The Ministry of Corporate Affairs (MCA) taking into cognizance the issue faced by Corporates due to COVID-19 has issued several notifications & circulars in order to grant immunities & reduce the compliance cum financial burden on the Corporates. One of the recent initiatives taken by MCA is the introduction of COMPANIES FRESH START SCHEME, 2020 (Scheme).
The Scheme has been introduced by means of following Circulars of MCA:
1. General Circular No. 11/2020 dated 24th March, 2020 ; &
2. General Circular No. 12/2020 dated 30th March, 2020.
This scheme offers a great opportunity to Companies to make good any filing related default, irrespective of duration of default and to make a “fresh start” as a fully compliant Company. A Company which has made a default in filing any Statutory Form with Registrar (ROC) can avail the benefit of this Scheme by filing all those forms at Normal Fee only.
The attempt has been made to make all the readers understood the essence of law & that too in simplified manner so that the implementation of the same becomes easy.
FREQUENTLY ASKED QUESTIONS (FAQs)
(A). Who can avail this scheme?
Any Company which has failed to file any mandatory form with ROC may avail this scheme.
(B). When the defaulting Company can avail this scheme?
The duration of the scheme is 6 months i.e. from 01st April, 2020 till 30th September, 2020. So the defaulting Companies can file all the due forms during this period of 6 months.
(C). Can “officer in default’ avail this scheme as well?
No, the scheme can be availed by defaulting Companies only. The officer in default CANNOT avail the scheme. For e.g.
If a Company has defaulted in filing e-form BEN-2 with the ROC & also the concerned SBO has failed to give declaration in form BEN-1 within the stipulated time period, then the defaulting Company can avail the scheme but the SBO cannot avail the same.
(D). Will there be any additional fee payable?
The defaulting Company which avails the scheme has to pay normal fee only. No additional fee is payable on the delayed filing provided the filing is made till 30th September, 2020.
(E). If a defaulting Company files the pending forms during the currency of the scheme, will it still be liable for prosecution or penalty for the default?
No, there will be no prosecution/ penalty for the Companies which file their pending forms till 30th September, 2020 provided such prosecution/ penalty is associated with the filing related default.
No immunity is available for any default other than filing related default.
(F). Will the defaulting Company get the immunity from the prosecution/ penalty instantly after filing the pending forms under the scheme?
No, form filing is just making the default good. The MCA Circulars mentioned above clearly provides for the post-filing compliances which a Company is required to do after filing all the pending forms. The steps to be taken by the defaulting Companies are given hereunder:
Step (i). Filing of all the due forms till 30th September, 2020 along with normal fee;
Step (ii). Withdrawal of appeal, if any pending against the prosecution/ proceedings related to the filing related default;
Step (iii). Filing of Form CFSS-2020* for obtaining Immunity Certificate from the ROC (no fee payable on such form); &
Step (iv). Grant of Immunity Certificate by ROC^.
* Form CFSS-2020 has to be filed at any time after filing all the pending forms but not later than 6 months from the conclusion of the scheme i.e. 31st March, 2021.
^ Once the Immunity Certificate is issued by the ROC, the Company gets complete immunity from the prosecution/ penalty, as the case may be.
(G). Can this scheme be availed by all the Companies?
The scheme CANNOT be availed in the following cases:
1. Form SH-7 (for increasing Authorized Share Capital of the Company);
2. Charge related forms like CHG-1, CHG-9, CHG-4 etc.;
3. Companies which have applied for Strike Off by filing e-form STK-2;
4. Companies which have applied for obtaining status of Dormant Companies by filing e-form MSC-1;
5. Companies whose current status in MCA Portal is “ACTION INITIATED FOR STRIKE OFF”;
6. Amalgamated Companies;
7. Vanishing Companies*.
* “Vanishing Companies” are those Listed Companies:
- which have defaulted in filing with ROC or Stock Exchange for two years; AND
- whose Registered Office is not maintained; AND
- None of whose directors is traceable.
(H). If a Company has not filed e-forms AOC-4 & MGT-7 for last 10 years & still active in the records of ROC, can it avail this scheme?
Irrespective of due date, the scheme can be availed for all the forms unless expressly provided in the Scheme. In the given case, the all the Annual Filing related forms can be filed at normal fee only without incurring any additional liability.
(I). Does the grant of Immunity Certificate by ROC waive off all kinds of prosecution/ penalty over the Company?
The grant of Immunity Certificate waive off prosecution/ penalty related to default of filing only. No immunity is available in the following matters:
(i). Matters where appeal is pending before any Court;
(ii). Where any management dispute is pending before the Court or NCLT;
(iii). Where an order of conviction has been issued by the Court & no appeal preferred against such order as on 01st April, 2020;
(iv). Where an order imposing penalty has been made by the Adjudicating Authority & no appeal preferred against such order as on 01st April, 2020;
(J). Can ROC withhold Immunity Certificate even after filing Form CFSS-2020?
Once the Company files Form CFSS-2020 with ROC within stipulated time period along with all the mandatory attachments, then the concerned ROC becomes duty bound to grant immunity certificate without any delay.
(K). What is the definition of “Inactive Company”?
Explanation (i) to Section 455(1) of the Act defines the term “Inactive Company” as
“Inactive Company” means a company which has not been carrying on any business or operation, OR has not made any significant accounting transaction during the last two financial years, OR has not filed financial statements and annual returns during the last two financial years”
(L). What is there in the scheme for Inactive Companies?
Under the scheme, Inactive Companies like other Companies are being encouraged to start fresh by filing all their pending forms at Normal Fee only. Thereafter, they have been given two options:
(i) either to apply for voluntary strike off by filing e-form STK-2; OR
(ii)apply for the status of Dormant Company by filing e-form MSC-1.
(M). If any Company doesn’t avail the scheme, what will be the consequences?
The Registrar has been issued directions to take stringent actions against the Companies who have not filed their due forms till 30th September, 2020. The consequences may be:
1. Normal fee payable on the forms;
2. Additional Fee which can go in Lakhs;
3. Action for Strike Off by the Registrar;
4. Prosecution/ Heavy Penalty for the Directors & other Officers in default.
CONCLUSION
The scheme announced is only a one-time relaxation for the defaulting Companies to avoid their compliance burden & to give them a fresh start. All the Companies which advertently or inadvertently have made any mistake in past need to rectify the same by availing this scheme. The purpose is to give the defaulting Companies a fresh start but the moral, social, ethical & professional responsibility lies on the Companies to ensure that no such mistake is repeated in the future.
DISCLAIMER:
This write up is intended to simplify the scheme issued by MCA. It is not intended to be a professional advice to anyone therefore neither the Author nor the Organization he represents accepts any responsibility whatsoever and hence no liability can arise for any losses, claims or due to the contents of this write up.
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