Relaxations by SEBI in times of COVID-19: Right Step in Right Direction

The economic shock of COVID-19 pandemic has propelled governments to intervene with monetary and fiscal policies to counter the downturn and provide temporary income support to businesses and households.

Apr 22, 2020 10:04 IST India Infoline News Service

Who knew we would get a break from the madness we put ourselves in on a daily basis! Well, the coronavirus has actually taught us a lesson; be prepared for unforeseen circumstances. Economies, the world over, are under pressure and suffering. It is expected that the world trade will fall between 13% and 32% in 2020, disrupting normal economic activity and life around the world.

The economic shock of COVID-19 pandemic has propelled governments to intervene with monetary and fiscal policies to counter the downturn and provide temporary income support to businesses and households. But restrictions on movement and social distancing to slow the spread of the disease mean that labour supply, transport and travel are today directly affected in unprecedented ways.

Important relaxations announced by SEBI
The regulatory authorities in India and around the world have acknowledged the weak economy, lower consumption and absence of staff from offices. Taking into account these hardships, the Indian regulatory authorities have relaxed compliances, extended due dates for filing quarterly/annual results, waived late filing fees, re-assured markets/economy with rate cuts, moratorium on loan payments, moved meetings to video conferences and excluded lockdown period from NPA timeline.

The Securities and Exchange Board of India ("SEBI"), one such regulatory authority in India, which regulates securities transactions and their compliances has notified relaxations under various regulations from making statutory filings, extending due dates and waiving the requirement of making advertisement publications in newspapers.

Let's look at some of the important relaxations announced by SEBI to mitigate the hardships faced by individuals and companies because of COVID-19 and the impact, if any, these relaxations may have on the function of a company and the economy as a whole.

Regulatory Filings and Submissions under the Listing Obligations and Disclosure Requirements (LODR)
  • half-yearly compliance for share transfer facility extended till May 31, 2020
  • details on investor complaints extended till May 15, 2020
  • yearly secretarial compliance report extended to June 30, 2020
  • quarterly compliance report on corporate governance extended to May 15, 2020
  • quarterly shareholding pattern submission extended to May 15, 2020
  • annual audited standalone or consolidated, as the case may be, financial results and quarterly financial results extended to June 30, 2020
  • initial disclosure and annual disclosure for large corporates extended to June 30, 2020
  • half-yearly and yearly filings extended to June 30, 2020
  • certificate of company secretary, certifying all certificates have been issued within 30 days extended to May 31, 2020
  • requirement of top 100 entities to hold their AGM within 5 months from the end of the financial year extended to September 30, 2020
  • the requirement of the nomination and remuneration committee meeting at least once before the end of a financial year extended to June 30, 2020
  • prior intimation of Board meetings held till July 31, 2020 relaxed to 2 working days for financial results and in other cases as well
  • penalty for delay in intimating loss and issue of share certificates made between March 1, 2020 to May 31, 2020 waived.
The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("LODR") mandates that the board of directors and audit committee must meet at least 4 times a year, with a maximum time gap of 120 days between any two meetings. In view of the lockdown, SEBI has waived this requirement of 120 days for meetings between December 1, 2019 and June 30, 2020 but the number of meetings must be a minimum of 4 in a financial year. Likewise, the Ministry of Corporate Affairs ("MCA") has also extended the period of 120 days by 60 days, i.e. 180 days till September 2020.

The SEBI has also extended timelines for issuance and filings for companies which have listed their Non-Convertible Debentures (NCDs), Non-Convertible Redeemable Preference Shares (NCRPS), Municipal Debt Securities (MDS) and Commercial Papers (CPs). SEBI has also deferred enforcement of its circular on Standard Operating Procedure, which will now come into effect for compliance periods ending on or after June 30, 2020.

Regulatory Filings and Submissions under the Takeover Regulations
  • filing disclosures, in terms of Regulation 30 (Continual Disclosures) of the Takeover Regulations extended to June 01, 2020
  • promoter disclosure on encumbrance extended to June 01, 2020.
Other Relaxations
  • due date for regulatory filings for AIFs and VCFs extended by 2 months
  • timeline for compliance with certain requirements for Portfolio Managers relaxed
  • submission of registration documents, KYC update or material change timelines relaxed
  • compliance by credit rating agencies relaxed
  • compliances by mutual funds and REITs relaxed
  • timeline for processing of various investors request and complying with the compliances and disclosures to be made by market participants and intermediaries relaxed
  • timeline for regulatory filing and compliance by trading members / clearing members relaxed
  • timeline for certain activities carried by depository participants, stock brokers, share transfer agents relaxed.

How can these relaxations help businesses?
Taking into account the disruption of business activities, the Government of India announced certain relaxations in relation to statutory compliances under various laws, which will help business organisations in India to focus on necessary measures to address the threat of COVID-19. These relaxations, together with the relaxations granted by the MCA, IBBI and other authorities, will enable companies to reduce compliance burden and avoid penalties on account of unavoidable delay in meeting their regulatory compliances. While the Government and entrepreneurs work their minds to revive the economy, these relaxations will take away some burden (albeit small) from their shoulders.

The authors of this article are Sangeeta Lakhi, Senior Partner, Rajani Associates and Rahul Pandey, Senior Associate, Rajani Associates  

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