As per Companies Act 2013, all companies are required to make various statutory compliances which includes annual compliances like Annual Return and Financial Statements and various other statements, documents, returns etc. within the stipulated time period. Due to the unprecedented situation caused globally due to the COVID-19 pandemic, a lot of companies could not meet the required compliances in the stipulated dates. In order to grant the companies a one-time opportunity for completing all their pending compliances, MCA has come up with the Company Fresh Start Scheme, 2020 (CFSS, 2020).
In this write up, we will discuss about this CFSS, 2020.
As per the latest guidelines, CFSS 2020 shall be applicable from 01.04.2020 to 30.09.2020.
> One-time opportunity to meet the compliances outside the stipulated timeKey Features of this Scheme:
> Only normal fees will be payable
> Gives an opportunity to inactive Companies to get their companies declared as ‘dormant company’.
Applicability:
Any ‘defaulting company’ is required to file their belated documents.
‘Defaulting company’ means a company defined under the CA 2013, and which has made a default in filing of any of the documents, statements, returns, etc. including annual statutory documents on the MCA-21 registry.
1. To companies against which action for final notice for striking off the name has already been initiated by the designated authorities Non applicability:
2. Where application has already been filed by the companies for striking off the name of the company from ROC
3. To the companies which have amalgamated under a scheme of arrangement or compromise
4. Where application has already been filed for obtaining Dormant status before this scheme
5. To vanishing companies
6. Where increase in authorized share capital is involved (Form SH-7) or charge related documents (CHG-1, VHG-4, CHG-8 & CHG-9)
√ Every defaulting company shall withdraw the appeal with respect to any statutory filing under the Act or its officer in default, as the case may be against any notice issued or complaint filed, or an order passed by a court.
√ The defaulting company shall before filing an application (CFSS-2020) or the issue of immunity certificate, furnish the proof of such withdrawal.
Grant of immunity:
Every defaulting company shall be provided with immunity from the launch of prosecution or proceedings for imposing penalty only in relation to filing of belated documents and not the consequential proceedings, including any proceedings involving interests of any shareholders or any other person qua the company or its directors or KMP.
For Example:
Every company is required to file a return of allotment [Section 42(8)] within a stipulated time frame. However, proviso to section 42(4) says that utilization of money raised through private placement shall not be made unless the Return of allotment has been filed with registry.
Now, as per CFSS, 2020, the immunity shall only be made available in respect of the proceedings for imposing penalty on account of delay in filing the return of allotment, but not on account of utilization of the money raised through private placement prior to the filing of return.
Immunity shall not be granted in case:
> an appeal is pending before the court of law,
>management disputes of the company pending before any court of law or tribunal,
> where court has ordered conviction, or an order imposing penalty has been passed but no appeal has been made against such orders before this scheme has come into force.
In cases where penalty is imposed associated in filing of any document, statement or return etc. but appeal has not been made, in all such cases:
> Where the last date of filing the appeal falls between 1st March, 2020 to 31st May, 2020 (includes both the days), a period of 120 additional days shall be allowed with effect from such last date to all companies and their officers for filing the appeal and also during this additional time frame, no prosecution shall be initiated against such companies or their officers.
Options available for defaulting inactive companies:
Defaulting inactive companies, while filing due documents under CFSS-2020, can simultaneously, either:
For Example:
Every company is required to file a return of allotment [Section 42(8)] within a stipulated time frame. However, proviso to section 42(4) says that utilization of money raised through private placement shall not be made unless the Return of allotment has been filed with registry.
Now, as per CFSS, 2020, the immunity shall only be made available in respect of the proceedings for imposing penalty on account of delay in filing the return of allotment, but not on account of utilization of the money raised through private placement prior to the filing of return.
> Apply to get themselves declared as Dormant Company by filling e-Form MSC-1; or
> Apply for striking off the name of the company by filing e-Form STK-2
List of Forms eligible for additional fee waiver under this scheme:
http://www.mca.gov.in/Ministry/pdf/CFSS2020_02042020.pdf
Conclusion:
It is a commendable decision by the MCA to introduce this scheme to ease the matters for the companies in lieu of the pandemic and taking the initiative to grant an opportunity to the companies of having a “fresh start”. The only drawback of the scheme is its applicability to only a select lot rather than all. It would be interesting to see how many companies would be able to take advantage of this scheme and start afresh.
References:
General Circular No. 12/2020 Dated 30.03.2020 Companies Fresh Start Scheme (CFSS-2020)
Disclaimer: The entire contents of this article is solely for information purpose and have been prepared based on relevant provisions and as per the information existing at the time of the preparation. It doesn’t constitute professional advice or a formal recommendation. The author has undertaken utmost care to disseminate the true and correct view and doesn’t accept liability for any errors or omissions. You are kindly requested to verify & confirm the updates from the genuine sources before acting on any of the information’s provided herein above.
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