Spending Of Corporate Social Responsibility Funds And Finance Ministers Announcement In Relation To Companies Act And IBC Compliances

A. Spending of Corporate Social Responsibility funds for COVID-19 relief is eligible for Corporate Social Responsibility Activities

The Ministry of Corporate Affairs (MCA) vide its circular dated March 23, 2020 has taken series of steps in the wake of the rapidly spreading COVID-19 and issued a clarification on spending of Corporate Social Responsibility (CSR) funds for COVID-19. As per the said circular, the Companies spending CSR funds for COVID-19 are considered eligible for CSR activity.

Further, the funds may be spent for various activities to COVID-19 mentioned under item nos. (i) and (xii) of Schedule VII of Companies Act, 2013 as follows:

1. Eradicating hunger, poverty and malnutrition, promoting health care including preventive health care and sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water

2. Disaster management, including relief, rehabilitation and reconstruction activities
http://www.mca.gov.in/Ministry/pdf/Covid_23032020.pdf

B. Announcement by the Finance Minister

I. In relation to the Companies Act, 2013

1. The moratorium has been issued from April 01, 2020 to September 30, 2020. Hence, no additional fee shall be levied during this period for late filing

2. For the board meetings to be held in the next two quarters i.e., April to June and July to September, 2020; relaxation of sixty days has been provided

3. Companies Audit Report Order 2020 which was previously applicable for FY 2019-20 shall now be applicable for FY 2020-21

4. If an independent director was not present in any of the Board meeting for the FY 2019-20, such non-attendance of the independent director shall not be the violation of the provisions of the Companies Act 2013.

5. All the newly incorporated companies are now provided additional six months’ time for filing of form INC-20A for declaration of commencement of business implying that a complete period of one year is now available for making such declaration to ROC

6. For the FY 2019-20, if any director does not meet the criteria of residency in India i.e. resident in India for at least 182 days or more under the provisions of Section 149 shall not be treated as violation of the provisions of the Companies Act 2013

7. Companies that are required to create a Deposit Repayment Reserve Account of twenty per cent of the amount of its deposits maturing during the following financial year before April 30 of each year can now create such reserves till June 30, 2020

8. Companies issuing debentures are required to invest 15% of the amount of its debentures maturing during the year, ending on the 31st day of March of the next year in the specified instruments before April 30 of each year can now invest in such specified securities till June 30, 2020

II. In relation to the Insolvency & Bankruptcy Code:

1. The threshold limit of default for filing a case under IBC has been revised from Rs. 100,000 to Rs. 100,00,000

2. The government may suspend the Section 7, 9 and 10 of the IBC for six months to prevent companies from being forced into insolvency depending upon the situations

Please feel free to revert on below mentioned email ids in case you need any further clarification or information.
Nidhi Singh at nidhi.singh@ibadvisors.co and Manisha Martolia at manisha.martolia@ibadvisors.co



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