) dated 4 July release draft Code of Wage 2019 and notified that the said draft of Code of Wages shall be taken into consideration after the expiry of a period of 45 days from such notification. Further, the ministry, vide this notification invited objecttions and suggestions to be submitted to ma.khan15@nic.in or r.bolimeri@nic.in.

Ministry of Labour and Employment vide Press Release dated 22 September 2020 notified that the Parliament has passed the three Bills in order to categorize the labour laws within 4 codes. The Bills passed are: Industrial Relations Code, 2020, Code on Occupational Safety, Health & Working Conditions Code 2020 and Social Security Code 2020. The 4th Code i.e. Code on Wages has already been passed in 2019. The above mentioned codes are said to amalgamate 29 Labour Laws.