.png)
The Government of India has reacted to the adversity of times that Covid-19 has brought to the business world by initiating certain legislative amendments and policy responses.[1] In the following blog, the said changes vis-à-vis changes to the Companies Act, 2013 have been listed and analysed.
1. CHANGES TO THE COMPANIES ACT, 2013
1.1 CORPORATE SOCIAL RESPONSIBILITY:The Ministry of Corporate Affairs vide its General Circular has clarified that spending CSR funds for Covid-19 is an eligible CSR activity.[2] The Government gave a liberal interpretation to the already existing circular defining items under Schedule VII that qualify as CSR activities.[3] This includes, “‘creating health infrastructure for COVID care’, ‘establishment of medical oxygen generation and storage plants’, ‘manufacturing and supply of Oxygen concentrators, ventilators, cylinders and other medical equipment for countering COVID-19’ or similar such activities are eligible CSR activities under item nos. (i) and (xii) of Schedule VII of the Companies Act, 2013 relating to promotion of health care, including preventive health care, and, disaster management respectively.”[4] Further even contribution to research and development activities in collaboration with public funded universities or organizations will be considered as CSR activities.[5] However as per the FAQ’s released by the Ministry of Corporate Affairs contribution to the CM’s Relief fund will not be included as CSR activity whereas the same is not the norm for the PM Cares Fund.[6] Thereafter vide circular No. 1/2021 dated 13.01.2021 even programmes to increase awareness regarding vaccination were included in the ambit of Schedule VII of the Companies Act.[7] The said contributions as mentioned above make the corporate for 100% tax deduction and even if the corporates exceed their spending above the ‘minimum prescribed level’ the same can be set-off and claimed for the next year.[8]
1.2 ANNUAL GENERAL MEETINGS: The Ministry of Corporate Affairs have provided companies with certain relaxations with regard to holding an Annual General Meeting under Section 96[9] wherein the companies whose financial year (except first financial year) ends on 31st December, 2019 hold their AGM within a period of 9 months then the same will not be held as a derogation or violation vide General Circular No. 18/2020, F. No.2/4/2020-CL-V dated 21st day of April, 2020.[10] Furthermore, the MCA has agreed to permit Companies to conduct their AGMs through video conferencing mode vide General Circular No. 20 l2O2O F. No. 21412020-CL-V dated 05th May, 2020.[11] Companies such as Tata and Reliance have already begun conducting virtual AGMs wherein Reliance saw an attendance crossing nearly half a million logins.[12]The said steps has its fair share of pros and cons, whereas on one side it increases participation, transparency and accuracy on the other hand it suffers from vices such as technical glitches, lack of digital knowledge etc.[13] However, the said steps to digitalize AGMs via a hybrid-model is a step in the right direction even for a post-covid world. The said model has already tasted success in nations such as the United Kingdom vide Section 360A of the Companies Act, 2006.[14] Companies have also been permitted to conduct the Extra-ordinary General Meetings through Video Conference along with a e-voting facility for simplicity through registered E-Mails till 30th June, 2021.[15]
1.3 DE-CRIMINALIZATION OF OFFENCES: The Ministry of Corporate Affairs has wanted to decriminalize minor offences under the Companies Act, 2013 since the last few years on account of increasing the ease of business and therefore the Companies Amendment Act, 2019 saw decriminalization of 16 compoundable offences.[16] The new bill in the Parliament seeks to decriminalize 23 compoundable offences, omit 7 compoundable offences and limit 11 compoundable offences only to fines.[17] However, the said moves by the Legislature are even especially more pertinent considering the Covid 19 situation as they clearly show the intent of the legislature to provide companies with a fearless atmosphere to operate and further reduce the burden on the NCLT.[18] However, the said amendment also opens the doors for certain malpractices, therefore the legislature must take into consideration elements of fraud and larger public interest.[19]
1.4 RELAXATION IN FILING: The Government has also come out with certain schemes such as the Companies Fresh Start Scheme, 2020 which permits companies to file belated documents in MCA-21 registry without any penalty from April 1 to December 31, 2020.[20] By virtue of the Condonation of Delay scheme under Section 252 of the Companies Act, 2013 now the companies restored by the NCLT between 1st December, 2020 and 31st December, 2020 do not have to pay additional fees while condoning the delay in filing forms with the Registrar.[21]
CONCLUSION
The changes brought about in the Companies Act, 2013 on a reading clearly display the intent of the legislature to bring ease in doing business across India, especially by reducing the procedural Compliance burden upon Companies incorporated as per the Companies Act, 2013. There due to the onset of the pandemic resulting in restricted physical movement, there is a stark recognition of the advantages that technology brings with itself facilitating compliance by companies in an E-Mode. These above-mentioned changes have brought about a certain level of convenience for Companies and its members, stake holders etc. Therefore, the changes carried out during Covid-19 have accelerated the transition to an online mode, which was in its nascent stages prior to the Pandemic. As such these changes are here to stay because even after the pandemic ceases to exist, an online mode of functioning is the next step in Corporate Reforms.
References [1] Taxation & Notification, Relief measures by Government of India for Business During Covid-19, RazorPay (6 May, 2020) < https://razorpay.com/learn/government-schemes-during-covid-19/> accessed 28 October, 2021. [2] Ministry of Corporate Affairs, General Circular No. 10/2020 (23 March, 2020). [3] Ministry of Corporate Affairs , General Circular No. 21/2014 (18 June, 2014). [4] Ministry of Corporate Affairs General Circular No. 09/2021, (05 May, 2021). [5] Ministry of Corporate Affairs General Circular No. 09/2021, (05 May, 2021). [6] Ministry of Corporate Affairs, MCA’s Frequently Asked Questions on eligibility of CSR expenditure related to COVID-19 activities, Pib.Gov.In (Delhi, 11 April, 2020) <https://pib.gov.in/PressReleasePage.aspx?PRID=1613404> accessed 31 October, 2021. [7] Ministry of Corporate Affairs , Circular No. CDN-27011/2/2021-CDN-MCA (23 February, 2021) <https://www.mca.gov.in/Ministry/pdf/MonthlyAchievementsJanuary_25022021.pdf> accessed 31 October, 2021. [8] Swarna Hardikar & Shibana Farheen, Corporate Social Responsibility Expenditure: A COVID-19 Perspective [2020] taxmann.com, 120. [9] Companies Act 2013, Section 96 ACT NO. 18 OF 2013. [10] Lalit Rajput, Decoding MCA Relaxation on Holding of AGM [2020] taxmann.com, 116. [11] KIRTHANA SINGH KHURANA, Virtual AGMs: Temporary easement or a new normal?, (2020) taxmann.com 118, 215 [12] Rajesh Kurup & Venkatesh Ganesh, Now streaming the next big hit: India Inc’s virtual AGMs, TheHindu (Mumbai, 17 July, 2020) < https://www.thehindubusinessline.com/companies/now-streaming-the-next-big-hit-india-incs-virtual-agms/article32117429.ece> accessed 31st October, 2021. [13] KIRTHANA SINGH KHURANA, Virtual AGMs: Temporary easement or a new normal?, (2020) taxmann.com 118, 215. [14] Companies Act 2006 [UK] [15] Ministry of Corporate Affairs, General Circular 14/2020 (8 April, 2020) [16] Raj Raditya Shahi, Decriminalization of Corporate Offences in India: An Analysis, [2020], IJLSI, 786. [17] Dheeraj Nair and Vishrutyi Sahni, Why it is necessary to decriminalise offences under the Companies Act to help businesses, TheNewIndianExpress (8April, 2020), < https://indianexpress.com/article/opinion/why-it-is-necessary-to-decriminalise-offences-under-the-companies-act-to-help-businesses-6353613/> accessed 31 October, 2021. [18] Raj Raditya Shahi, Decriminalization of Corporate Offences in India: An Analysis, [2020], IJLSI, 786. [19] Reeti Prakash, A Discourse on Decriminalization of Minor Economic Offences, (2020) taxmann.com 118,180. [20] Companies Fresh Start Scheme, 2020. [21] Ministry of Corporate Affairs General Circular No. 03/2021, (15 January, 2021).