• The extension is given in view of the requests received from various stakeholders seeking more time on account of covid-19
• The move comes at a time when businesses are struggling with a weak balance sheet after the national lockdown
The government has given a three-month extension to companies to set aside a part of the deposits and debentures maturing in FY21 in a dedicated account, a statutory requirement under the Companies Act.
The Ministry of Corporate Affairs (MCA) said in a circular that the due date of April end, which was extended till end of June in a circular in March, has been further extended till end of September, 2020.
The circular, signed on Friday, said the extension was given in view of the requests received from various stakeholders seeking more time on account of covid-19.
The extension is applicable to both deposits as well as debentures maturing this fiscal. The Companies (Share Capital and Debentures) Rules of 2014 said every company needs to set up a Debenture Redemption Reserve before end of April every year and deposit in that not less than 15% of the debentures maturing in that year. This investment could be in the form of bank deposits or central and state government securities or specified corporate bonds.
Similarly, companies accepting deposits from its members have to deposit not less than 20% of such deposits maturing in a financial year and in the subsequent financial year in a scheduled bank in a separate account called deposit repayment reserve account. For this requirement under the Companies Act too, the government had in March given three months extra time till end of June. Due dates for both the requirements now stand extended till end of September, 2020.
The move comes at a time when businesses are struggling with a weak balance sheet after the national lockdown to check the spread of coronavirus infections wiped out two months of business. The government’s over ₹20 trillion stimulus package relied mostly on bank credit to businesses rather than on more upfront measures.
The Ministry of Corporate Affairs (MCA) has in the last few months taken a series of steps that will reduce the compliance burden and lower the cost of capital for businesses.
Source: MCA Circular dated 19 June 2020
