The Companies Act, 2013 requires all Companies to make annual statutory compliance by filing the Annual Return and Financial Statements. Apart from this, various other documents such as eForm DIR-12 for appointment/resignation of Director, eForm PAS-3 for allotment of shares, eForm DIR-3 KYC or web based KYC, Active Form (eForm INC-22A) is required to be filed by the Company time to time depending upon various events. In order to give an opportunity to long standing non-compliant Companies to be compliant again or to such defaulting Companies who are inactive, the Ministry of Corporate Affairs has come up with Companies Fresh Start Scheme, 2020 (CFSS-2020) condoning the delay in filing, in so far, as it relates to the additional fees, and granting of immunity from launching of prosecution or proceeding for imposing penalty on account of such. In this article, we shall study about aforementioned scheme in form of some frequently asked question (FAQs).
1. What is the basic intention of the government in launching Company Fresh Start Scheme, 2020?
In order to reduce the compliance burden amid widespread COVID-19 and to provide an opportunity to long standing non-compliant Company to make a ‘fresh start’, it is an appreciable move by the government. Company Fresh Start Scheme, 2020 gives relaxation from not only additional fees but also from launching of prosecution or proceedings for imposing penalty on account of such delay associated with certain filing. For instance, in the event of default of filing eForm MGT-7, apart from Rs. 100/- per day penalty, each officer in default is also liable to pay a penalty of Rs. 50,000/-, i.e. this scheme is not only providing relaxation of additional fees but also any other penalty that the government may impose because of late filing of returns.
However, for instance, in case of eForm PAS-3 to be filed for private placement, relaxation to the extent of additional fees shall be available to the Companies but section 42(4) also provides that the money shall not be utilized unless return for allotment has been filed, and in case of default on account of later part the immunity shall not be provided.
2. What is the period for which government has introduced Company Fresh Start Scheme, 2020? Is the benefit confined to only the provisions of the Companies Act, 2013 only?
Company Fresh Start Scheme, 2020 has been introduced by the government for a moratorium period commencing from April 1, 2020 till September 30, 2020 wherein any pending eForm like eForm MGT-7, eForm AOC-4, eForm PAS-3, eForm ADT-1, eForm ADT-3 with the jurisdictional ROC can be filed. The benefit of the scheme is not only confined to the provisions of the Companies Act, 2013 but also extends to Companies Act, 1956 as well i.e. the stakeholders can file eForm 20AC, eForm 66 as well.
3. Are there any exceptions (or non-applicability) to Company Fresh Start Scheme, 2020?
Company Fresh Start Scheme, 2020 shall not be applicable on the following Companies:
- Against whom notice has been issued for strike off i.e. mandatory striking off by the government;
- Who had already applied for strike off;
- Which have been amalgamated;
- Have obtained dormant status;
- Vanishing Companies;
- Where any increase in capital is involved (eForm SH-7) and also charge related documents (CHG-1, CHG-4, CHG-8 and CHG-9)
4. What is the basic procedure to get the immunity certificate under Company Fresh Start Scheme, 2020?
Once the requisite eForms are filed by the Company like we file it normally, the application for immunity can be made in the eForm CFSS-2020 after closure of the Company Fresh Start Scheme, 2020 or once the concerned eForm is approved/or taken on record, but not after the expiry of six months from the date of closure of the Scheme. It is pertinent to note that there shall be no fees payable for CFSS-2020. Further, in the event of the following, the scheme shall not be applicable:
- In case appeal is pending before any court;
- In case of management disputes pending before any court or tribunal;
- In case court has ordered conviction in any matter and any order for imposing penalty has been passed and no appeal has been filed against such orders before this scheme comes into force i.e. on April 1, 2020.
5. In the event we have filed any appeal against any prosecution launched or the proceedings for imposing penalties?
In such an event, before filing application under this scheme, it is mandatory to withdraw such appeal and furnish proof of such withdrawal in eForm CFSS-2020. For instance, recently, a lot of Companies received notices for non-filing of eForm 20A and an appeal in this matter is required to be filed before the jurisdiction Regional Director. In the event such Companies has filed appeal then it would be viable to withdraw it.
6. What if my Company is inactive and we intend to strike it off or obtain the status of dormant Company without filing any belated returns?
Company Fresh Start Scheme, 2020 is boon to these Companies as well wherein the inactive Companies (i.e. a Company which is not carrying on any business, or has made any significant accounting transaction, or has not filed financial statements and annual returns during the last two financial years) can apply for status of “dormant Company” by filing eForm MSC-1 whereas by owning to the language of the law, in case we intend to strike off a Company, we need to file all belated returns as well even if the Company was inactive. Further, for obtaining the status of dormancy or strike off, we can apply for the same simultaneously while filing due returns and not wait for the eForm CFSS-2020 to be notified after closure of the moratorium period.
7. What shall be the end effect of the Company Fresh Start Scheme, 2020?
After granting the immunity certificate, the jurisdictional Registrar of Companies shall withdraw the pending prosecution against the Company, if any.
On the conclusion, it is also pertinent to note that this Scheme comes up with some special measures for cases where order of the adjudicating authority was passed but the appeal could not be filed and the last date for filing the appeal against the order falls between 1st March, 2020 to 31st March, 2020 (both days included), a period of 120 additional days shall be allowed to such Companies to file an appeal.
{The author i.e. Kajal Goyal is a Company Secretary in Practice at Kajal Goyal and Associates and can be reached at (M) 9999952595 and (E) cskajalgoyal@gmail.com}
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