Knowledge Update June edition

Dear Professionals,

We are happy to present our June edition of Knowledge Update on the recent developments in the field of Corporate Laws and other allied laws.

During this month, some of us would have resumed working like we did pre Covid and also would have started attending office, albeit seldom. As we Professionals work together towards reviving the economy through our efforts, we need to be mindful of the increasing number of cases especially the metropolitan areas. 

We have seen most of our clients businesses facing severe cash crunch and some have been forced to shut down. The various stimulus packages announced by the Government are in the right direction, however, its full implementation is yet to happen. Also, some of the schemes do not cover first time entrepreneurs/borrowers and all of us hope there are further policy changes and stimulus packages to address these challenges/issues.

We look forward to your valuable feedback and comments on the updates.

Best Regards,

Akansha Rathi

TABLE OF CONTENTS

COMPANY LAW

 1.     Extension of time for creation of deposit repayment reserve and to invest or deposit 15 % of the amount of debentures 

2.     Extension of timeline for name reservations/resubmission of forms for Companies and LLPs

3.     Amendment to list of eligible CSR Expenditure under Companies Act, 2013*

4.     Extension to time limit to hold general meetings/postal ballots via VC or OAVM

5.     MCA relaxation for registration of Independent Directors in database

6.     Extension in time limit to hold VC or OAVM Board meeting for approval of financials

7.     Relaxation Of Time For Filing Forms Related To Creation Or Modification Of Charges Under The Companies Act, 2013

8.     Sweat equity shares issuance to startups registered with Department for Promotion of Industry and Internal Trade

9.     Relaxation to listed company which has issued debentures privately

 SECURITIES LAW

 1.     SEBI’s clarification on daughter of a Promoter not be reclassified as Public shareholder

2.     Relaxation of maximum time gap between two board/Audit Committee meetings

3.     SEBI’s recommendation to allow companies to trade excess CSR spending

4.     Extension of time for submission of financial results for quarter/half year/financial year ending 31st March 2020

5.     Extension of time for submission of Annual Secretarial Compliance Report

6.     Relaxation in pricing norms for preferential issue

7.     Amendment to Substantial Acquisition of shares and Takeover (SAST) Regulations

8.     Amendment to Prohibition of Insider Trading (PIT) Regulations

9.     Amendment to SEBI Settlement Proceedings Regulations

10. Relaxation in pricing methodology for listed companies having stressed assets

 IBC REFORMS

 Suspension of initiation of Corporate Insolvency Resolution process (CIRP)

Amendment to IBBI (Insolvency Professionals) Regulations

MSME ACT

Changes made to MSME registration process

REVISED STAMP DUTY

Rationalized and harmonized system through centralized collection mechanism

COMPANY LAW

1. Extension of time for creation of deposit repayment reserve & to invest or deposit 15% of amount debentures

The Ministry of Corporate Affairs has extended the time limit for creation of deposit repayment reserve & to invest or deposit 15% of amount of debentures maturing during the year to 30th September 2020 from 30th June 2020.

2. MCA extends timeline for name reservations/resubmission of forms for Companies and LLPs wherever expiry is between 15th March to 30th June 2020

·        Companies

? when the name reservation for new company or name change of existing company - extended by 20 days or 60 days respectively beyond 30th June

? Resubmission - Additional 15 days beyond 30th June 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 30th June 2020

? Resubmission- Additional 15 days beyond 30th June 2020

3. Contribution for Armed and Para military forces part of CSR Expenditure

 MCA now allows amount spent towards any measure for the benefit of Central Armed Police Forces (CAPF) and Central Para Military Forces (CPMF) veterans, and their dependents including widows to be treated as eligible CSR expense.

4. Extension of time limit to hold General meetings/postal ballots through VC or OAVM

In view of the continuing effect of Covid 19 pandemic, the time limit to hold AGM/EGM through VC or OAVM extended till 30th September 2020.

5. Relaxation in last date to register Independent Directors in databank

Date for registration of Independent Directors in Databank extended till 30th September 2020

6. Extension of time limit to hold Board meetings for approval of financials through VC or OAVM

Due to the continuing effect of Covid 19, MCA has extended the time limit to hold VC or other audio video mode board meetings for approval of financials till 30th September 2020. 

7. Relaxation of time for filing charge creation or modification form

·        If date of creation / modification of charge

? Is before 01.03.2020, but the timeline for filing such form had not expired under section 77 of the act as on 01.03.2020, fees shall be as on 29.02.2020

? Falls on any date between 01. 03.2020 to 30. 09.2020- such period shall be excluded for counting the time limit of 120 days for filing

·        Not applicable for charge satisfaction forms

·        Scheme valid till 30th September 2020

8. Issuance of Sweat Equity shares for startups registered with DIPP

·        Start-ups registered with DIPP may issue sweat equity shares upto 50% of its capital upto 10 years from the date of its incorporation (earlier it was for 5 years)

·        Done to align with the DIPP rules

9. Relaxation to listed company which has issued debentures privately to increase liquidity

Requirement to invest amount less than 15 per cent of amount of its debentures maturing during the year, ending on March 31 of the next year on or before April 30 in each year relaxed.

SECURITIES LAW

1. SEBI’s informal guidance on daughter of a Promoter cannot be reclassified as Public shareholder

SEBI has clarified that daughter of a Promoter (where she holds more than 10% of the voting rights) cannot be reclassified as Public shareholder because she is married, living a separate life and has no involvement in the management of the Company.

2. Relaxation from gap between two Board/Audit Committee meetings 

Relaxation of maximum time gap between two board/Audit Committee meetings has been further extended till July 31, 2020.

3.     SEBI’s recommendation on trading of excess CSR Spending

The working group has recommended that CSR Certificates be issued for excess CSR spending to be utilized by companies which have not spent their CSR Funds. Stakeholders views are sought by June 30 after which the final guidelines will be put in place. 

4.     Extension of time for declaration of financial result for quarter/half year/year ending 31st March 2020

In view of the effect of pandemic, the due date for declaration of financial result for quarter/half year/financial year ending 31st March 2020 further extended till 31st July 2020.

 5. Extension of time- submission of Annual Secretarial Compliance report due to Covid 19

The due date for submission of Annual Secretarial compliance report extended till 31st July 2020.

 6. Relaxation in pricing norms for preferential issue

·         allotment of shares under preferential issue will be a volume-weighted average of weekly highs and lows for 12 weeks or two weeks — whichever is higher

·        shares will be locked in for three years

·        pricing relaxation will be valid for issuances made until December 2020.

 7. Amendment to SAST Regulations 

·        In case indirect acquisitions, 100% of the open offer amount must be deposited in 2 working days

·        the escrow account can be in the form of cash and/ or bank guarantee.

·        simple interest of 10% to all the shareholders in case of delays due to Acquirer 

 8. Amendment to PIT Regulations 

·        maintaining a structured digital database including nature of unpublished price sensitive information, names of persons who have shared the information;

·        automation of process of filing disclosures to stock exchanges

·        restriction on trading window not applicable for transactions as prescribed by SEBI

·        entities to file the non-compliances of Code of Conduct with the stock exchanges and amount so collected shall be credited to Investor Protection Education Fund

 9. Amendment to SEBI Settlement Proceedings Regulations 

·        Promoters along with the Principal Officer included for the purpose of calculation of the base amount in terms of Table X of Schedule II

·        Schedule II to be suitably amended to rationalize & benchmark certain Base Amount

 10. Relaxations in pricing methodology for listed companies having stressed assets

·        Meaning of stressed company

ü defaulted on payment obligations for more than 90 days

ü credit rating agencies downgraded its securities to D

ü has inter-creditor Agreement in terms of RBI (Prudential framework for resolution of stressed assets) Directions 2019

·        Exemption to allotees of preferential issues from open offer obligations

·        Pricing not less than average of the weekly high and low of the volume weighted average prices during the two weeks preceding the date

·        Cannot be made to entities that are part of promoter group or undischarged insolvent, willful defaulter or fugitive economic offender

·        Resolution to be passed by majority of minority shareholders and end use to be disclosed

·        Proceeds cannot be used for repayment of loans taken from promoter group/group companies

·        Three year lock in for shares allotted 

IBC REFORMS

 Suspension of initiation of CIRP

 ·        In the wake of Covid 19, the Government has suspended initiation of new CIRP process for a period of 6 months from 25th March 2020.

·        CIRP can be initiated for defaults prior to 25th March 2020 provided it meets the threshold limit of 1 Cr.

 Amendment to IBBI (Insolvency Professionals) Regulations

 Any Insolvency Professional Entity (IPE) can provide support services to any Insolvency Professional (IP), no requirement of being a Partner in the IPE.

 MSME registration process w.e,f 1st July 2020

·        To be known as Udyam Registration, Micro, small and Medium have new threshold limits taking both investment in Plant & Equipment or equipments and Turnover

·        All existing MSMEs to be re-registered on Udyam Registration portal

·        Export of goods and services to be excluded from Turnover in the criteria.

·        Thresholds revised upwards so more enterprises are covered

·        Micro- Investment less than 1 Cr and Turnover less than 5 Crores

·        Small- Investment less than 10 Crs and Turnover less than 50 Crores

·        Medium- Investment less than 50 Crs and Turnover less than 250 Crores

Revised stamp duty w.e,f 1st July 2020

·        the duty will be incidental on the buyer or the seller

·        no stamp duty will be charged on government securities

·        State-wise stamp duty rates will be replaced as under

? Issue of a security: 0.005%

? Transfer of security on delivery and non delivery basis: 0.015% 0.003%

? Equity and commodity futures: 0.002%

? Equity and commodity options: 0.003%

? Currency and interest rate derivatives: 0.0001%

? Other derivative:0.002%

? Repo on corporate bonds: 0.00001%

? debentures stamp duty 0.005% on issuance & 0.0001% in case of transfer and re-issue.

Due Dates

Foreign Liabilities and Assets Information Reporting (FLAIR) with RBI- 15th July 2020

 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 are based on the internal research done by the Author.