Tag Archives: LexCounsel

ILN Today Post

Guidelines to pass Ordinary and Special Resolution by Companies Owing to the threat posed by COVID-19

To ease the impact of disruption caused by the Coronavirus/COVID-19 pandemic and in the spirit of social distancing, the Ministry of Corporate Affairs (“MCA”), through its circular dated April 8, 2020 (“Circular”) and a subsequent clarificatory circular dated April 13, 2020 (“Clarification”), has provided specific guidelines for the companies to take all decisions which are urgent in nature and which require the approval of members of such companies, other than items of ordinary business or business where any person has a right to be heard, through the mechanism of postal ballot or e-voting, in accordance with the provisions of the Companies Act, 2013 (“CA 2013”). Given that the CA 2013 does not provide for any specific provision in relation to allowing the conduct of shareholders meetings through video conferencing (“VC”) or other audio-visual means (“OAVM”), the general provisions in relation to postal ballot or e-voting under the CA 2013 and the rules framed thereunder shall be applicable for such extraordinary general meetings (“EGMs”).

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RELAXATIONS GRANTED BY SEBI AND IRDA ON ACCOUNT OF COVID-19 PANDEMIC

Compliances have taken a backseat during the ongoing lockdown due to Covid-19 pandemic. Regulatory authorities have granted several relaxations to assist businesses to cope with the unprecedented lockdown and economic distress. We discuss herein below a few relaxations granted by the Securities and Exchange Board of India and the Insurance Regulatory and Development Authority of India to ease the compliance distress of the companies.

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Ring-fencing under IBC, and Open Issues

An ordinance was promulgated on December 28, 2019 (“Ordinance”) making further amendment in the Insolvency and Bankruptcy Code, 2016 (“IBC) and the President of India accorded his assent to the Insolvency and Bankruptcy Code (Amendment) Act, 2020 (Amendment Act) inserting section 32 A which is now the fourth amendment to IBC.

The Amendment Act inter alia introduced Section 32 A to IBC which provides immunity to the corporate debtor and its assets if the resolution plan is approved and it results in change of the management of the corporate debtor from any prosecution, action, attachment, confiscation.

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Delhi High Court: Party challenging an award under Section 34, Arbitration and Conciliation Act, 1996 or seeking a stay on award to deposit the entire sum awarded

Judgment: Power Mech Projects Limited Vs. SEPCO Electric Power Construction Corporation [O.M.P. (I) (COMM.) 523/2017],

Forum: Hon’ble High Court of Delhi (“Court”)

Judgment delivered on: February 17, 2020

Act/Law: Arbitration and Conciliation Act, 1996 (“Act”).

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Extension of Realisation Period of Export Proceeds

To ease the impact of disruption caused by the Coronavirus/COVID-19 pandemic, the Reserve Bank of India (“RBI”) has provided extension of the period for realisation of the export proceeds as prescribed under the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015 (“FEM Export Regulations”) read with the RBI Master Direction on Export of Goods and Services (“RBI Master Directions on Exports”).

Regulatory Framework:

The export of goods and services in India and the payments to be received for such export of goods and services are regulated by the FEM Regulations, framed under the Foreign Exchange Management Act, 1999, read with the RBI Master Directions on Exports. We discuss hereinbelow certain key provisions of the FEM Export Regulations and the RBI Master Directions on Exports:

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Possibility of Non-Payment of Lease Rent Due to COVID-19

Amidst the outbreak of novel coronavirus (“COVID-19”) and its consequential countrywide lockdown, shutting down majority of the commercial, industrial and retail activities, the much forgotten ‘Force Majeure’ clause in contracts and leases is now receiving close scrutiny. In simple terms, ‘Force Majeure’ events relieve a party from performance of its contractual obligations, without any consequential breach of the contract, provided such performance is adversely impacted by events outside the control of an affected party such as act of God, natural disaster, war, strike, lockout, epidemic, Government orders, etc.

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Relaxation Schemes for Companies and Limited Liability Partnerships

In furtherance of its previous corporate governance reliefs, the Ministry of Corporate Affairs (“MCA”) has introduced the Companies Fresh Start Scheme, 2020 (“CFS Scheme”) and amended the LLP Settlement Scheme, 2020 vide its circular dated March 30, 2020 (“LLP Modified Scheme”) to allow defaulting companies and limited liability partnerships (“LLPs”) an opportunity to file belated documents, returns etc. without charging of additional fees with respect to the delay in filing and grant immunity from prosecution with respect to such delay.

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LEGAL AND REGULATORY FRAMEWORK FOR DIGITAL HEALTH – TELEMEDICINE PRACTICE GUIDELINES

In a significant move, the Ministry of Health and Family Welfare (“MoHFW”) on March 25, 2020 has issued the Telemedicine Practice Guidelines (“Guidelines”) for enabling Registered Medical Practitioners (“RMPs”) to provide healthcare using telemedicine. As per the Guidelines, ‘telemedicine’ is the delivery of health care services, where distance is a critical factor, by all the healthcare professionals using information and communication technologies for the exchange of valid information for diagnosis, treatment and prevention of disease and injuries, research and evaluation, all in the interests of advancing the health of individuals and their communities.

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Time to Protect Indian Businesses from Insolvency

The medium to long term financial effects of Coronavirus are yet to unfold, but the magnitude is already anticipated to be huge. Many countries across the world are announcing financial packages for businesses. India is also on the track to take a decision on relief packages.

With widespread lockdowns, the coming months are expected to witness a series of defaults by many viable businesses, and in this situation, we need to protect viable Indian businesses from landing up in our bankruptcy tribunals, for no fault of their promoters.

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FORCE MAJEURE AND CORONAVIRUS: FREQUENTLY ASKED QUESTIONS

Part 2: Possibility of Reduction in Workforce and Wage Bills

In Part 1 of this series, we discussed Force Majeure and Suspension/Termination of Contracts. You can contact newsletter@lexcounsel.in to get a copy of Part 1 of this series.

In this Part 2, we have attempted to answer some of the questions which businesses are asking concerning their ability to reduce workforce and wage bills.

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