Introduction

In order to facilitate the companies registered in India to make a fresh start on a clean slate, The Ministry of Corporate Affairs has decided to take certain measures for the benefit of all companies. Companies Act. 2013 requires all companies to make annual statutory compliance by filing the Annual Return and Financial Statements. Apart from this, various other statements, documents, returns, etc. are required to be filed on the MCA-21 electronic registry within prescribed time limits. Filing fees for filing such statements, documents, returns, etc are governed by section 403 of the Companies Act, 2013 read with Companies (Registration Offices and Fees) Rules 2014.

The Ministry has received representations from various stakeholders requesting for grant of one-time opportunity, in as to enable them to complete their pending compliances by filing necessary documents in the MCA-21 registry including annual filings without being subject to a higher additional fee on account of any delay.

In order to give such an opportunity to the defaulting companies and to enable them to file the belated documents in the MCA-21 registry, the Central Government in the exercise of powers conferred under section 460 read with section 403 of the Companies Act, 2013 has decided to introduce a Scheme namely Companies Fresh Start Scheme, 2020 (CFSS-2020)” condoning the delay in filing the above-mentioned documents with the Registrar, in so far as it relates to charging of additional fees and granting of immunity from launching of prosecution or proceedings for imposing a penalty on account of delay associated with certain filings. Only normal fees for filing of documents in the MCA-21 registry will be payable in such cases during the currency of CFSS-2020 as per the provisions of section 403 read with Companies (Registration Offices arid Fee) Rules, 2014 and section 460 of the Act.

In addition, the scheme gives an opportunity to Inactive companies to get their companies declared as ‘dormant company’ under section 455 of the Act by filing a simple application at a normal fee. The said provision enables inactive companies to remain on the register of the companies with minimal compliance requirements.

Important Definitions

i. Defaulting company– It means a company defined under the Companies Act, 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.

ii. Inactive Company- It 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.

Details of the Scheme

(i)  Duration

The scheme shall come into force on the 01.04.2020 and shall remain in force till 30.09.2020.

(ii) Applicability

Any “defaulting company’ is permitted to file belated documents that were due for filing on any given date in accordance with the provision of this Scheme.

(iii) Manner of payment of normal fees for filing of belated documents and seeking immunity under the Scheme

Every defaulting company shall be required to pay normal fees as prescribed under the Companies (Registration Office and Fees) Rules, 2014 on the date of filing of each belated document and no additional fees shall be payable. “Immunity from the launch of prosecution or proceedings for imposing a penalty shall be provided only to the extent such prosecution or the proceedings for imposing a penalty under the Act pertain to any delay associated with the filings of belated documents”.

Any other consequential proceedings, including any proceedings involving interests of any shareholder or any other person qua the company or its directors or key managerial personnel, would not be covered by such immunity.

For example, under section 42(8), every company is required to file a return of allotment within the period provided therein. However, the proviso to section 42(4) also requires that utilization of money raised through private placement shall not be made unless the return of allotment has been filed in the registry. Now, the immunity under the scheme shall only be available in respect of the proceedings for imposing a penalty on account of delay in filing the return of allotment, but not on account of utilization of money raised through private placement prior to the filing of the return with the registry.

(iv) Withdrawal of appeal against any prosecution launched or the proceedings for imposing penalties initiated

If the defaulting company, with respect to any statutory filing or its officer in default, has filed any appeal against any notice issued or complaint filed or any order passed by the court or by an adjudicating authority under the Act, before a competent court or authority for violation of the provisions under the Companies Act, 1956 and/or Companies Act, 2013, in respect of which the application is made under the scheme, the applicant shall before filing an application for issue of immunity certificate, withdraw the appeal and furnish proof of such withdrawal along with the application.

(v) Special measure for cases where the order of the adjudicating authority was passed but the appeal could not be filed

In all the cases where due to delay associated in the filing of any document, statement or return, etc. in the MCA-21 registry, penalties were imposed by an adjudicating officer under the Act, and no appeal has been preferred by the concerned company or its officer before the Regional Director under section 454(6) as on the date of commencement of the scheme, the following would apply:-

(A) Where the last date for filing the appeal against the order of the adjudicating authority under section 454(6) falls between the 1st March 2020 to 31st May 2020 (both days included), a period of 120 additional shall be allowed with effect from such last date to all companies and their officers for filing the appeal before the concerned Regional Directors;

(B) During such additional period as stated in (A) above, prosecution under section 454(8) for noncompliance of the order of the adjudicating authority, insofar as it relates to delay associated in the filing of any documents, statement or return, etc. in the MCA-21 registry shall not be initiated against such companies or their officers;

(vi) The procedure under the scheme

1. The defaulting company shall file their overdue documents/returns/other statements as well as statutory Annual Filing documents such as Financial Statements and Annual Returns in respective prescribed e-Forms by paying the normal statutory filing fee without any additional fee as payable as per section 403 of the Act read with Companies (Registration Offices and fee) Rules, 2014within due immunity period.

2. The Defaulting Companies shall file the Form CFSB-2020 after making all default good, as well as all filed document, are taken on file or on record or approved by the Designated authority as the case may and after the closure of the Scheme but not after the expiry of six months from the date of closure of the Scheme. The are no filing fees of Form CFSB-2020.

3. The Form CFSB-2020 is entirely self-declaration-based form. After submission of Form CFSB-2020 and on the basis of self-declaration made by Director, the ROC will issue an Immunity Certificate.

(viii) The scheme not to apply in certain eases

1. Companies against which action for final notice for striking off the name u/s 248 of the Act (previously section 560 of Companies Act, 1956) has already been initiated by the Designated authority;

2. where an application has already been filed by the companies for the action of striking off the name of the company from the register of companies;

3. to companies which have amalgamated under a scheme of arrangement or compromise under the Act;

4. where applications have already been filed for obtaining Dormant Status under section 455 of the Act before this Scheme;

5. to vanishing companies;

6. where any increase in authorized capital is involved (Form SH­-7) and also charge related documents (CHG-1, CHG-4, CHD-8, and CHG-9);

(ix) Effects of immunity

After granting the immunity, the Designated authority concerned shall withdraw the prosecution(s) pending, if any, before the concerned Court(s) and the proceedings of adjudication of penalties under section 454 of the Act, other than those referred in the second proviso to subparagraph (vii) of paragraph 6 of this Scheme, in respect of defaults against which immunity has been so granted shall be deemed to have been completed without any further action on the part of the Designated authority;

Scheme for Inactive Companies

The defaulting inactive companies, while filing due documents under CFSS-2020, can, simultaneously, either:

1. Apply to get themselves declared as Dormant Company under section 455 of the Companies Act, 2013 by filing e-Form MSC-1 at a normal fee on the said form; or

2. Apply for striking off the name of the company by filing e-Form STK-2 by paying the fee payable on form STK-2.

Conclusion

1. Ministry of Corporate Affairs facilitates companies a one-time opportunity to take this benefit and make a fresh start.

2. In the end, the Designated Authority shall take necessary action under the Act against the companies who have not availed this Scheme and are in default in filing these documents in a timely manner.

Disclaimer- This write-up is intended to insight on significant circular under Companies Act, 2013. It is not intended to be a piece of professional advice; therefore, Our Firm accepts no responsibility whatsoever and will not be liable for any losses, claims or damages which may arise because of the contents of this write-up.

We are hopeful that this write up would be of some help w.r.t. your professional working and endeavors under Companies Act, 2013. Kindly share your opinion and if anyone has query then pls mail at sjvandassociates@outlook.com or

Contact at +91-9919906206, +91-9453101795, +91-9918252876

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Qualification: CA in Practice
Company: S J V & Associates
Location: LUCKNOW, Uttar Pradesh, IN
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