Centre extends relief on compliance till September2 min read . Updated: 21 Jun 2020, 10:56 PM IST
- Companies now get more time to meet deposit, debenture norms
- MCA has in the last few months taken steps that will reduce compliance burden for businesses
The Centre has given yet another extension to companies to set aside part of the deposits and debentures maturing in FY21 in a dedicated account, which is a statutory requirement under the Companies Act.
The corporate affairs ministry said in a circular that the original due date specified under the law was 30 April, which was extended till end of June, and has now been further extended till the end of September.
A ministry circular on Friday said the extension is given in view of the requests received from various stakeholders seeking more time on account of the covid-19 crisis.
The extension is applicable to both deposits as well as debentures maturing in this fiscal year. The Companies (Share Capital and Debentures) Rules of 2014 say that every company needs to set up a Debenture Redemption Reserve before the end of April every year, and deposit at least 15% of the debentures maturing in that year. This investment could be in the form of bank deposits, or central and state government securities, or specified corporate bonds. In March, the ministry had given a three-month extension for compliance.
Similarly, companies accepting deposits from members have to deposit not less than 20% of such deposits maturing in a financial year and in the subsequent financial year in a separate account of a scheduled bank, or deposit repayment reserve account. For this requirement under the Companies Act, too, the government had in March given three months’ extra time till end of June. Due dates for both the requirements now stand extended till end of September.
The government’s move comes at a time when businesses are struggling with a weak balance sheet following the nationwide lockdown to contain the spread of coronavirus infections. The government’s over ₹20 trillion stimulus package relied mostly on bank credit to businesses rather than on upfront measures. The corporate affairs ministry has in the last few months taken a series of steps to reduce the compliance burden and lower the cost of capital for businesses.
The latest move seeks to give more flexibility to companies on the use of the funds available with them and complements a host of steps taken by the Reserve Bank of India (RBI) in easing their liquidity crunch. In May, RBI extended the three-month moratorium on term loan instalments it had announced earlier for the March-May period by another three months till end of August.
The government on the other hand brought an ordinance in February suspending the Insolvency and Bankruptcy Code (IBC) for at least six months starting 25 March so that no business will be dragged into bankruptcy tribunals for defaults during this period. The ordinance also allows a limited extension of this suspension period. The Modi administration also allowed more time for businesses and individuals to file tax returns for FY20 till end of November, reduced the rate of tax deducted and collected at source by a fourth on specified transactions and extended the due date for a direct tax dispute settlement scheme till December from June to help struggling businesses.