Dear Professionals,
We are happy to present to you our May month edition of Knowledge Update on recent developments in the field of Corporate Laws and other allied laws.
As we are facing a global recession in major sectors of the economy, we have to be positive and fight this Pandemic with our united strength and compassion towards others.
In the last few months, we have learned quite a few lessons in life and if we could follow those for the rest of our lifetime, the World and people across the globe would change for the better.
On the professional front, we have learned to work from home in an equally productive way and this practice is here to stay even after the lockdown is lifted. All of us have become tech-savvy and VC meetings/webinars are most common nowadays.
Going forward, resilience is going to be most important for businesses to sustain.
On this note, we hope you will enjoy reading this update. Please help us grow and learn by sharing your valuable feedback and comments for improvement.
COMPANY LAW
- Clarification on dispatch of a notice to shareholders (SH) in respect of rights issue of listed companies
- MCA Extends Timeline For Name Reservation / Re-Submission For Companies & LLP's
- Contribution towards PM CARES Fund to be eligible as CSR expenditure
SECURITIES LAW
- Advisory by SEBI on disclosure of material impact of Covid 19 on Listed companies
- Relaxation from the applicability of SEBI Circular dated October 10, 2017 on non - compliance with the Minimum Public Shareholding (MPS) requirements
- Relaxation from procedural matters of SEBI Substantial Acquisition of shares and takeovers regulations (SAST) 2011 and SEBI Buy Back of Securities Regulations 2018
- Relaxation in timelines for compliance by trading/clearing members
- Extension of last date of payment of listing fees by NSE
- Relaxation in eligibility criteria for MSMEs to list on SME exchange of BSE
- Relaxation from compliance of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 (LODR) due to Covid 19 Pandemic
- Relaxation from certain regulations of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations) pertaining to Rights Issue opening upto July 31, 2020
IBC REFORMS
- Announcement by the Finance Minister on May 17, 2020
STAMP ACT
- Extension of time to make stamp duty payments due to Covid
COMPANY LAW
1. Clarification on dispatch of notice to SH in respect of rights issue of listed companies
The Ministry of Corporate Affairs by General circular no 21 has clarified that due to difficulties faced by the Companies in sending right issue notices by courier or speed post due to Covid 19, in respect of rights issue opening upto 31st July 2020, the listed companies may use electronic means to issue the said notices. Such electronic notice shall be sufficient compliance of Section 62(2) of the Companies Act 2013.
2. MCA extends timeline for name reservations/resubmission of forms for Companies and LLPs wherever expiry is between 15th March to 31st May 2020
Companies
- When the name reservation for new company or name change of existing company - extended by 20 days or 60 days respectively
- Resubmission - Additional 15 days beyond 31st May 2020.
It also includes IEPF Non-STP eForms (IEPF3, IEPF-5 and IEPF-7)
- LLPs
- For new LLP Formation or change of name - Extension by 20 days beyond 31st May 2020
- Resubmission- Additional 15 days beyond 31st May 2020
3. Contribution to PM CARES Fund part of CSR Expenditure
Schedule VII of the Companies Act, 2013 was amended by including contributions to PM-CARES Fund as valid CSR activity. This change shall come into effect w.e.f 28th March 2020.
SECURITIES LAW
1. Advisory on disclosure of material impact of Covid 19 Pandemic on listed companies
Listed Companies are hereby advised to disclose financial impact of Covid 19 on their operations, financials, future operations, capital and financial resources, demand for their products/services so that Investors have timely, accurate and updated information.
Regular updates as and when material developments takes place should be provided.
2. Relaxation from SEBI circular for minimum public shareholding (MPS) requirements
The stipulations of the October 10, 2017 SEBI circular are relaxed for listed entities for whom the deadline to comply with MPS requirements falls between the period from March 1, 2020 to August 31, 2020.
- Currently SEBI (Buy Back of Securities Regulation 2018) provides a restriction that the companies shall not raise further capital for a period of one year from the expiry of buyback period, except in discharge of their subsisting obligations.
- It has been represented that the said period of one year may be reduced to six months, which would be in line with the Companies Act, 2013.
- This relaxation will be applicable till December 31, 2020
3. Relaxation of procedural matters- Buy back and Takeovers
- Service of letter of offer for buy back and Takeovers can be done by electronic means. The letter to be published on website of the Company, stock exchange, Registrar, Manager to the issue.
- adequate steps to reach out to shareholders through other means like digital, audio visual, SMS etc
- Acquirer shall make public announcement as per regulation 14(3) of Takeover Regulation or as per regulation 7(i) of Buy-back regulation.
- Acquirer company to disseminate information on tendering process through internet etc
- Acquirer/ company and the manager shall provide procedure for inspection of material documents electronically.
4. Relaxation in timelines for compliance by trading/clearing members
Further relaxations were provided for compliance by trading/clearing members till 30th June 2020, 2 months from due date and exclusion of period from March 23, 2020 till June 30, 2020 in furtherance of SEBI circular no 61,62 and 68 dt 16th and 21st April 2020.
5. Relaxation of due date of payment of listing fees by NSE
NSE has relaxed the last date of payment of Annual listing fees from 30th April 2020 to 30th June 2020 for payment of listing fees in view of the pandemic.
6. Relaxation in eligibility criteria for MSMEs to list on SME exchange of BSE
- company's Net Tangible Assets limit reduced to Rs 1.5 Crores from Rs. 3 crores.
- In track record, the change is that the Company or firm or the firm which has been converted into company should have combined positive cash accruals in any one year out of the last 3 years
The above criteria applicable for listing w.e.f 1st June 2020.
7. Relaxation from compliance of LODR requirements in view of Covid 19 Pandemic
- Sending physical copies of annual report to shareholders
- Proxy at general meeting
- Sending of dividend warrants/cheque by speed post
- Publication of advertisement in newspaper
- Publishing quarterly consolidated financial result
8. Relaxation from compliance of ICDR Regulations for rights issue
- Service of the abridged letter of offer, application form and other issue material to shareholders by electronic transmission
- issue related advertisement as mandated by Regulation 84(1) shall mention the manner in which the shareholders who have not been served notice electronically may apply
- physical shareholders have to provide the demat account details
- Issuer along with lead manager, the registrar, and other recognized intermediaries institute an optional mechanism (non cash mode only) to accept the applications
Due Dates:
- Reg 7(3)- Compliance certificate for transfers etc by Compliance Officer and RTA- 30th may 2020
- Reg 40(9)- Practicing Company Secretary certificate for issue of share certificates/consolidations/sub division- 30th May 2020
IBC REFORMS
Suspension of initiation of insolvency proceedings up to one year
However, the start date of the one-year period is not clear which may be clarified later on by way of an ordinance. The fate of insolvency applications pending adjudication or those which have been filed but not been heard is also uncertain.
The suspension will cover all corporate insolvency filings, including under Section 7 (by financial creditors), Section 9 (by operational creditors) and Section 10 (by corporate debtors). The need for suspending fresh insolvency filings for up to one year is not clear without clarity on the defaults which are covered in such suspension since even pre-existing defaults and accounts that are already NPAs will get covered. Suspension of Section 10 Proceedings (Voluntary) would lead to no possibility of formal restructuring and in those cases, Sections 230-232 of the Companies Act, 2013 will need to be resorted to in case of default situations.
Empowering Central Government to exclude COVID - 19 related debt from the definition of default' under the IBC for the purpose of triggering insolvency proceedings.
This announcement is not qualified by any timeline, i.e. how long can such default continue before insolvency proceedings are initiated based on it. It is also not clear what exactly 'COVID - 19 related debt' means.
Special insolvency resolution framework for MSMEs to be notified soon- On March 24th 2020, the monetary limit for initiating insolvency proceedings was increased to Rs. 1 crore.
Now, a special insolvency resolution framework for MSMEs under Section 240A of the IBC will be notified to address issues that are peculiar to MSMEs.
EXTENSION OF TIME TO PAY STAMP DUTY DUE TO COVID
Due to lockdown in the entire Country, the stamp duty can be paid on the first working day after the lockdown period comes to an end in that district.
In case, the duty could not be paid on the first working day, an application can be made to to the District Collector of Stamps within one month from the date on which the lockdown ends (but within one year from execution) and in such case the District Collector of Stamps shall, with prior permission of Dy. IGR or Additional Controller of Stamps collect the deficit stamp duty without any penalty.
Disclaimer:
This newsletter is a compilation of updates prepared and circulated from the academic point of view only and are not intended to constitute professional advice on any matter.
The views and opinions expressed in this newsletter are those of the author of this document and don't represent views of any organization to which he/she belongs and are based on the internal research done by the Author.
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