The weekly messenger | Edition 33.20

REGULATORY NEWS

Relief Measures introduced in Insolvency Resolution Process in the Country due to Outbreak of COVID-19 Pandemic – 8 September 2020

The Committee on Insolvency and Bankruptcy Code of ICAI has issued a publication on ‘Relief Measures introduced in Insolvency Resolution Process in the Country due to Outbreak of COVID-19 Pandemic’, which provides the listing of several relief measures which were introduced in the insolvency resolution process in the country due to the outbreak of COVID-19 pandemic by the Government and by the Regulators.
 
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Companies (Acceptance of Deposits) Amendment Rules, 2020 – 7 September 2020

The Central Government has issued the Companies (Acceptance of Deposits) Amendment Rules, 2020, wherein the following changes have been made:

• In Rule 2(1)(c)(xvii), which states that “an amount of twenty five lakh rupees or more received by a start-up company, by way of a convertible note (convertible into equity shares or repayable within a period not exceeding five years from the date of issue) in a single tranche, from a person shall not be considered as deposits”:

1. the repayment period of ‘five years’ has been substituted with ‘ten years’;
2. In Explanation I i.e. the definition of a start-up company, the reference of the erstwhile notification ‘G.S.R. 180 (E) dated 17th February, 2016 issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry’ has been replaced by the new notification ‘G.S.R. 127 (E),  dated the 19th February, 2019 issued by the Department for Promotion of Industry and Internal Trade’.

• In clause (i) of second proviso to sub-rule (3) of Rule 3 ‘Terms and Conditions of Acceptance of Deposits by Companies’, which provides that maximum limit in respect of deposits to be accepted from members shall not apply to a private company which is a start-up, for five years from the date of its incorporation. Here the words ‘five years’ have been substituted with the words ‘ten years’.

These Rules shall come into force w.e.f. 7 September 2020.
 
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General order for extension of time to hold AGM for FY 2019-20 – 8 September 2020

Due to COVID-19 and on the request of the various associations, the Ministry of Corporate Affairs (MCA) has issued directions to ROCs to issue orders for extension of the timeline for holding of Annual General Meeting (AGM) for the Financial Year (FY) 2019-20 from 30 September 2020 till 31 December 2020 without filing of formal application and payment of fee.
 
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Long Form Audit Report – Review – 5 September 2020

The Reserve Bank of India (RBI) has revised the formats of Long Form Audit Report (LFAR). The revised formats would be applicable from FY 2020-21 onwards.
 
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Report of the Expert Committee on Resolution Framework for Covid-19 related Stress – 7 September 2020

The RBI has constituted an Expert Committee on 7 August 2020, in order to make the recommendations on the required financial parameters to be factored in the resolution plans under the ‘Resolution Framework for COVID-19 – related Stress’ along with sector specific benchmark ranges for such parameters. The Committee has submitted its report, wherein it has recommended financial parameters that, inter alia, include aspects related to leverage, liquidity and debt serviceability and financial ratios for 26 sectors which could be factored by lending institutions while finalizing a resolution plan for a borrower.

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