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Legal and Regulatory Impact of Coronavirus on Indian Corporate Sector

Legal and Regulatory Impact of Coronavirus on Indian Corporate Sector

India reported its first novel Coronavirus case on January 30, 2020. Ever since, India, being the second most populated country of the world, has reported 415 cases of Coronavirus and seven reported deaths, as per the reports of Ministry of Health and Family Welfare. Considering the globally vast spread of Covid 19 virus, India has channelized strict restrictions on public gatherings in order to combat the blow-out of coronavirus.

Indian Railways have taken to cancelling more than 100 trains in order to check spreading of coronavirus. Incoming international flights have been stalled. The Central Government and respective State Governments have undertaken extraordinary lockdown measures ensuring closure of schools, colleges, movie theatres through issuing notifications limiting the public gatherings till March 31, 2020.

Our Prime Minister (‘PM’), Mr. Narendra Modi, in his address to nation on March 19, 2020 announced “Public Curfew” on March 22 wherein from 7 am to 9 pm, people stayed inside their homes and the streets, malls, shops and highways were empty across the nation. PM further requested firms and companies to allow their employees to work from home. While such steps shall help the country in its fight against coronavirus, the restrictions do have an impact on corporate India. Following are the legal and regulatory impact of changes introduced by the Government to contain the global pandemic:

  • Coronavirus covered under ‘Force majeure clause’

Indian Government officially declared coronavirus to be considered as natural calamity on February 19, 2020, thereby invoking the ‘Force majeure clause’. It is common practise in India to add Force majeure clause in commercial contracts. This shall have far reaching impact on corporate India and on contracting companies to a contract, resulting in delayed deliveries, payment lags, trade losses etc.

  • Compliance through new Web Form CAR introduced

The Ministry of Corporate Affairs (‘MCA’) has vide a notification dated 20.02.2020 conveyed and strongly advised to all the Companies and LLPs  to put in place an immediate plan to implement ‘Work from Home’ Policy in their headquarters and field offices. MCA  is in process of developing a Web Form for Companies/ Limited Liability Partnership’s named as CAR (Company Affirmation of Readiness towards COVID-19), to be deployed on March 23, 2020 on MCA portal. This move from MCA is a welcome step in ensuring the preparedness for worldwide calamity in these taxing times.

  • Board meetings to be held via video conference for three months

MCA has further issued a notification dated March 18, 2020 allowing virtual mode of holding the board meetings for companies in order to close important matters namely approval of financial statements as well as books of accounts, approval of the board’s report, decisions on mergers, amalgamation and takeovers, through video conferencing for a period of three months. This step has been taken in the wake of travel restrictions being imposed by various central and state governments. Accordingly, the need for the directors to be physically present in the board meetings has been absolved for the time being. MCA’s novel steps shall ensure that compliances shall not come to a halt in wake of the widespread effects of the pandemic.

  • Functioning by Indian judicial structure temporarily restrained 

Recently, Hon’ble Apex Court and several High Courts have notified (without fixing the date of closure) that they will take only urgent matters of bail etc. only and the litigants shall have the onus to explain/ justify the urgency of the matter, lest the Court shall stand to penalize the parties involved if the matters are found to be non-urgent. This is a welcome step towards ensuring the containment of the wide spread of the disease.

  • Review of Insurance Cover

Companies should review the specific insurance cover to identify if they have the novel pandemic clause being covered in their insurance policies. If yes, adequate steps should be taken in this regard including intimation to insurance company.

  • Limited Operation from office premises

The Labour Department, Haryana government has issued guidelines on March 17, 2020, to the management of factories and establishments encouraging flexible work policies/ work from home policies, maintaining proper, safe and healthy work environment for employees. On similar lines, in New Delhi, public transportation, including metro, rickshaws, shops, factories, places of worship and offices have been shut down and interstate travel has been restricted till March 31.

  • Impacts on relationship between the employer and the employees

The provisions of the Epidemic Disease Act advocates the companies to ensure the installation of safety precautions such as maintaining safety distances between employees, disinfecting and cleaning the workplace regularly, providing safety clothing and masks, keeping temperature checks at the office premises etc. Further, the employer should ensure that the employees have the required IT infrastructure to work safely from home, especially regarding data protection regulations. At the same time, the “self-quarantine” work from home is not a permissible reason for termination.

 

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