SEBI circular dated 31st August, 2020 directing rating agencies not to take cognizance of the defaults by the companies due to the ongoing covid pandemic. Gist of circular follows:
CRAs recognize default based on the guidance issued vide SEBI circulars dated May 3, 2010 and November 1, 2016. Further, SEBI vide circular dated March 30, 2020 had provided for relaxation from recognition of default owing to moratorium permitted by RBI and lockdown due to COVID-19 pandemic.
The Reserve Bank of India (RBI), vide notification no. RBI/2020-21/16 DOR.No.BP.BC/3/21.04.048/2020-21 dated August 6, 2020, has provided for a resolution framework for COVID-19 related stress.
Based on its assessment, if the CRA is of the view that the restructuring by the lenders/ investors is solely due to COVID-19 related stress or under the aforementioned RBI framework, CRAs may not consider the same as a default event and/or recognize default. Appropriate disclosures in this regard shall be made in the Press Release.
The above relaxation is extended till December 31, 2020.
This circular is issued in exercise of the powers conferred by Section 11 (1) of Securities and Exchange Board of India Act, 1992 read with the provisions of Regulation 20 of SEBI (Credit Rating Agencies) Regulations, 1999, to protect the interest of investors in securities and to promote the development of, and to regulate, the securities market.
MCA has issued a circular dated 30th March, 2020 wherein it has given companies a one time opportunity to file old forms without any additional filing fee between 1st April 2020 and 30th September, 2020. Immunity from launch of prosecution or proceedings for imposing penalty shall be provided only to the extent of delay in filings and not with substantive violation of law. Any other consequential proceedings including proceedings involved interest of shareholders vis-a-vis the company concerned shall not be covered by the immunity.
Where the company has filed an appeal against a notice issued by the ROC for violation of the provisions of the Act with respect to delay in filings, then the company should first withdraw the appeal before filing for immunity under this Scheme. But this is applicable only with respect to statutory filing under the Act and will not apply in cases where company has filed a petition before the NCLT where the company has been struck off under the provisions of section 248 of the Act, due to non conduct of any business activities for two years consecutively, for revival of the company. Also it is not clear where companies have been under strike off due to non filings and their directors DIN disqualified – whether the disqualifications would be removed so that they can do the filings. Ideally that should happen so that companies in the fault can then revive their companies with little cost involved. There are many such companies in that category and it would be great if MCA can redress that aspect.
Where orders have been passed against the company for non filings and penalties levied but the appeals could not be lodged and if the last date for filing appeal falls between March to May 2020 then a period of 120 additional days shall be provided to that company to file its appeal to the relevant authorities. During that 120 days additional period no action shall be taken against the company concerned in so far as it pertains to delay in filing
Companies who have taken advantage of this fresh start scheme have to further file an immunity form called CFSS-2020. This is required to be filed only after closure of the Scheme AND after all the forms have been taken on record or approved by the MCA but not before 6 months from the closure of the scheme. There shall be no immunity in case of appeal pending before any court of law or in respect of management disputes in the company before any court or tribunal. Also there is no immunity where the court has already ordered conviction OR an order imposing penalty has been passed and no appeal has been preferred against such orders before the Scheme has come into force.
This Scheme will not apply in following cases
a) company against which final notice for strike off has already been initiated u/s 248 of the Act;
b) where strike off application has already been made by the company;
c) companies which have been amalgamated under a scheme of amalgamation or compromise under the Act;
d) where company has filed application for obtaining Dormant status for the company under section 455 of the Act;
e) to vanishing companies;
f) to forms for increase in authorised share capital (SH-7) or charge related documents
After the immunity is granted, the ROC/ RD shall withdraw the prosecution proceedings, if any, pending before the concerned court and prosecution for adjudication of penalties u/s 454 of the Act, other than those where the court has already ordered conviction or penalty has been imposed by the court/ tribunal or adjudicating authority.
Further the defaulting inactive companies can, after all the filings have been made uptodate, take advantage of the dormant company provisions or strike off company provisions under the Act.
Simultaneously a LLP settlement scheme is also running for delayed filings of form 3 & 4