There has been a lot of representation from the stakeholders before the Ministry of Corporate Affairs (‘MCA’) to provide a one-time opportunity to file all the pending documents including the Annual Filing of the Company without charging additional fees.
In the wake of the coronavirus pandemic, MCA by exercising his power under section 460 read with section 403 of the Companies Act 2013 has now introduced ‘Companies Fresh Start Scheme, 2020’ (‘CFSS 2020’), which allows Companies to make a fresh beginning as fully compliant entities by making good any defaults related to statutory filings, without paying the additional fees irrespective of the duration of the default.
Duration – the CFSS 2020 shall remain in force from 1st April 2020 to 30th September 2020.
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Highlights of the CFSS 2020:
- Condoning delay in filing of Annual Returns, Financial Statements and other various statements, documents, returns, etc.
- Granting immunity from the launching of prosecution or proceedings for imposing a penalty on account of delay associated with certain
- Only normal fees for filing of documents in the MCA 21 registry will be payable in the above cases during the period in which CFSS 2020 is effective.
- Any appeal filed by the Company against any notice issued or complaint filed or an order passed by a court or an adjudicating authority w.r.t. default in statutory filings under the Act needs to be withdrawn.
- In case, no appeal is filed against such order and the last date of filing appeal is between 1st March 2020 and 31st May 2020, a period of additional 120 days is allowed to file the appeal. Till such time, no prosecution can be initiated for non-compliance with such order.
How to apply for immunity under CFSS 2020?
- An application for seeking immunity has to be made electronically in E-form CFSS-2020 after the closure of the Scheme but not after 6 months from the date of closure. Provided that no immunity would be granted for any appeal pending in the court against the management disputes or in case of conviction ordered already passed by a court or adjudicating authority.
- Based on the above declaration, a certificate of immunity would be granted.
Non-Applicability of CFSS 2020 in following circumstances
- Where final notice for striking-off the name of the Company has already been issued by the ROCs
- Where the Company has made an application for striking-off the name of the Company
- Where the Companies are amalgamated under the scheme of Compromise & Arrangement
- Where the Company has applied for the dormant status before the introduction of the scheme
- In the case of Vanishing Companies
- Where the documents are related to Increase in authorized share capital (Form SH-7) and charge (CHG-1, CHG-4, CHG-8 & CHG-9)
Scheme for inactive companies
The defaulting inactive companies while filing Form CFSS-2020 can simultaneously apply for the following actions:
- Application for dormant status by filing Form MSC-1 at a nominal fee;
- Application for striking-off the name of the company by filing Form STK-2 and paying the applicable fee.
Effect of immunity
After granting the immunity, the Designated Authority concerned shall withdraw the prosecution(s) pending, if any, before the concerned courts(s) and the proceedings of adjudication of penalties shall be deemed to be completed without any further action.
In a nutshell, MCA has brought this scheme to give an opportunity for the non-compliant, defaulting companies to rectify their default by filing their due documents. This is like a one-time opportunity for the defaulting companies to rectify their defaults and to avoid the Prosecution by the Registrar of Companies for not filing their Annual Accounts and Returns.
Author Bio
There is no reason for the government to hold back on relief packages for fledgling businesses during this untimely crisis. If this does balloon the deficits, it shouldn’t be a problem either way. CFSS-2020 should be seen as only one step, out of many, that would be needed to stabilize the financial ecosystem at the end of this covid-19 tunnel.
~Sanjeev Nanda