MCA relaxes time to file forms for creation/modification of charges

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In a view of the pandemic situation due to COVID-19 outbreak and several representations made, by the stake holders, Ministry of Corporate Affairs (MCA) has came out with a new scheme called “Scheme for relaxation of time for filing forms related to creation or modification of charges under the Companies Act, 2013” for the purpose of condoning the delay in filing certain forms related to creation/ modification of charges.

This important relaxation by MCA in relation to creation and modification of Charges under the Companies Act, 2013 is very significant, especially during the pandemic situation due to COVID-19, is detailed as below:

=========================================================

F.No. 02/05/2020 CL-V
Government of India
Ministry of Corporate Affairs
5th Floor, ‘A’ Wing, Shastri Bhawan,
Dr. Rajendra Prasad Road, New Delhi-1.

General Circular No. 23/2020
Dated: 17th June, 2020

To

All Regional Directors,
All Registrar of Companies,
All Stakeholders.

Subject: Scheme for relaxation of time for filing forms related to creation or modification of charges under the Companies Act, 2013.

Sir/Madam,

The companies are required to file forms related to creation or modification of charges within the timelines provided in section 77 of the Companies Act, 2013 (Act), i.e. a total of 120 days of the creation or modification of charge. In case, the company fails to register the charge within the period of thirty days referred to in sub-section (1) of section 77, the charge holder may file the form related to creation or modification of charges under section 78 of the Act, within the overall timelines for filing of such form under section 77.

  1. On account of the pandemic caused by the COVID-19, representations have been received in this Ministry, requesting that the timelines related to filing of certain charge related forms may be suitably relaxed so as to provide a window of compliance for the registration of charges. Under the Companies Fresh Start Scheme, 2020 as laid out in the General Circular No. 12/2020, dated 30.03.2020, the benefit of waiver of additional fees was not extended to the charge related documents. Therefore, it has been suggested that some dispensation may be provided for filing of charge related documents as well.
  2. In view of the above, the Central Government in exercise of its powers under section 460 read with section 403 of the Act and the Companies (Registration Offices and Fees) Rules, 2014 (Fees Rules) has decided to introduce a Scheme, namely “Scheme for relaxation of time for filing forms related to creation or modification of charges under the Companies Act, 2013” for the purpose of condoning the delay in filing certain forms related to creation/modification of charges.
  3. The details of the scheme are as under: –

(i) The scheme shall come into effect from the date of issue of this Circular.

(ii) Applicability: The scheme shall be applicable in respect of filing of Form No. CHG-1 and Form No. CHG-9 (both referred as ‘form’ or ‘forms’) by a company or a charge holder, where the date of creation/modification of charge:

(a) 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, or

(b) falls on any date between 01.03.2020 to 30.09.2020 (both dates inclusive).

(iii) Relaxation of time:

(a) In case a form is filed in respect of a situation covered under sub-para (ii)(a) above, the period beginning from 01.03.2020 and ending on 30.09.2020 shall not be reckoned for the purpose of counting the number of days under section 77 or section 78 of the Act. In case, the form is not filed within such period, the first day after 29.02.2020 shall be reckoned as 01.10.2020 for the purpose of counting the number of days within which the form is required to be filed under section 77 or section 78 of the Act.

(b) In case a form is filed in respect of a situation covered under sub-para (ii)(b) above, the period beginning from the date of creation/modification of charge to 30.09.2020 shall not be reckoned for the purpose of counting of days under section 77 or section 78 of the Act. In case, the form is not filed within such period, the first day after the date of creation/modification of charge shall be reckoned as 01.10.2020 for the purpose of counting the number of days within which the form is required to be filed under section 77 or section 78 of the Act.

(iv) Applicable Fees:

(a) In regard to sub-para (iii)(a) above, if the form is filed on or before 30.09.2020, the fees payable as on 29.02.2020 under the Fees Rules for the said form shall be charged. If the form is filed thereafter, the applicable fees shall be charged under the Fees Rules after adding the number of days beginning from 01.10.2020 and ending on the date of filing plus the time period lapsed from the date of the creation of charge till 29.02.2020.

(b) In regard to sub-para (iii)(b) above, if the form is filed before 30.09.2020, normal fees shall be payable under the Fees Rules. If the form is filed thereafter, the first day after the date of creation/modification of charge shall be reckoned as 01.10.2020 and the number of days till the date of filing of the form shall be counted accordingly for the purposes of payment of fees under the Fees Rules.

(v) The Scheme shall not apply, in case:

(a) The forms i.e.CHG-1 and CHG-9 had already been filed before the date of issue of this Circular.

(b) The timeline for filing the form has already expired under section 77 or section 78 of the Act prior to 01.03.2020.

(c) The timeline for filing the form expires at a future date, despite exclusion of the time provided in sub-para (iii) above.

(d) Filing of Form CHG-4 for satisfaction of charges.

  1. This issues with the approval of the Competent Authority.

Yours faithfully,

(K S Narayanan)

Assistant Director (policy)

RBI Governor Press Conference Highlights: Repo rate cut by 40 bps to 4%

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The Reserve Bank of India on Friday announced a surprise 40 basis points repo rate cut in an off-cycle policy review. RBI Governor Shaktikanta Das announced the decision of the Monetary Policy Committee at a press conference. He also said that the GDP growth for FY21 is expected to be in negative territory

The RBI Governor Shaktikanta Das announced a slew of measures aimed at further easing the liquidity conditions and providing relief to borrowers just a few days after the government concluded unveiling its five tranches of Rs 20 lakh crore worth of stimulus.

Staying true to what he had said earlier, RBI Governor came out for the third time with a set of measures to alleviate distress in the economy. The interventions included announcement on policy rates front with the Monetary Policy Committee holding an out of- cycle review meeting and extension of previously announced relief measures for both industrial establishments and individual borrowers.

The RBI was expected to follow up with monetary-side interventions after the government announced fiscal measures to cushion the economy from the Covid impact.

Key Takeaways:

Liquidity support: The RBI Governor Shaktikanta Das announced a 40 basis points repo rate cut. The MPC voted, with five of its six members in favour, for a reduction of repo rate by 40 basis points to 4 per cent from 4.4 per cent. Consequently, the reverse repo rate now stands at 3.35 per cent.

Moratorium extended: A further three-month extension up to August 31, 2020 on the following:

  1. Moratorium on term loan installments
  2. Deferment of interest on working capital
  3. Easing of working capital financing requirements by reducing margins
  4. Exemption from being considered as defaulter in supervisory reporting and reporting to credit information companies
  5. Extension of resolution for stressed assets, asset classification standstill by excluding moratorium period of three months.

Growth Outlook: On economic growth in the current fiscal, the RBI projected negative growth with a pick-up in growth impulses in second half. However, these depend on the trajectory of the pandemic.

Inflation Outlook: Headline inflation may fall below the RBI’s medium term target of 4% in third or fourth quarter of the current fiscal.

Demand & Supply: The governor said that the private consumption, which comprises 60 per cent of the GDP, has taken the biggest hit. Both the demand compression and supply disruption has taken a toll on the economy, the governor observed.

Foreign trade: Line of credit of Rs 15,000 crore for 90-days with roll over of up to one year so as to enable it to avail US dollar swap facility.

SIDBI: The special refinancing facility of Rs 15,000 cr to SIDBI at repo rate for 90 days for lending & refinance operations has been further rolled over for another 90 days at the end of initial 90 days period.

NCLT makes ‘default record’ mandatory

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Financial creditors moving the National Company Law Tribunal (NCLT) for initiation of insolvency process will have to mandatorily file ‘default record’ from the information utility (IU). No new petition will be entertained without record of default under Section 7 of the Insolvency and Bankruptcy Code (IBC), said the NCLT in a new directive.

The NCLT has also directed authorised representatives/ parties, in the cases pending for admission under Section 7 of the IBC, to file default record from an IU before the next date of hearing.

What is an IU?

An information utility is a repository of electronic evidence. It is an information network that stores financial data such as borrowings, default, and security interests, among others, of firms.

In India, the National e-Governance Services Limited ( NeSL), in mid-2017, became the first IU for bankruptcy cases under the insolvency and bankruptcy code (IBC).

A record of default is a statement of default on a particular loan and facility. With the latest NCLT move, the entirety of an IU as an integral part of the process to establish default and allow immediate admission before such a Tribunal is now complete, say experts.

The Corporate Affairs Ministry (MCA) had, about four months back, internally taken a decision that there is a need to make IU evidence mandatory in insolvency admission matters.

Today, the NeSL, which started its journey in September 2017, has information of loan details of 100 per cent of the corporates in India. It is sitting on data of ₹76-lakh crore of corporate borrowing outstanding.

As of end April this year, 220 financial institutions, including 75 banks, 147 NBFCs, and two debenture trustees, have uploaded data on the NeSL. Reacting to the latest NCLT move making record of default from an IU mandatory, S Ramann, Managing Director and CEO, NeSL, said: “We are satisfied that the Information Utility is playing its part as per the design of the IBC.”

Vidisha Krishan, Partner, MV Kini & Co, a law firm, said that till date the default record from IU was not mandatory, and even other records or evidence were sufficient to demonstrate a default.

However, now it has been made compulsory vide the latest direction, she added.

 

Read The NCLT Order dated 12.05.2020

 

Govt suspends IBC provisions that trigger fresh insolvency proceedings

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As per existing norms, if a payment default exceeds 90 days then the lender concerned has to refer the account for resolution under IBC or any other mechanism permitted by the Reserve Bank of India (RBI). The lender does not have the option to restructure the loan.

The government has decided to suspend insolvency and bankruptcy proceedings for at least six months owing to challenges businesses are facing due to the Covid-19 pandemic.

A new Section is likely to be added to the Insolvency and Bankruptcy Code (IBC).

It will suspend Sections 7, 9, and 10, which are used to trigger insolvency proceedings for six months or a period not exceeding one year from the date they commence, the official said.

A new Section is likely to be added to the Insolvency and Bankruptcy Code (IBC).

It will suspend Sections 7, 9, and 10, which are used to trigger insolvency proceedings for six months or a period not exceeding one year from the date they commence, the official said.

Section 7 of the Code enables financial creditors to start insolvency proceedings against a company while Section 9 gives operational creditors these powers.

Under Section 10, the promoter of the company can trigger insolvency proceedings against his or her own concern.

All the three Sections will cease to be effective for six months or further.

The provision is likely to require a change in the Act, according to experts.

“This is a positive step for companies.

But for companies, which were otherwise already in stress and could have found resolution under the IBC, their resolution may also be delayed due to this suspension,” said Anshul Jain, partner, PwC India.

Jain also said it needed to be seen if this move would have a positive impact on privately negotiated transactions on mergers and acquisitions.

In March, Union Finance Minister Nirmala Sitharaman had indicated the government would consider suspending the IBC for a few months if the Covid situation persisted and caused stress to businesses.

Already, the default threshold for stressed companies facing insolvency has been increased from Rs 1 lakh to Rs 1 crore.

In March, Union Finance Minister Nirmala Sitharaman had indicated the government would consider suspending the IBC for a few months if the Covid situation persisted and caused stress to businesses. Already, the default threshold for stressed companies facing insolvency has been increased from Rs 1 lakh to Rs 1 crore.

Read the Original Notification:

IBBI Notification dated 20th April, 2020

FM Nirmala Sitharaman announces Rs 1.7 lakh crore relief package for poor

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FM Sitharaman announces Rs 1.7 lakh crore ‘PM Gareeb Kalyan Scheme’

The government announced a Rs 1.7 lakh crore relief package aimed at providing a safety net for those hit the hardest by the Covid-19 lockdown, along with insurance cover for frontline medical personnel. About 800 million people will get free cereals and cooking gas apart from cash through direct transfers for three months. The 21-day lockdown began on March 25.

The Pradhan Mantri Garib Kalyan Yojana includes higher wages under the Mahatma Gandhi National Rural Employment Act (MGNREGA), Rs 1,000 ex-gratia payment to nearly 30 million poor senior citizens, widows and disabled as well as insurance coverage of as much as Rs 50 lakh each for about 2 million healthcare workers battling the disease.

States have been asked to use the Building and Construction Workers Welfare Fund to provide relief to construction workers and the first installment of Rs 2,000 under the Pradhan Mantri Kisan Yojana will be frontloaded to reach 87 million farmers in April.

Immediately
“We’ve immediately responded within 36 hours of the lockdown. We’ve first reached out to the poorest of the poor, who need help,” finance minister Nirmala Sitharaman said while announcing the programme on Thursday.

The package will be rolled out immediately.

“We will think about the others… will gradually address if there’s more to attend to,” she said, when asked about  a stimulus plan for companies, many of which have had to cease production, cut salaries or lay off employees because of the economic pain.

Industry and experts welcomed the announcements, even as the market responded positively with the Sensex closing at 29,947 points, up nearly 5% from Wednesday’s close.

“It’s a very well-defined package, reinforcing government’s intent that no one should be deprived of basic facilities in today’s stressed times,” said State Bank of India Chairman Rajnish Kumar. “We are hopeful of more calibrated responses in coming weeks as the impact of the pandemic unfolds.”

Under the package, the government will provide 5 kg of wheat or rice and 1 kg of pulses free every month for the next three months. Besides, 204 million women Jan Dhan account holders will get Rs 500 per month for the next three months. MGNREGA wages will rise to Rs 202 a day from Rs 182 to benefit 136.2 million families.

The measures will benefit the most vulnerable sections of society, said ITC chairman Sanjiv Puri.

Such “critical and large-scale interventions” are the need of the hour, he said. “These timely measures… will go a long way in providing support to farmers, daily wage earners, SHG (self-help group) women and poor senior citizens during such an unprecedented situation.”

ORGANISED SECTOR
The government said it will pay the entire provident fund contribution of those who earn less than Rs 15,000 per month in companies having less than 100 workers as they are at risk of losing their jobs. That amounts to 24% of basic pay–12% from the employee and 12% from the employer. This will be paid by the government for three months.

“This would prevent disruption in their employment,” a finance ministry statement said.

In addition, the Employees’ Provident Fund Regulations will be amended to include the coronavirus pandemic as grounds for allowing a non-refundable advance of 75% of the corpus or three months of wages, whichever is lower, from their accounts.

INDUSTRY DEMAND
India Inc sought help for distressed businesses across sectors such as tourism, hospitality, automobiles and aviation, besides micro, small and medium enterprises (MSMEs), where cash flows are down to a trickle amid mandatory adherence to tax and statutory payments.

“We hope that the RBI will soon bring in relief measures for distressed businesses including a moratorium on debt repayments and redefinition of non-performing assets,” said Confederation of Indian Industry director general Chandrajit Banerjee.

He added that the government could be more aggressive in its spending with an overall fiscal stimulus at 2.5-3% of GDP if disruptions continue for the next three months.

“Other segments of society, who are also looking forward to measures such as EMI waivers, as also extension of loan scheme tenures among ot others, economic package shall be on wait and watch mode,” said Niranjan Hiranandani, president of Assocham.

MCA amends threshold limits for Related Party Transactions.

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On November 18, 2019 the Companies (Meetings of Board and its Powers) Second Amendment Rules, 2019 (“Amendment Rules“) amended certain threshold limits prescribed by the Rules.

The central government notified the Companies (Meetings of Board and its Powers) Second Amendment Rules, 2019 on 18 November 2019. The amendment rules amend sub-clause 3 of rule 15 of the Companies (Meetings of Board and its Powers) Rules, 2014. The amendment rules alter the various transaction thresholds within which the board may authorize a related party transaction without referring the matter to the shareholders pursuant to section 188(1) (Related party transactions) of the Companies Act, 2013.

Rule 15 provides for conditions applicable to the board taking up, discussing and approving a related party contract or arrangement. The first proviso to section 188(1) of the act provides that no contract or arrangement which exceeds certain monetary thresholds, in relation to the company’s paid-up share capital or otherwise, may be entered into without the prior approval of the shareholders by a resolution. The thresholds in relation to this proviso to section 188(1) of the act are prescribed by the rules and have been amended through the amendment rules as follows:

  • For a contract or arrangement in relation to a sale, purchase or supply of any goods, previously the threshold, was the lower of: (1) 10% or more of the turnover of the company; or (2)₹1 billion. The amendment rules have relaxed the threshold and fixed it at 10% or more of turnover of the company.
  • Similarly, for a contract or arrangement for selling or otherwise disposing of, or buying property of any kind, previously the threshold for requiring a shareholder resolution was the lower of: (1) 10% or more of the turnover of the company; or (2)₹1 billion. The amendment rules have relaxed the threshold and fixed it at 10% or more of turnover of the company.
  • The amendment rules has similarly amended the threshold for a contract or arrangement in relation to leasing of property any kind, and in relation to availing or rendering of any services (directly, or through the appointment of an agent). The amendment rules now fix the threshold at 10% or more of turnover of the company.

Accordingly, the ministry has relaxed the thresholds and made it simpler for companies to ensure ease of business, and the ease of entering into related party transactions.

 Nature of Related Party Transactions Earlier Threshold Limit* Amended Threshold Limit*
Sale, purchase or supply
of any goods or material (directly or through an agent).		 Amounting to ten percent (10%) or more of turnover or Rs. 100 Crore, whichever is lower. Amounting to ten percent (10%) or more of the turnover of the company.
Selling or otherwise
disposing of, or buying, property of any kind (directly or through an agent).		 Amounting to ten percent (10%) or more of net worth or Rs. 100 Crore, whichever is lower. Amounting to ten percent (10%) or more of the turnover of the company.
Leasing of property of
any kind.		 Amounting to ten percent (10%) or more of net worth or 10 percent (10%) or more of turnover Rs. 100 Crore, whichever is lower. Amounting to ten percent (10%) or more of the turnover of the company.
Availing or rendering of any services (directly or through an agent) Amounting to ten percent(10%)or more of turnover or Rs. 50 Crore, whichever is lower Amounting to ten percent (10%) or more of the turnover of the company
*limits specified above shall apply for transaction or transactions to be entered into either individually or taken together with the previous transactions during a financial year.
Appointment to any
office or place of profit in the company, subsidiary company or associate company		 Remuneration exceeding
Rs. 2,50,000 per month		 No Change
Underwriting the
subscription of any securities or derivatives of the company		 Remuneration exceeding
one percent (1%) of net worth		 No Change

Insolvency regime for personal guarantors to corporate debtors from December 1

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The provisions for resolution for individuals under the Insolvency and Bankruptcy Code (IBC) is being implemented in a phased manner. On Friday, the corporate affairs ministry said the provision pertaining to personal guarantors to corporate debtors will be in force from December 1
A case is taken up for resolution under the law only after approval from the National Company Law Tribunal.

The insolvency regime for individual guarantors to corporate debtors will be in force from December 1, according to the government.

The provisions for resolution for individuals under the Insolvency and Bankruptcy Code (IBC) is being implemented in a phased manner.

On Friday, the corporate affairs ministry said the provision pertaining to personal guarantors to corporate debtors would come into force from December 1.

The Code provides for a market-driven and time-bound resolution for stressed assets.

A case is taken up for resolution under the law only after approval from the National Company Law Tribunal (NCLT).

In October, Corporate Affairs Secretary Injeti Srinivas said personal insolvency regime would be fully operational in one year.

“In the first phase, personal guarantor to a corporate debtor is almost under commencement. The next would be the fresh start process, basically giving relief to very small borrowers who are not in a position to repay the debt. That may be in another four to six months. Then proprietorship and partnership and others,” he had said.

Source : Economic Times