CFSS 2020 Companies Fresh Start Scheme 2020

All you need to know about MCA’s COMPANIES FRESH START SCHEME, 2020 – Let’s clean the non-compliance mess without paying any Additional Fees

As we are getting equipped to build our immunity to fight with COVID-19, Ministry of Corporate Affairs is getting all of us equipped to fight against non-compliances and shell Companies and has come up with CFSS 2020 i.e. Companies Fresh Start Scheme 2020 to give defaulting Companies opportunity to complete their pending compliances by filing necessary documents in the MCA-21 registry including Annual Filing without being subject to a higher additional Fees on account of any delay also under CFSS 2020 designated authority will grant immunity certificate to the Companies. The immunity Certificate will protect the Companies from various penal provisions, prosecutions and hefty fines/penalties.

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

> To Whom Companies Fresh Start Scheme, 2020 Is Applicable? 

Any DEFAULTING COMPANY is permitted to file belated documents which were due for filing on any given date in accordance with the provisions of this Scheme.

Companies Fresh Start Scheme, 2020 Shall Not Apply To:

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

b)Where any application has already been filed by the companies for action of striking off the name of the Company from the register of companies;

c)to companies which have amalgamated under a scheme of arrangement or compromise under the Act;

d)where applications have already been filed for obtaining Dormant status under section 455 of the Act before this Scheme;

e)to vanishing companies;

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

> Why Companies Fresh Start Scheme, 2020 Is Important?

This Scheme is important for its three factors-

1. One of its kind opportunity for defaulting Companies to Comply with the Provisions of the Companies Act, 2013 which were previously violated and remove the tag of defaulting Company.

2. No additional Fees to be paid. By just paying normal fees all the documents which are pending to be filed including Annual Returns (Except SH-7 form and Charges related forms) can be filed.

3. Immunity Certificate granting protection from any possible penalties and prosecutions.

Further, the defaulting Companies while filing due documents under CFSS 2020 can simultaneously, either:

a)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 said form; or

b)Apply for striking off the name of the Company by filing e-form STK-2 by paying the fee payable on form STK-2.

> How To Get Immunity?

The application for seeking immunity in respect of belated documents filed under the Scheme may be made electronically in the Form CFSS 2020 annexed, after closure of the Scheme and after the document(s)are taken on file, or on record, or approved by the Designated authority as the case may be but not after the expiry of SIX months from the date of closure of the Scheme. There shall not be any fee payable on this Form.

> Why Companies Must Apply To Take Benefit Of Immunity Certificate?

After granting the immunity, the designated authority concerned shall withdraw the prosecution(s) pending, if any, before the concerned court(s) and the proceeding(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 sub-paragraph (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.

> What About The Appeals Against Prosecution Filed Or To Be Filed By Companies Against Order Of Adjudicating Authority?

If the defaulting company had filed any appeal against any notice issued or complaint filed or an order passed by a 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, the applicant under this CFSS 2020 Scheme shall before filing the application for issue of immunity certificate, withdraw any such appeal and furnish the proof of such withdrawal along with the application.

This is the really good concept and opportunity for Companies to save on time and resources in the adjudication matters. Not just that this Scheme will also due to this withdrawals burden of Adjudicating Authorities will reduce they can now devote their time to focus on more crucial matters. Further, this will also help authorities to expedite the procedures and hearings.

However, for the Companies against whom the orders are already issued and penalties are already imposed by Designated Adjudicating Authority and they are yet to file Appeal against any of such orders where the last date  for filing the appeal against the order of the adjudicating authority under section 454(6) falls between the 1^st March, 2020 to 31^st May, 2020 (both days included), 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 before the concerned Regional Directors.

> Why Is It Important To File An Appeal?

The purpose of giving an additional period of 120 days for those who fall under the category of the last date for filing the appeal against the order of the adjudicating authority under section 454(6) falls between the 1^st March, 2020 to 31^st May, 2020 (both days included) is to bring such defaulting companies at par with other defaulting companies whose prosecution(s) are pending and the same will be withdrawn by the concerned Designated Authorities under CFSS 2020 Scheme.

Also, this is to be noted that no immunity shall be provided in case any court has ordered conviction in any matter, or an order imposing penalty has been passed by an adjudicating authority under the Act, and no appeal has been preferred against such orders of court or of the Adjudicating authority, as the case may be.

By giving additional 120 days to Companies who did not file any appeal against the Designated Adjudicating Authorities are given one more chance to think about doing away with non-compliances and remove a tag of defaulting Company by filing pending documents and reduce financial burden.

Further, during such period of additional 120 days prosecution by concerned Regional Directors under section 454(6) insofar as it relates to delay associated with filling of documents and Annual Returns in MCA 21 registry shall not be initiated against such companies or their officers against whom the Adjudication order was already issued.

> To Whom Immunity Shall Not Be Applicable?

Immunity shall not be applicable in the matter of any appeal pending before the court of law and in case of management disputes of the Company pending before any court of law or tribunal;

Provided also that no immunity shall be provided in case any court has ordered conviction in any matter, or an order imposing penalty has been passed by an adjudicating authority under the Act, and no appeal has been preferred against such orders of court or of the Adjudicating authority, as the case may be, before this Scheme has come into force.

>> What To Expect After Closure Of The Scheme?

CFSS 2020 is very crucial Scheme for both Companies as well as regulatory. Where Ministry is trying all means to make sure purpose of the enacted Rules and Regulations are achieved by Compliance of the same. At the same time it is a duty of the Companies and officers involved to take this Scheme as a Final opportunity and also as a warning sign of future repercussions if not taken the applicable laws seriously in spite of giving many opportunities for complying the same.

We are to expect that at the conclusion of the Scheme, 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.

While in this Quarantine time period India is in cleaning every possible mess mode, Ministry of Corporate Affairs has facilitate the Companies registered in India to make a fresh start on a clean slate. Let’s clean the non-compliance mess as well.

CS PAYAL TACHAK | Practicing Company Secretary | Email: payaltachakandassociates@gmail.com