Tag: SOCIAL DISTANCING

The Indian government has announced a number of preventive measures to minimize the entry and spread of COVID-19. This is an evolving situation and some of these measures are important for businesses to be aware of so that they can take steps to inform their stakeholders accordingly. Boards of Directors are required to be mindful of the following and factor them in while assessing business continuity risks.

• Evacuation measures: The Indian Government has been evacuating thousands of Indian citizens in batches from various locations since January 2020. These passengers are placed under quarantine for a 14 (fourteen) day period and their health conditions are monitored on a daily basis. Now that there is a moratorium on international flights landing in India, Indians abroad are being asked to extend their stay there, with Indian missions in various countries assisting with alternative accommodation. India has also been requesting various countries to extend the visa duration of Indians abroad, in light of the COVID-19 disaster.
  
  
• Screening, testing and quarantining: Universal screening at all airports in the country has been mandated due to the given rise in coronavirus imports. Screening measures have also been implemented at 12 major seaports and 65 minor seaports and land borders. Quarantine centers have been set-up to isolate passengers showing symptoms of the infection. [Press note, 2 March 2020, Ministry of Health and Family Welfare https://pib.gov.in/PressReleseDetail.aspx?PRID=1604909]
  
  
• Labs testing: The National Institute of Virology, Pune (NIV) and 52 other laboratories under the Indian Council of Medical Research’s (ICMR) Viral Research and Diagnostics Laboratories network are equipped to test samples. NIV has facilities for COVID-19 molecular diagnosis and next-generation sequencing. The labs are equipped with reagents to test up to 25,000 samples. Recently, certain private laboratories have also been approved for testing (see our post on testing guidelines)
  
  
• Travel restrictions: Travel advisories are being issued by the Indian Government to avoid non-essential travel abroad. Self-quarantine was mandated to passengers arriving in India from China, Hong Kong, Republic of Korea, Japan, Italy, Thailand, Singapore, Iran, Malaysia, France, Spain and Germany. India has now imposed a moratorium on all international flights. Indian Railways has suspended all its passenger train operations till 31 March 2020 (with the exception of a handful of suburban trains). Most inter-state road travel is banned. Several states have taken measures to cancel most forms of intra-state public transport in an effort to prevent community transmission.
  
  

• Visa restrictions: From February onward, the e-visas issued to foreign nationals of China were cancelled, followed by cancellation of visas issued to foreign national of various other affected counties such as Japan, South Korea, Iran, Italy. Now, all tourist visas to India stand cancelled.
  
  
• Directing the shut-down of educational institutions, malls, cinema halls, restaurants, bars, pubs and certain other establishments in some States. The Central Government imposed a “Janata Curfew” or voluntary curfew on 22 March 2020. Following this, the Government recommended that the relevant state governments implement shutdowns in the 75 districts that have reported confirmed COVID-19 cases or casualties. While several state governments have reacted immediately with their own shutdown orders, others are expected to make their announcements very shortly. (Stay tuned to this blog for updates on developments)
  
  
• Restriction on public gatherings in various States. (see our post on Section 144)
  
  
• Social Distancing. (see our post on the social distancing advisory)
  
  
• Restriction on functioning of courts in various States. (see our post on the restrictions on court functioning)

In view of the ongoing travel restrictions to restrict the spread of COVID-19, multiple stakeholders, including the Institute of Company Secretaries of India (“ICSI”), had made representations to the Ministry of Corporate Affairs (MCA) requesting a relaxation in the applicability of certain provisions of the Companies Act, 2013 (“Act”) pertaining to the conduct of board and shareholder meetings.

Section 173 of the Act permits directors to attend board meetings through video/audio-visual conference and Section 174 states that attendance through video/audio-visual conference counts as quorum. Rule 3 of the Companies (Meetings of Board and its Powers) Rules, 2014 discusses procedures to be followed if any director elects to attend a board meeting through audio-visual/video conference.

However, Rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014 states that the following matters shall not be dealt with in any meeting held through audio-visual /video conferencing provided that where there is quorum presence in a meeting through physical presence of directors, any other director may participate conferencing through video or other audio visual means:

(i) the approval of the annual financial statements;

(ii) the approval of the board’s report;

(iii) the approval of the prospectus;

(iv) the audit committee meetings for consideration of financial statement (including consolidated financial statement if any), to be approved by the board; and

(v) the approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover

On 18 March 2020, the MCA issued a notice granting in-principle approval for relaxation of the requirement of physical presence of directors in board meetings until 30 June 2020. On 19 March 2020, the MCA notified the Companies (Meetings of Board and its Powers) Amendment Rules, 2020 – to insert the following in Rule 4:

“(2) For the period beginning from the commencement of the Companies (Meetings of Board and its Powers) Amendment Rules, 2020 and ending on the 30 June 2020, the meetings on matters referred to in sub-rule (1) may be held through video conferencing or other audio visual means in accordance with rule 3”

This is a welcome step indeed and will provide some much needed relief to companies whose directors do not operate out of the same geographic location. However, it must be noted that no relaxation has been made for the conduct of shareholders’ meetings.

Simultaneously, the MCA also issued an “Advisory on Preventive Measures to Contain the spread of COVID-19”. Here, the MCA affirmed that it was examining the Act to ascertain other relaxations that would increase the ease of functioning for companies under the pandemic. The MCA also stated that companies and LLPs are “expected and strongly advised” to institute work from home policies at least until 31 March 2020, to help propagate social distancing as a weapon against the spread of COVID-19. The MCA also recommended the institution of staggered shifts for essential workers.

To adjudge corporate preparedness, the MCA stated that a web-form CAR (Companies Affirmation of Readiness towards COVID-19) would be made available from 23 March 2020 onward. This form will need to be filed by every company and LLP. The format of web-form CAR (available here) requires each company and LLP to self-declare its compliance with COVID-19 guidelines, including the availability of a work-from-home policy.

However, web-form CAR does not appear to need any attachments (such as a copy of a COVID-19 Preparedness Policy or a work from home policy. Further, the consequences of non-compliance have not been outlined. This is probably because, as on date of writing, no binding rule or mandate has been issued by MCA obligating companies and LLPs to institute a work from home policy – it remains a strong suggestion.

As India enters a rigorous lock-down phase across large swathes of the country, it may be necessary for MCA to bolster this requirement, at least for those enterprises where some or all of the employees can work remotely.