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13 July 2020
The COVID-19 pandemic has affected businesses' ability to comply with various statutory rules and regulations due to lockdowns and other social distancing measures. The government – particularly the Ministry of Corporate Affairs (MCA) – has proactively taken various steps to support companies in their ability to comply with the Companies Act 2013, including:
The Companies Act, by way of the Companies (Meetings of Board and its Power) Rules 2014 (2014 Rules), provides that the following actions cannot be performed at a board of directors' meeting held via videoconferencing or other audiovisual means (unless a physical quorum of directors is present):
Since COVID-19 has drastically affected boards' ability to meet at a common place to approve these matters, on 19 March 2020 the MCA issued the (Meetings of Board and its Powers) Amendment Rules 2020 (Amendment Rules), allowing companies to perform the abovementioned restricted actions at a board meeting convened via videoconferencing or other audiovisual means, without requiring the physical presence of directors, until 30 June 2020.
Considering that COVID-19 cases are still being detected in India and the government intends to minimise physical contact between individuals as much as possible, on 24 June 2020 the MCA issued the Companies (Meetings of Board and its Powers) Second Amendment Rules 2020 (Second Amendment Rules), further amending the 2014 Rules. By way of the Second Amendment Rules, the MCA extended the relaxation introduced by the Amendment Rules until 30 September 2020. Accordingly, Indian companies' board of directors can now perform the abovementioned actions at a meeting held via videoconferencing or other audiovisual means until 30 September 2020. However, companies must comply with various conditions as specified in the Companies Act with respect to convening board meetings via videoconferencing or other audiovisual means, including:
The Second Amendment Rules also considered the due date for the completion of annual compliances by Indian companies. As per the Companies Act, Indian companies' shareholders must, among other things, approve and adopt the audited financial statements, including the board report, for the financial year ending on 31 March by 30 September. Since the board of directors must approve the financial statements and the board report prior to their adoption by the shareholders in the general meeting, the above relaxation will help to ensure the timely completion of annual compliances by Indian companies, as boards can approve the financial statements and the board report in a meeting held via videoconferencing or other audiovisual means until 30 September 2020. Further, as the government looks to revive India's economic growth while simultaneously minimising the impact of COVID-19, the introduction of the Second Amendment Rules will help to address procedural difficulties with respect to the approval of amalgamation, merger, demerger, acquisition and takeover transactions in India.
For further information on this topic please contact Neetika Ahuja or Vikrant Anand at Clasis Law by telephone (+91 11 4213 0000) or email (email@example.com or firstname.lastname@example.org). The Clasis Law website can be accessed at www.clasislaw.com.
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