In a move that would bring much needed respite to India Inc and banks, the Corporate Affairs Ministry (MCA) has granted moratorium to companies for registration and modification of charges during Covid-19 period.
It has now come up with a new scheme to condone the delay in filing of certain documents/forms relating to creation or modification of charges under the Companies Act 2013.
This move comes in the wake of representation received (in the backdrop of Covid-19 ) by the MCA requesting that timelines related to filing of certain charge related forms may be relaxed to provide a window of compliance for the registration of charges, official sources said.
Under the Company law, when a company avails itself of a secured loan, it is required to register charge by filing prescribed forms on the MCA portal. Similarly, there are filing requirements for modification and release of charge.
As per Section 77 of Companies Act 2013, companies are required to file forms related to creation or modification of charges within prescribed timelines i.e. within 120 days of the creation or modification of charge after payment of prescribed fees, with the registrar.
Not filing the form related to charge during the lockdown would have put the companies at risk of their loans being treated as unsecured, say company law experts. The MCA’s latest move would bring relief to the companies as treatment of their loans as unsecured would have other implications, they said.
The new MCA scheme essentially gives a moratorium for filings for registration/modification of charge which falls between March 1, 2020 and September 30, 2020. For such filings, the period or balance period for counting the due date will commence from October 1 and calculation of fee would also be considered accordingly.
Nitesh Mehta, Partner-Transaction Tax and Regulatory Services, BDO India, said: “While this scheme certainly gives relief from delayed filing (on registration of charge) which may have happened or likely to happen due to Covid-19, interestingly the scheme does not provide relaxation with respect to release of charge. This means in case of delay in filings for release of charge, a company will need to file for the condoning of delay. This aspect may be looked at by the government which seems to be be an unintended miss-out”.
Harish Kumar, Partner, L&L Partners, said that the new MCA scheme would reduce compliance burden amongst companies and charge holder during the lockdown period.
Sandeep Jhunjhunwala, Partner, Nangia Andersen LLP, said that the latest MCA move would secure investor community’s interests while also protecting the companies from a punishable fine of up to ₹10 lakh and imprisonment of up to 6 months for its officers in default, on account of non-compliance with registration of charges.
Sandeep Grover, Partner, Ortis Law Offices, said that companies will now have sufficient window of compliance for registration of charges. Further, by extending the benefit of waiver of additional fees to the charge related documents, companies will be at liberty to complete the process in due course, he added.