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SEBI notifies the Capital and Debt Market services that shall remain functional

In its order no. 40-3/2020-DM-I(A) and the guidelines dated 24 March 2020, the Ministry of Home Affairs, inter alia, stated that all commercial and private establishments shall be closed down except for capital and debt market services as shall be notified by the Securities and Exchange Board of India (“SEBI”). (The details of the order and the guidelines can be accessed here)

Pursuant to the above mentioned order, SEBI, on 24 March 2020, notified vide Circular No.: sebi/covid-19/2020/01, that the head/regional/local offices of SEBI shall remain functional with a minimum number of employees.

The notification, further, listed the entities which shall be considered as providing capital and debt market services under the above order and shall remain functional, as follows:

  1. Recognised Stock Exchanges,
  2. Recognised Clearing Corporations,
  3. Depositories,
  4. Custodians,
  5. Mutual Funds,
  6. Asset Management Companies,
  7. Stock Brokers,
  8. Trading Members,
  9. Clearing Members,
  10. Depositories Participants,
  11. Registrar and Share Transfer Agents,
  12. Credit Rating Agencies,
  13. Debenture Trustees,
  14. Foreign Portfolio Investors,
  15. Portfolio Managers,
  16. Alternative Investment Funds,
  17. Investment Advisers,
  18. Any other entities and regulated activities as notified by SEBI.

SEBI relaxes compliance under SEBI-LODR and under SEBI circular relating to Standard Operating Procedure

The Securities and Exchange Board of India (“SEBI”), vide its circular dated 26 March 2020 (Circular no. SEBI/HO/CFD/CMD1/CIR/P/2020/48) has granted the following relaxations from compliance with certain provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI-LODR”) and the SEBI circular dated 22 January 2020 relating to Standard Operating Procedure (Circular no. SEBI/HO/CFD/CMD/CIR/P/2020/12).

  1. Relaxations with respect to filings and committee meetings under SEBI-LODR:
Reg.ParticularsFrequencyOriginal Due DateRelaxation PeriodExtended Date
19(3A)The nomination and remuneration committee shall meet at least once in a yearAnnual31 March 20203 months30 June 2020
20(3A)The Stakeholders Relationship committee shall meet at least once in a year.Annual31 March 20203 months30 June 2020
21(3A)The Risk Management Committee shall meet at least once in a year.Annual31 March 20203 months30 June 2020
40(9)Filing relating to certificate from Practicing Company Secretary on timely issue of share certificatesHalf yearly
Due within 1 month of the end of each half of the financial year		30 April 20201 month31 May 2020
44(5)Filing relating to holding of AGM by top 100 listed entities by market capitalization for FY 2019-20Annual
Due within a period of 5 months from the date of closing of the financial year		31 August 20201 month30 September 2020

2. The circular of SEBI dated 22 January 2020 relating to Standard Operating Procedure, which was originally intended to come into effect for the compliance periods ending on or after 31 March 2020 shall now come into effect from the compliance periods ending on or after 30 June 2020. Until then the SOP circular dated 3 May 2018 shall be applicable.

3. Exemption from publication of advertisements in newspapers, as required under Regulation 47, for all events till 15 May 2020.

RBI announces further measures to deal with COVID-19

In its press release dated 1 April 2020 (Press Release : 2019-2020/2167), the Reserve Bank of India (“RBI”) announced the following measures to deal with the COVID-19 pandemic:

  1. Extension of realisation period of export proceeds

In view of the disruption caused by the COVID-19 pandemic and in order to enable exporters of goods and software to realise their receipts and to provide greater flexibility to these exporters to negotiate future export contracts with foreign buyers, the time period for realization and repatriation to the country of export proceeds with respect to exports of goods and software made till 31 July 2020 shall be extended to 15 months from the date of the export instead of the existing 9 months from the date of the export.

  1. Review of limits of Way and Means Advances (WMA) of states/union territories

The final recommendation of the Advisory Committee constituted by RBI, under the chairmanship of Shri Sudhir Shrivastava, to review the Ways and Means limits for state governments and union territories is pending to be submitted. However, in the interim, in order to enable the state governments to effectively deal with the situation arising due to the outbreak of the COVID-19 pandemic, RBI has decided to increase WMA limit by 30% from the existing limit for all states and union territories. The revised limits shall come into force with effect from 1 April 2020 and shall be valid till 30 September 2020.

  1. Implementation of countercyclical capital buffer

RBI in its Guidelines for implementation of Countercyclical Capital Buffer (CCCB) dated 5 February 2015 had laid down the framework on CCCB wherein it was advised that the activation of the CCCB shall take place when the circumstances warrant, and that the decision would be pre-announced. Per the framework the credit-to-GDP gap shall be the main indicator for the CCCB and it shall be used in conjunction with other supplementary indicators. Based on the review and analysis of CCCB indicators, RBI has decided that it shall not be necessary to activate the CCCB for a period of one year or earlier.

RBI instructions in-light of COVID-19

On 27 March 2020, the Reserve Bank of India (“RBI”) issued a press release – “Statement on Developmental and Regulatory Policies”, which set out various developmental and regulatory policies to address the stress in financial conditions cause by COVID-19. This statement, inter alia, contained regulatory measures to mitigate the burden of debt servicing brought about due to the disruptions on account of COVID-19 and to ensure the continuity of viable businesses.

In furtherance to the above press release, RBI issued the following instructions under – “COVID-19 – Regulatory Package” (DOR.No.BP.BC.47/21.04.048/2019-20 dated 27 March 2020):

  1. Rescheduling of Payments for Term Loans

(a) All commercial banks, co-operative banks, all-India Financial Institutions and NBFCs shall be permitted to grant a 3-month moratorium on all payment of instalments (which shall include principal, interest, bullet repayments, equated monthly instalments and credit card dues), falling due on 1 March 2020 and 31 May 2020 with respect to all term loans, including agricultural term loans, retail and crop loans.

(b) The repayment schedule and the residual tenor for such term loans shall also be shifted by 3 months after the moratorium period.

(c) However, during the moratorium period interest shall continue to accrue on the outstanding portion of the term loans.

  1. Rescheduling of Payments for Working Capital Facilities

(a) During the period from 1 March 2020 to 31 May 2020, the lending institutions shall be permitted to defer the recovery of interest applied in respect of working capital facilities, sanctioned in the form of cash credit/ overdraft.

(b) After the completion of the above mentioned period, accumulated interests shall be recovered immediately.

  1. Easing of Working Capital Financing

(a) Lending institutions shall be entitled to recalculate the ‘drawing power’ by reducing the margins or by reassessing the working capital cycle, in respect of working capital facilities sanctioned in the form of cash credit/ overdraft to borrowers facing economic stress on account of COVID-19.

(b) The relief shall be subject to the lending institution satisfying itself that such relief has become necessary in light of the economic fallout caused due to COVID-19 and shall be available in respect of changes effected up to 31 May 2020.

(c) The account which has been provided with this relief shall remain subject to a subsequent supervisory review with regard to their justifiability on account of COVID-19.

  1. Classification of Special Mention Account (SMA) and Non-Performing Asset (NPA)

(a) The above mentioned reliefs with respect to moratorium/ deferment/ recalculation of ‘drawing power’ shall not be treated as a concession or change in terms and conditions of loan agreements due to financial difficulty of the borrower under paragraph 2 of the Annex to the Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets) Directions, 2019 (dated 7 June 2019) and shall not result in the downgrade of the asset classification.

(b) Any asset reclassification for the term loans which are granted the above mentioned reliefs shall be determined on the basis of the revised due dates and the revised repayment schedule.

(c) The SMA and the out of order status for the working capital facilities, in respect of which the above mentioned reliefs are provided, shall be determined considering the application of the accumulated interest after the completion of the deferment period and the revised terms.

(d) There shall be no impact on the credit history of the beneficiaries and the rescheduling of payment shall not amount to a default for the purposes of supervisory reporting and reporting to Credit Information Companies by the lending institutions.

  1. Lending institutions shall frame policies for making available the above mentioned reliefs to eligible borrowers.
  2. Bank shall also develop an MIS on the reliefs provided to its borrowers wherever the exposure of a lending institution to a borrower, as on 1 March 2020, is INR 5 crore or more.

Order dealing with Migrant Workers – Ministry of Home Affairs

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The Ministry of Home Affairs, through the National Executive Committee, on 29 March 2020 issued an order (no. 40-3/2020-DM-I(A)) acknowledging that the movement of a large number of migrant workers taking place in the country to reach their home-towns is in violation of the lock-down measures on maintaining social distance as notified by the Ministry. (Refer to “21-day nationwide lock-down – Guidelines issued by the Ministry of Home Affairs” for the details of containment measures)

To deal with this situation and to ensure effective implementation of the containment measures prescribed by the Ministry, the Order directed the government and the authorities of the states and the union territories to take necessary actions and issue orders to implement the following;

  1. The government of the states and the union territories shall ensure and make arrangements for proper temporary shelter and food etc. for poor and needy people, including migrant labourers, stranded due to the lock-down measures.
  2. The government of the states and the union territories shall properly screen the migrant labourers who have moved out to reach their home towns, for a minimum period of 14 days as per the standard protocol, and to keep them in the nearest shelter by the respective state/ union territory government’s quarantine facilities.
  3. All employers, whether an industry or a shop or a commercial establishment, shall pay wages to their workers on the due date at their work places, without any deduction for the period during which the establishment was closed due to the lock-down measures.
  4. The landlords of any property at which workers, including migrants, are staying on rent shall not demand rent for a period of one month.
  5. If any landlord forces the labourers or students to vacate the premises, such landlord shall be liable for punishment under the Disaster Management Act, 2005.

Further, all violations of the abovementioned order shall be liable for action under the Disaster Management Act, 2005.

Amendment in EPF Scheme to allow withdrawal of non-refundable advance by EPF members

The Ministry of Labour & Employment issued a notification GSR 225(E) amending the EPF Scheme, 1952 to allow withdrawal of non-refundable advance by Employee Provident Fund (EPF) members/subscribers in the wake of the COVID -19 pandemic.

Para 68L(3) has been inserted in the EPF Scheme, 1952, stating that employees working in establishments and factories across India, who are members of the EPF Scheme, 1952, are eligible for the benefit of non-refundable advance. The amended Employees Provident Fund (Amendment) scheme, 2020 came into force on 28 March 2020.

The notification permits withdrawal of upto the amount of basic wages and dearness allowance for 3 months or upto 75% of the amount standing to member’s credit in the EPF account, whichever is less, in the event of outbreak of epidemic or pandemic. Further, field offices have been directed to promptly process any application received from EPF members to help them fight the situation.

SEBI relaxes compliance requirement pertaining to disclosure filings under the SAST Regulations, 2011

In view of the developments arising due to the spread of the COVID-19 pandemic, and the consequent travel restrictions and various other logistical challenges, a need for temporary relaxations in compliance with certain deadlines in SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“SAST Regulations”) was felt.

Therefore, SEBI, vide circular No. SEBI/HO/CFD/DCR1/CIR/P/2020/49 dated March 27, 2020, issued certain relaxations for compliance with respect to the disclosure filings to be made under the provisions of the SAST Regulations.

The disclosure filings under Regulations 30(1), 30(2) and 31(4) of the SAST Regulations, requires shareholders to compile, collate, and disseminate information of their consolidated shareholding as on March 31, 2020, to the company and the stock exchanges within 7 working days from the end of the financial year. These reports as per the 2020 calendar are required to be filed by April 15, 2020.

It has therefore been decided to extend the due date of filing disclosures, in terms of Regulations 30(1), 30(2) and 31(4) of the SAST Regulations for the financial year ending March 31, 2020 to June 01, 2020. This relaxation has come into effect on and from March 27, 2020.

Relaxation in compliance with requirements pertaining to AIFs and VCFs

A need was felt to extend the due date for regulatory filings for Alternate Investment Funds (“AIFs”) and Venture Capital Funds (“VCFs”), as a result of the recent market events due to the COVID-19 pandemic. Therefore, the Securities Exchange Board of India (“SEBI”) on 30 March 2020, vide circular No. SEBI/HO/IMD/DF1/CIR/P/2020/58, issued a relaxation in complying with the requirements pertaining to AIFs and VCF.

Accordingly, the due date for regulatory filings for AIFs and VCFs for the periods ending 31 March 2020 and 30 April 2020 has been extended by 2 months, over and above the timelines prescribed under SEBI (Alternative Investment Funds) Regulations, 2012 and circulars issued thereunder.

Stamp Duty Revisions to take effect on 1 July 2020

Notification no. S.O. 1226(E), dated 30 March 2020, issued by the Ministry of Finance, (Department of Revenue) stated that “for the words and figures “the 1st day of April 2020”, the words, figures and letters “the 1st day of July 2020” shall be substituted”. It further stated that, “the principal notification was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii) vide number S.O. 4419 (E), dated the 10 December 2019 and subsequently amended vide notification dated 8th January, 2020, published vide number S.O.115 (E) dated the 8th January, 2020”,

  1. The principal notification issued on 10th December 2019, vide notification no. S.O. 4419 (E) (“Principal Notification”), stated that the date on which the provisions of Part I of Chapter IV of the Finance Act, 2019 (“Act”) shall come into force shall be the 9th day of January, 2020.

Note:

  • Part I of Chapter IV of the Act deals with provisions pertaining to “Amendment to the Indian Stamp Act, 1899”; and
  • Section 11 of the said Act states that the provisions of Part I of Chapter IV, shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.

    In this regard the Principal Notification notified, the 9th day of January 2020 as the date on which the provisions of Part I of Chapter IV of the said Act shall come into force.

  1. Subsequently, on 8th January 2020, vide notification no. S.O. 115(E) (“Subsequent notification”), an amendment was made to the Principal Notification, amending the date on which the provisions of Part I of Chapter IV of the Act shall come into force to be, the 1st day of April 2020 instead of the 9th day of January 2020.
  2. Further, on 30 March 2020 vide notification no. S.O. 1226(E) (“Latest Notification”), further amendment was made to the Subsequent Notification, amending the date on which the provisions of Part I of Chapter IV of the said Act shall come into force to be the 1st day of July 2020 instead of 1st day of April, 2020.

As incorrect news was circulated that the reference to the extension to 1 July 2020 was the extension of the Financial Year itself, the Ministry of Finance, on 30 March 2020, issued another notification clarifying that there is no extension of the Financial Year and that the Latest Notification relates to certain amendments to the Indian Stamp Act, such as putting in place an efficient mechanism for collection of Stamp Duty on Security Market Instruments transactions through Stock Exchanges or Clearing Corporation authorized by Stock Exchanges Depositories. This change was earlier notified to be implemented from 1st April 2020. However, due to the prevailing situation, it has been decided that the date of implementation will now be postponed to 1st July 2020.

Temporary relaxation in processing of documents pertaining to FPIs

In light of the recent events pursuant to COVID-19, a need was felt for temporary relaxations with respect to compliance requirements for Foreign Portfolio Investors (“FPIs”). Accordingly, Securities and Exchange Board of India (“SEBI”) on 30 March 2020, vide circular no. SEBI/HO/FPI&C/CIR/P/2020/056 granted the following relaxations pertaining to a situation where FPI applicants are unable to send original and/or certified documents as specified in Operational guidelines for Foreign Portfolio Investors & Designated Depository Participants (“DDPs”) issued under SEBI (FPIs) Regulations, 2019:

  • DDPs & Custodians may consider and process the request(s) for registration/ continuance/ KYC / KYC review & any other material change on the basis of scanned version of signed documents (instead of originals) and copies of documents which are not certified, received from:

a) e-mail IDs of their Global Custodians/existing clients where these details are already captured in records; or

b) e-mail IDs of new clients received from domains which are duly encrypted with Transport Layer Security (TLS) or similar encryption or the documents are password protected.

  • These documents may be uploaded on KYC Registration Agencies so that the other intermediaries may rely on said documents.

  • These temporary relaxations shall be applicable only till 30 June 2020.

  • Within 30 days from the aforesaid deadline, the DDPs & Custodians shall ensure to obtain the original and/or certified documents (as applicable normally).

  • In case required documents for registration/ KYC are not received by the said deadline, the accounts of such FPIs shall be blocked for any fresh purchase.

  • In case documents are still not received within 3 months of the said deadline, DDPs & Custodians shall report these cases to SEBI for appropriate action. Further, Intermediaries should undertake necessary due diligence including that required for regulatory and risk-based approach towards compliance with Anti-Money Laundering (AML) requirements while processing these documents based on scan copy.

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