In order to provide relief to law abiding Companies, the Ministry of Corporate Affairs has introduced the Companies Fresh Start Scheme, 2020 [CFSS – 2020] on Monday, 30th March, 2020. CFSS – 2020 will certainly provide a noble opportunity to all companies to make good any previous filing defaults without paying any additional fees and become a compliant company. As per the Press Release issued by the Ministry of Corporate Affairs, the USP of the CFSS – 2020 is a one-time waiverof additional filing fees for delayed filings by the companies with the Registrar ofCompanies during the currency of the CFSS – 2020.
“CFSS – 2020 provides an opportunity to companies to complete long standing compliances and also incentivize compliance and reduce compliance burden during the unprecedented public health situation caused by COVID-19.”
It is important to note that CFSS – 2020 contains the provisions for giving immunity from penal proceedings, including against imposition of penalties for late submissions and also provide additional time for filing appeals before the concerned Regional Directors against imposition of penalties, if already imposed. However, the immunity is only against delayed filings on MCA 21 and not against any substantive violation of law. CFSS – 2020 also gives an opportunity to inactive companies to get their companies declared as ‘dormant company’ under Section 455 of the Companies Act, 2013 by filing a simple application at a normal fee. The said provision enables inactive companies to remain on the Register of Companies with minimal compliance requirements.
“CFSS – 2020 shall come into force on the 1st April, 2020 and shall remain in force till 30th September, 2020”
The CFSS – 2020 provides various definitions which will help various Stakeholders to understand the CFSS -2020 effectively. Synopsis of the same is as follows;
The CFSS – 2020 is applicable to all defaulting companies to file belated documents which were due for filing on any given date which shall be in accordance with the provisions of the CFSS – 2020.
It can be understood that the CFSS – 2020 is applicable on various e-forms such as e-form AOC-4 [Standalone, CFS & XBRL], e-form MGT-7, e-form DIR-12, e-form ADT-1, e-form MGT-14 or any other e-forms EXCEPTe-form SH-7 [Increase in Authorized Capital], e-form CHG-1, CHG-4, CHG-8 & CHG-9 [any charge related documents].
√ 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;
√ Any court has ordered conviction in any matter, or an order imposing penalty has been passed by an adjudicating authority and no appeal has been preferred against such orders of the court or of the adjudicating authority before the CFSS – 2020 has come into force.
√ To companies against which action for final notice for striking off the name under Section 248 of the Companies Act, 2013 has already been initiated by the Designated Authority;
√ 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;
√ To companies which have amalgamated under a scheme of arrangement or compromise under the Act;
√ Where applications have already been filed for obtaining Dormant Status under Section 455 of the Companies Act, 2013 before CFSS – 2020;
√ To vanishing companies;
√ Where increase in authorized share capital is involved and also charge related documents.
√ 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
√ apply for striking off the name of the company by filing e-form STK-2 by paying the fee payable on form STK-2.
At the conclusion of the CFSS – 2020, the Ministry of Corporate Affairs has also instructed to the Designated Authority to take necessary action under the Act against the companies who have not availed the CFSS – 2020 and are in default in filing these documents in a timely manner. Such conclusion of CFSS – 2020 also indicates future austere steps which will be taken by the Ministry of Corporate Affairs and the Designated Authority against the defaulting companies which would not take the shelter of CFSS – 2020.
Thus, the CFSS – 2020 apart from giving longer timelines for corporates to comply with various filing requirements under the Companies Act, 2013, it significantly reduce the related financial burden on them, especially for those with long standing defaults,thereby giving them an opportunity to make a “fresh start”.
The entire contents of this article have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer the relevant existing provisions of applicable laws. The user of this information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information. Further, in no event shall I be liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the information.