CHALLENGES FACED BY COMPANY SECRETARIES DURING CORONA VIRUS & LOCK DOWN PERIOD

By

V.R. Shashanghan Suresh

340516549/02/2017ICSI - SIRC

SLIDE CONTENTS

Title Slide Number

On Corona Virus and Lockdown 01

Relaxations Given to Companies 03

Challenges faced by Company Secretaries due to Lockdown 05

Challenges faced by Company Secretaries - In Practice 06

Challenges faced by a Company Secretary - in Employment 11

Challenges faced by Company Secretary - Students 16

Measures taken by the ICSI for students welfare 17

The Way Forward 18

To Conclude 20

References 21

ON CORONA VIRUS AND LOCKDOWN The World Health Organization declared Corona

Virus as pandemic on March 11, 2020. India, on thisday had 60 active cases.

It pointed out to over 1,18,000 cases in 110 Countriesand territories around the world and the sustainedrisk of further global spread.

The Government on March 14, 2020 declared it as anotified disaster under the Disaster Management Act,2005.

On March 22, 2020 the Government imposed JanataCurfew from 7 am to 9 pm.

Taking the success of Janata Curfew, the Governmentimposed 21 day lockdown from midnight of March25, 2020, where only essential and emergency serviceswill only continue to run.

01

ON CORONA VIRUS AND LOCKDOWN - CONT…

► On the conclusion of the first lockdown on April 14, 2020, the Government extended the sametill May 03, 2020. Though some relaxations were announced from April 20, 2020, still manyparts of India remained under lockdown and transportation was curbed during this period.

► Third lockdown was announced by the Government which was effective from May 04, 2020till May 17, 2020. Here, during this lockdown, places were categorised as red zone, orangezone and green zone. During this lockdown green zone were eased from tough restrictions.

► The Government further extended lockdown from May 18, 2020 to May 31, 2020. This timemore freedom was given to the respective State Governments where they can decide theirguidelines within the ambit of Centre Guidelines.

► On June 01, 2020 the Government issued the guidelines for Unlock 1.0 where furtherrelaxations were given, which focussed on restarting the economy in a phased manner.

► On June 30, 2020 Unlock 1.0 ended and Unlock 2.0 was enforced from July 01st 2020, wheremany relaxations were given. Unlock 2.0 will be effective till July 31, 2020.

► Overall the above points summarises the imposition of lockdown by the Government.

02

RELAXATIONS GIVEN TO COMPANIES Since March 2020, the Government has been proactive in easing the compliance burden on

companies by relaxing due dates, issuing various advisories and exemption from compliance.

Corporate Social Responsibility (CSR) funds spent for COVID-19 shall be eligible CSR activityand contribution made to Prime Minister’s Citizen Assistance and Relief in Emergency SituationFund [PM-CARES] is also an eligible CSR activity as per Schedule VII of Companies Act, 2013.

In a major relaxation for Micro Small Medium Enterprises and Small Companies, the thresholdlimit for initiating insolvency proceeding under the Insolvency and Bankruptcy Code, 2016 hasbeen raised from Rupees One lakh to Rupees One Crore.

Certain relaxations by the Ministry of Corporate Affairs include:

1. In a major relief to Companies and LLPs the MCA has introduced “Fresh Start Scheme “ and“Revised LLP settlement scheme” for Companies and LLPs respectively. Where, there is a onetime waiver of additional fees for delayed filing with the Registrar of Companies during theperiod from 1st April, 2020 till 30th September, 2020. Thereby providing a chance to companies andLLPs to rectify their non compliance without additional fees. Further immunity is also providedfrom penal proceedings.

2. Mandatory Board meeting as per Section 173 of Companies Act, 2013 stands extended by a periodof 60 days for the next two quarters, i.e. till 30th September, 2020.

03

3. Annual accounts, Board’s Report of a Company can be adopted through Video Conferencemode till 30th September, 2020.

4. Creation of Deposit Repayment Reserve of 20% and Investment or Deposit of 15% ofamount of Debentures maturing during the year, shall be extended till 30th September, 2020.

5. Relaxation & Directions has also being provided for conducting Annual General Meeting/Extra-ordinary General Meetings through Video Conferencing or Other Audio VisualMeans.

6. Scheme for Relaxation of time for filing of Form CHG -1 and Form CHG- 9 is also given.

7. For filing of Form INC-20 A, a further period of 180 days is given apart from the existingtime limit.

The above relaxations are given by the Ministry of Corporate Affairs, further authoritiessuch as the Ministry of Finance, Reserve Bank of India, Securities and Exchange Board ofIndia and other authorities have also given various guidelines, relaxation of due dates,easing of compliance and exemptions for companies to ease the company’s complianceburden during this time of crisis.

RELAXATIONS GIVEN TO COMPANIES - CONT…

04

Challenges faced by Company Secretaries due to

Lockdown

In Practice

In Employment

Students

05

CHALLENGES FACED BY COMPANY SECRETARIES - IN PRACTICE

• The major impact due to imposition of lockdown in on their receivables management, wherethere is considerable pressure on them to maintain their liquidity as they are finding it difficultto obtain the fees from their clients for the activity done as their clients are also facing liquiditycrunch and are unable to pay them.

• Due to the lockdown, restriction on transportation and introduction of Social Distancing norms,it became difficult for Practicing Company Secretaries to conduct the Secretarial Audit as theycould not personally visit the client place.

• Although through Virtual Data Room, Secretarial Audit can be conducted, as this lockdownmeasure was not anticipated for it, many companies may not have the documents in electronicform/ certain physical documents may have been left in the office premises itself, where it can’tbe accessed during audit and certain documents could be with the Directors for their signaturewhich complicates the whole process of auditing in electronic form.

06

ELIMINATION OF OPPORTUNITIES AND DEFERMENT OF SERVICE

• Proposals for new establishments, proposedmergers, amalgamations, demergers andother arrangements has either been stalled orcalled off hence reducing the opportunitiesfor Company Secretary in Practice.

• Certain Industries which has been drastically affected by this Corona Virus induced lockdown,they may not be required to comply with certain turnover based compliances such as SecretarialAudit for the Financial Year 2020-2021 thereby leading to elimination of opportunity.

• The threshold of default has been enhanced, for filing CIRP proceedings under Insolvency andBankruptcy Code, 2016. This amendment to a certain extent would have an impact on thePracticing Company Secretaries who are Resolution Professionals and Registered Valuers.

CHALLENGES FACED BY COMPANY SECRETARIES - IN PRACTICE – CONT…

07

• Due to uncertain future events and other factors Practicing Company Secretaries may lose theirclients due to termination of their agreement or it may lead to renegotiation of fees payable tothem or the retainership fees payable to them may be reduced, which may affect the income ofthe Practicing Company Secretary.

• Due to extension of timelines in filing various forms, by Ministry of Corporate Affairs,Securities and Exchange Board of India and other authorities have caused deferment of thecertification services and other consultancy services, leading to deferment of service.

• Fall in the economy, limiting movement of vehicles and imposition of social distancing normshas led to fall in the opportunities thereby people who started their practice recently now find itmore difficult to find clients. This also discourages new entrants into the profession.

• The unavailability of new opportunities and/ or the loss of existing opportunities, the reductionin retainer fees, certification fees, deferment of payments by entities added with the fixed costsincurred by the practicing professionals(such as rent to office, salary to employees, stipendpayable to the trainees) adds up to the difficulty of managing their working capital and leadingthe professionals to liquidity crunch.

CHALLENGES FACED BY COMPANY SECRETARIES - IN

PRACTICE – CONT…

08

• As a Practicing Company Secretary, a person has to carry out various functions such as

liasoning, appearances, filing of physical documents to NCLT etc, these may not be carried out

from home.

• During the course of execution of a work sometimes documents need to be printed and signed,

which cannot be carried out from home.

• Due to sudden imposition of lockdown accessibility of documents has been difficult, as these

documents are either held physically or in electronic mode which can be accessed from the

place of work.

• As stated at first, carrying out secretarial audit from home will be difficult.

CHALLENGES FACED BY COMPANY SECRETARIES –IN PRACTICE –CONT…

CHALLENGES OF WORK FROM HOME

09

• Effective coordination & supervision of work carried

out by trainees under the Practicing Company

Secretary has been hampered.

• Ensuring digital connectivity is another problem being

faced, where the network may not be proper or signal

may be weak leading to delay in execution of work.

• Power Cuts also acts as a major hindrance.

• The above two problems are faced by people who have

been working in rural areas or who returned to their

native and hence they find it difficult to work.

CHALLENGES FACED BY COMPANY SECRETARIES –IN PRACTICE – CONT…

CHALLENGES OF WORK FROM HOME

10

CHALLENGES FACED BY A COMPANY SECRETARY - IN EMPLOYMENT

• Due to imposition of lockdown, restrictions on travel and social distancing norms,everything has become electronic and being carried out through the use of internet,where even physical meetings (including Board Meeting & General Meeting) are alsobeing conducted electronically.

• The Ministry of Corporate Affairs has also allowed to approve annual financialstatements and Board’s report through Video Conferencing or through other audiovisual means till 30th September, 2020.

• The role of Company Secretary is to facilitate convening the meetings and attend Board,committee and general meetings and maintain the minutes of the same.

• As these lockdown measures were not anticipated, some companies may not have thefacility to convene meetings electronically, thus it adds to the burden of the companysecretary to arrange for such facility and then conduct the meeting.

11

CHALLENGES FACED BY A COMPANY SECRETARY -IN EMPLOYMENT – CONT…

• Many companies still maintain their minutes in physical form, a sudden shift toelectronic maintenance of the same is not feasible and the necessary infrastructure for thesame may not also be available.

• The Company Secretary may not be a technological expert, thereby adapting to a newtechnology in such a small span of time will be challenging.

• When conducting meeting online, ensuring good network connectivity is another majorchallenge and security issues also poses some risk.

• While discharging the functions of the company secretary in a company, he may berequired to visit some places personally and act as a representative of the company, thishas become difficult now, due to the imposition of lockdown.

12

• Some companies may decide to hold their Annual General Meeting electronically, thismay lead to the following complications: -

1. Notice of the meeting has to be sent to the shareholders and Company Secretary has toensure that it has been sent electronically and other compliances regarding notice havebeen met.

2. Some Companies may not possess the updated details of members, such as E-mail id,phone number, Bank details etc., making the process challenging.

3. Ensuring the necessary infrastructure, digital connectivity and bandwidth managementfor conducting the meeting through Video Conferencing or through other audio visualmeans.

4. Conduction of voting procedure through electronic voting facility shall be challenging,Necessary infrastructure for conducting E-voting has to be arranged.

5. Ensuring inspection of the registers by the members shall be difficult as these might be inphysical form and these have to be converted into electronic form for the inspection.

6. As stated at first, preparation and maintenance of minutes shall also be difficult.

CHALLENGES FACED BY A COMPANY SECRETARY -IN EMPLOYMENT – CONT…

13

EMPLOYMENT RELATED ISSUES

• Industries that have been drastically hit by this lockdown, mayclose down its operations which may lead to loss of job for theemployees working in the company including the companysecretary of the company.

• According to a survey by Indian Society of Labour Economics,Job loss will the most severe impact of this crisis, whereCorporates may decide to reduce their employees strength.

• Whenever there is a job cut, it starts from the top of thecompany, a company secretary being on the top of the ladder,also faces the risk of losing his job.

• Corporates may, in response to this lockdown and fallingeconomy may decide to reduce the expenditure on employeesby renegotiating the employment terms with their employees,where salary cut will most important aspect of renegotiation.

• A survey conducted by Deloittestates that 27 of the top 100listed companies in NationalStock Exchange find it difficultto pay to the employees.

• Certain top companies havealready announced that it shallcut the salary of the employees.

CHALLENGES FACED BY A COMPANY SECRETARY -IN EMPLOYMENT – CONT…

14

• A survey conducted by the Economic Times,where around 3000 respondents participated,states that 39% of them are facing salary cut.

• Company Secretary also faces the risk ofsalary cut.

• Further, companies may suspend theincrement and other perks to the employees,this affects the growth of Company Secretary.

• Due to this lock down and other economicdownturn, the job market has come to astandstill. Hiring of new employees is veryless.

• Thus newly qualified Company Secretariesfind it very difficult to get a job.

• Also Company Secretaries who losttheir job due to closure of business/due to job cut find it difficult to find anew job.

• Further the above issues lead tomanagement of personal finance adifficult one.

EMPLOYMENT RELATED ISSUES

CHALLENGES FACED BY A COMPANY SECRETARY -IN EMPLOYMENT – CONT…

15

CHALLENGES FACED BY COMPANY SECRETARY - STUDENTS

• Students who are pursuing the Company Secretary course, due to the lockdown andother restrictions, their physical classes has been made online.

• Students find it difficult to adapt to this method of learning, although online classes areheld, it cannot absolutely replace the physical classes.

• Some students may not have the necessary facility or data connectivity for online classes.Students from rural areas especially encounter this difficulty.

• Students using Institute Library for studying and reference purpose now find it difficult.

• Students undergoing training, find it difficult to learn practically as they are currentlyworking from home and active supervision of the trainer is absent. Trainees are alsofinding it difficult to work from home due to issues in data connectivity and otheraspects.

16

MEASURES TAKEN BY THE ICSI FOR STUDENTS WELFARE:-

• The ICSI has issued guidelines regarding, treatment of lockdown period as continuationof training and payment of stipend during this lockdown thereby providing major relieffor the students undergoing practical training.

• The ICSI also provided extension of time for filing of quarterly report for the periodJanuary-March, April-June up to 30th September, 2020.

• Admission to E-MSOP has been made accessible to all eligible students, up to 30th

September, 2020 by temporarily removing the time gap between professional pass and E-MSOP registration.

• The ICSI in view of ensuring safety of the students amid this pandemic, after exhaustingall other viable option, has decided to merge the June 2020 examination with theDecember 2020 examinations, where the application for June 2020 exams will hold goodfor December 2020 exams thereby providing relief for the students and providing themappropriate time for planning and preparing for the December 2020 Examination.

• The Institute is trying its best, to keep the students updated by conducting various onlineclasses, webinar, workshops and interactions with subject experts.

17

THE WAY FORWARD

• Until the normalcy returns, onlineinteractions in the only way forward, thusa Company Secretary has to getaccustomed to conduct all the meetingsincluding Board Meeting, GeneralMeeting electronically. He also has toensure other compliances regarding themeeting are complied and has to adapt tomaintenance of minutes electronically.

• Further for a foreseeable future theconcept of “work from home” is the bestoption available, hence a CompanySecretary has to try to cope up with thisconcept, arrange for the necessaryinfrastructure, data connectivity andsecurity measures. So a companysecretary is required to keep himself upto date on technological updates.

• A practicing Company Secretary can use hisprofessional expertise for conducting theSecretarial Audit, without physically visiting theclient’s place, through the use of digitalconnectivity.

• He shall also keep the Board of Directors updatedregarding the various initiatives and relaxationsprovided by the Ministry of Corporate Affairs andother authorities.

18

• A Company Secretary employed in a Company, can takethe following steps:-

1. He may assess the long term impact on the companyand help in development of recovery plan, assist informulation of Business Continuity plan thereby ensurethe sustainability of the business

2. For those companies, which have been drastically hit bythis lockdown, a Company Secretary may help informulation of restructuring plan for the Company.

3. For companies facing liquidity crunch, CompanySecretary may assist in procuring short term borrowingfrom Banks/Financial Institutions, by ensuringnecessary compliance are followed.

4. Some Companies may decide to raise funds throughRights Issue/Public Offer or through issue of othersecurities, in such a situation, Company Secretary playsa vital role in ensuring that proper compliance is madeand helps in coordinating the issue.

5. Company secretary remains as thelink between the top managementand other stakeholders bycommunicating with theshareholders, employees and otherstakeholders about the measuretaken by the company.

6. Company Secretary also advisesthe company regarding theexpenditure incurred on CorporateSocial Responsibility Expendituretowards the relief measures. 19

The corona virus and lockdown has affected everyone, it has disrupted the whole supplychain process, not only India, the whole world in facing this situation. Many country’seconomy is facing a tougher time due to this unprecedented crisis. Adaptation to thechanging scenario is the key for survival. Mutual Understanding and Cooperation withothers help in sustainability.

India has faced a lot of crisis in the past, during each crisis, we fought it with cooperationand harmony and those crisis has made us strong and this one will also be fought in thesimilar manner and we shall emerge out of this crisis very soon, in that process, making usmore stronger and self reliant.

We, as Company Secretaries, who also face a lot of challenge during this crisis, shall adaptto this circumstance, develop ourselves to acquire new skills to suit the requirement ofchanging business environment. We have to get ourselves technologically updated, andstrategize our role in rebuilding our organization and economy as a whole. We can use ourprofessional expertise and can act as catalyst for economic development. We have to standtogether and work together with the regulators for improving our economy.

TO CONCLUDE:

Together We Can Together We Will20

REFERENCES1. http://www.mca.gov.in/

2. https://time.com/5791661/who-coronavirus-pandemic-declaration/

3. https://www.statista.com/statistics/1104054/india-coronavirus-covid-19-daily-confirmed-recovered-death-cases/

4. https://economictimes.indiatimes.com/jobs/job-loss-most-severe-immediate-impact-of-covid-19-survey/articleshow/76323649.cms

5. https://economictimes.indiatimes.com/wealth/personal-finance-news/covid-impact-2-in-5-employees-are-facing-salary-cuts-finds-survey/articleshow/75502876.cms

6. https://www.icsi.edu/media/webmodules/Impact_Analysis_Turbulent_2Design.pdf

7. https://www.financialexpress.com/industry/salary-cut-soon-large-companies-no-cash-pay-wages-employees-coronavirus-lockdown/1944388/

8. https://www.icsi.edu/media/webmodules/linksofweeks/ICSI-May_2020.pdf

9. https://bfsi.economictimes.indiatimes.com/news/policy/pm-modi-lays-emphasis-on-self-reliant-india-with-the-economic-package/75707570

10. https://www.icsi.edu/media/webmodules/Covid19-Regulatory_Updates.pdf

11. https://zeenews.india.com/economy/intent-inclusion-investment-innovation-infrastructure-pm-modi-s-5i-mantra-for-getting-economy-back-on-track-2287465.html 21

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