1. Introduction

It is an initiative taken by Ministry of Corporate Affairs in order to provide another chance to all the companies registered in India to start afresh. We all know the fact that compliance is not one time activity, but practiced continuously. But those companies who fail to practice it continuously are liable to pay huge cost of such non compliance in form of penalties, fines, imprisonment, strike off of name of companies and other legal consequences. In view of the economic condition and many other reasons, MCA (Ministry of Corporate Affairs) has introduced a new scheme namely CFSS, 2020 as a chance to file belated returns, records and other statements.

2. Background

Companies Act, 2013 is the law which governs and regulates the companies registered in India. According to this Act, Companies are required to comply with statutory annual compliances like filing of financial statements, annual return, event based forms and other statements, records and returns from time to time. MCA has received various representations from stakeholders to provide one time opportunity to file belated returns without being liable for additional fees or penalties. Therefore, considering the recommendation, the Central Government, in exercise of power given under the Companies Act, 2013 has introduced a scheme known as CFSS (Companies Fresh Start Scheme, 2020) to provide one time opportunity to complete the compliances without any additional liability or financial burden.

3. Benefits under the scheme

   The CFSS 2020 is a scheme with bundled benefits. Few of which are as follows:

a) Waive off additional fees – companies availing the scheme will not be liable to pay additional fees and penalties on belated filings. Hence, this will promote compliances among small company which were deliberately avoiding compliances due to heavy fines and penalties.

b) Condone by Central Government- Delay in filing of returns, statements and other statutory filings under CFSS Scheme is like a condonation application made and condoned (accepted) by central government. Moreover, this will also save time and monetary expenses involved in condonation of delay.

c) Inactive companies- Inactive company* can declare their status as dormant company by mere filing with normal fees without being liable for additional fees and/or penalties.

            *Inactive company means any company which:

    • Has not filed financial statement and annual returns during 2 preceding financial year.
    • Is not carrying on its business or operations.
    • have not any significant accounting transactions.

d) Normal fees-Defaulting companies are required to pay normal fees only for filing of belated documents.

e) Grant of immunity- Immunity (protection) will be grant to the defaulting company from launch of prosecution or initiation for imposing of penalty so far as such proceeding or prosecution is related to delay in filing of returns, documents or any other filing on MCA-21 registry. After grant of immunity designated authority shall withdraw the prosecution and proceeding for imposition of penalty. Application for grant of immunity shall be made by the applicants in form CFSS-2020 with zero fees.

f) Certificate of immunity- concerned person applying under the scheme will get immunity certificate on the basis of declaration made under the application for the belated documents filed under the scheme.

4. Applicability of scheme

The scheme will be in force from 1st day of April, 2020 to 30th September, 2020. This scheme is applicable to a company who has made default in filing of returns, financial statements, annual returns and other forms & documents on, MCA 21 registry.

5. Withdrawal of appeal (pre-condition to avail scheme)

If any defaulting company is filing application for immunity under the scheme, such applicant shall withdraw the appeal, if any, filed against the order of adjudicating authority in respect of the matter for which application for immunity is being filed under the scheme and furnish proof of withdrawal along with application.

6. Inapplicability of the scheme

Scheme shall not be applicable in following circumstances:

  • Where company has filed application to ROC for strike off its name.
  • Where ROC has initiated proceeding for final notice in respect of strike off the name of company from the register of companies.
  • Company amalgamated under the scheme of compromise & arrangement.
  • Company has filed application for obtaining the status of dormant company
  • to a vanishing company.
  • where belated documents or/and filing is related to increase in authorized share capital or charge related documents and filings

7. Extension of time for filing of appeal

In case, where penalties were imposed by adjudicating authority on account of delay in filing of documents and no appeal has been filed as on the date of commencement of the scheme, the following extension would apply:

i) If the last date for filing of appeal falls between 1stMarch to 31st May, then an extension of 120 days shall be allowed from such last date.

ii) During period of such extension, adjudicating authority shall not initiate prosecution for non compliance of order of adjudicating authority.

Author Bio

Name: Aman Khan
Qualification: Student - CA/CS/CMA
Company: N/A
Location: WEST DELHI, New Delhi, IN
Member Since: 10 Jul 2020 | Total Posts: 4
It is my passion and interest to read laws and to interpret them and to draft articles & notes in easy language on such laws, so that the public at large can understand it. My objective is first to gain knowledge and second to share knowledge. View Full Profile

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