Sitharaman Relaxes MCA Filings For Startups Till September; Scraps Late Fees

Addressing a broad range of concerns regarding the economic impact of the coronavirus pandemic, finance minister Nirmala Sitharaman announced a few changes to the compliance and regulation-related matters for startups and companies under the ministry of corporate affairs rules.

To begin with, in respect of the MCA’21 registry, there is a moratorium issued from April 1 till September 30, 2020. Sitharaman said there will be no additional fees on late filings.

The FM added that for board meetings, the ministry is relaxing the mandatory requirement for holding board meetings for a period of 60 days and this relaxation will be applicable for the next two quarters.

Applicability of the Companies (Auditor’s Report) Order, 2020 (Caro 2020) shall be made applicable from the year 2020-21, instead of 2019-2020, which will end March 31 2020.

Further, Sitharaman said that for 2019-2020, if the independent directors have not been able to hold even one meeting during the year, it will not be considered under violation, unlike under the existing rules.  The finance minister said the new rules will be notified officially by the ministry in the next few days.

Additionally, the FM said the requirement to file declaration for the commencement of new business within six months has been relaxed, with six more months given to startups and businesses, making it one year from the commencement of business.

Further, if there is a company director who is not able to comply with the minimum residency in India of 182 days, then it will not be treated as a violation under Section 149 of the Companies Act.

Sitharaman added that the requirement to create a deposit reserve of 20% of deposits maturing during FY 20-21 before April 30, 2020, has now been moved to June 30, 2020.

The requirement to invest 15% of debentures maturing during a particular year in specified instruments before April 30, 2020. Now, startups and businesses have until June 30, 2020 to comply with this norm.

These new rules are likely to bring plenty of relief for startups and businesses worried about the compliance burden during the time of lockdowns.

In addition to the changes in the companies regulations and compliance rules, the last date for March, April, and May 2020 GST returns and composition returns has been extended to June 30, 2020. Specific regions will get different dates in a staggered manner. The ministry will notify these rules officially over the next few weeks.