The Corporate Affairs Ministry (MCA) has yet again come to the aid of Corporate India, extending by three more months the timeline for compliance with creation of a deposit repayment reserve and investment of a portion of their maturing debentures in 2020-21 in specified liquid instruments.
As against the earlier specified deadline of June 30, the MCA has now given three more months, ie up to September 30, 2020 for this compliance. This is second time the timelines are getting extended — the first time being on March 24 when MCA allowed the compliance to be done by June 30.
Under company law, India Inc would have had to create by April-end a deposit repayment reserve of 20 per cent of deposits maturing during fiscal 2020-21. Corporates are also required to invest or deposit at least 15 per cent of the amount of maturing debentures during the financial year in liquid instruments.
Move lauded
Besides reducing the compliance burden, this latest MCA move would encourage companies to use their deposits and resources efficiently for the benefit of their employees and their sustenance, which will overall result in improving the economic health of the country, Sandeep Grover, Partner, Ortis Law Offices, said.
The extension of timelines would allow businesses to focus on re-opening and re-establishing their core functions, added Sandeep Jhunjhunwala, Partner, Nangia Andersen LLP.
Harish Kumar, Partner, L&L Partners said that the latest MCA move to extend the timeline for creation of a deposit repayment reserve account as well as for investing 15 per cent of the amount of maturing debentures in liquid instruments would further ease the liquidity crunch being faced by entities amid the ongoing Covid-19 disruption.
The latest MCA move is among the series of steps that the Ministry had taken post the Covid-19 induced lockdown from March 25 to soften the compliance blow on Corporate India, with several companies seeing revenues thin to trickle. It may be recalled that the MCA had, in the wake of the Covid-19 pandemic, allowed corporates to hold virtual board meetings, virtual annual general meetings and extraordinary general meetings to conduct urgent business.
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