Ministry of Corporate Affairs (MCA) vide General Circular No. 11/2020 dated March 24, 2020, provided special relief to companies and LLP amid COVID-19 pandemic. There are so many companies who have defaulted in filings Forms, Statements, returns and documents. In order to regularise filings of all the defaulting companies to be “Compliant Companies” and to make a fresh start, MCA introduced Companies Fresh Start Scheme, 2020 (hereinafter referred to as the “Scheme” or “CFSS-2020”), vide General Circular No. 12/2020 dated March 30, 2020, which gives detailed explanation about the Scheme and its applicability.

Brief Highlights of the Scheme:

We have herein by way of frequently asked questions (FAQs) explained the Scheme.

FAQs

Q 1. To which companies “CFSS-2020” shall be applicable?

Ans. The CFSS-2020 shall be applicable to all the defaulting companies. Defaulting company means a company defined under the Companies Act, 2013 (hereinafter referred to as the “Act”), which has made a default in filing any of documents, statements, returns, etc. including annual statutory documents on the MCA-21 registry.

Q 2. Are there any specific cases where “CFSS-2020” shall not be applicable?

Ans. Strike Off:

–   Companies against which action for final notice for striking off the name under section 248 of the Act has already been initiated by the Designated authority.

–   Companies which have already filed an application for striking off the name of the company from the register of companies.

1. Scheme of arrangement and compromise: Companies which have amalgamated under a Scheme of arrangement and compromise under the Act.

2. Dormant Status: Companies for which applications have already been filed for obtaining the Dormant status under section 455 of the Act before the Scheme.

3. Vanishing Companies: Vanishing Company means

– a company, registered under the Act or previous company law or any other law for the time being in force and

– listed with Stock Exchange which has failed to file its returns with the Registrar of Companies and Stock Exchange for a consecutive period of two years, and

– is not maintaining its registered office at the address notified with the Registrar of Companies or Stock Exchange and

– none of its directors are traceable.

Q 3. What is the duration of “CFSS-2020” Scheme?

Ans. The Scheme shall be enforced from April 01, 2020, and shall remain in force up to September 30, 2020.

Q 4. Whether all Forms, returns, documents and statements can be filed with the MCA-21 Registry?

Ans. All the Forms, returns, documents and statements can be filed with the MCA-21 Registry within the above-mentioned duration. However, following Forms cannot be filed under the Scheme:

–  Form for Increase in authorised share capital (SH-7), and/or

–  Form related to Charges (CHG-1, CHG-4, CHG-8 and CHG-9).

Q 5. What are the benefits available under the Scheme?

Ans. – Exemption from payment of additional fees

– Immunity from launch of prosecution under the Act which pertains to only delay associated with filings of belated documents.

– Immunity from imposing penalty under the Act which pertains to only delay associated with filings of belated documents.

Q 6. What does “which pertains to only delay associated with filings of belated documents” mean?

Ans. “which pertains to only delay associated with filings of belated documents” means the company which will file the documents under the Scheme will get immunity only with respect to filings of such belated documents. However, any consequential violation with respect to such filings would not be covered by such immunity. CFSS-2020 has clearly explained by way of example:

For example, under section 42(8), every company is required to file a return of allotment within the period provided therein. However, the proviso to section 42(4) also requires that utilisation of money raised through private placement shall not be made unless return of allotment has been filed in the registry. Now, the immunity under the Scheme shall only be available in respect of the proceedings for imposing penalty on account of delay in filing return of allotment, but not on account of utilisation of money raised through private placement prior to the filing of the return with the registry.

Q 7. What is the procedure for applying to obtain the Immunity Certificate?

Ans. – Company shall first have to file all the belated documents, returns, forms and statements with the MCA registry.

– Once all the belated document(s) are taken on file or on record or approved by the Designated authority, as the case may be, company shall file Form CFSS-2020 electronically after closure of the Scheme but not after six months from the date of closure of the Scheme.

– There is no filing fee for Form CFSS-2020.

– Designated authority shall issue immunity certificate.

Q 8. Are there any specific circumstances under the Scheme where immunity is not available?

Ans. – In the matter where appeal is pending before court of law for which immunity is being sought.

– In case management disputes of the company pending before any court of law or tribunal.

– Where court has ordered conviction in any matter

– Where an order imposing penalty has been imposed by an adjudicating authority or court and no appeal has been preferred before this Scheme has come into force.

Q 9. Can a company take benefit of the Scheme which has filed an appeal against any notice issued or compliant filed or an order passed by a court or an adjudicating authority under the Act for violation of provisions of the Act, before a competent court or authority?

Ans. – Yes, company can take benefit of the Scheme by filing all the documents, returns, statements and Forms within the above-mentioned duration.

– Once all the Forms are being filed, company shall apply for immunity certificate within six months from the date of closure of the Scheme.

– However, before filing the application for immunity, company shall make withdraw the appeal and furnish such proof of withdrawal along with the application for immunity.

Q 10. Can a company or its officers take benefit of the Scheme against whom order was passed by the adjudicating authority and no appeal has been filed by the company or its officers as on date of commencement of this Scheme?

Ans. – Yes, company can take benefit of the Scheme by filing all the documents, returns, statements and Forms within the above-mentioned duration.

– Once all the Forms are being filed, company shall apply for immunity certificate within six months from the date of closure of the Scheme.

– Once immunity certificate has been issued by the designated authority, the adjudicating authority will withdraw the order issued under the Act specifically which pertains to only delay associated with filings of belated documents.

Q 11. What if adjudication order was passed but no appeal has been preferred as on date of commencement of this Scheme?

Ans. In cases, where adjudication order was passed but no appeal has been preferred against the adjudicating authority under section 454(6) of the Act, the Scheme has provided following benefits to such companies:

– Extension of date of filing of appeal: where the last date of filing of appeal falls between March 01, 2020 to May 31, 2020, an additional 120 days shall be allowed from the last date of filing of appeal before the concerned authority.

– No prosecution under section 454(8): No prosecution order under section 454(8) shall be ordered by the concerned authority during such extension period specifically with respect to filing of belated documents.

Q 12. Can inactive companies take benefit of the Scheme?

Ans. – Yes, inactive companies can benefit the Scheme.

– Inactive company means a company which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years.

– After filing required documents they can apply for either as Dormant Company or Strike Off.

A brief note about us

Kular Chirag & Associates is a firm of practising Company Secretaries. Our mission is to strive for excellence and keep ourselves capable for the challenging role we have in serving our clients. Our motto is aligned with the motto of the Institute of Company Secretaries of India as ‘Satyam Vada, Dharmam Chara’ which translates to ‘Speak the Truth and Abide by the Law’.

Our firm is led by CS Chirag Kular, who has wide experience in the field of corporate and securities laws. Our firm has hands-on practical experience of handling assignments of secretarial due diligence, buyback of securities of listed companies, handling documentation of initial public offering (IPO) of shares on the SME exchange, as well as the mainboard, in addition to the routine secretarial work. We are also equipped to handle assignments relating to matters requiring applications/appearance with the National Company Law Tribunal (NCLT).

Please feel free to write to us with your suggestions and/or any queries that you may have. We’d be more than happy to assist you.

Author Bio

Qualification: CS
Company: Kular Chirag & Associates
Location: Ahmedabad, Gujarat, IN
Member Since: 06 Jun 2019 | Total Posts: 5
Kular Chirag & Associates (“KCA”) is a firm of Practising Company Secretaries. Our mission is to strive for excellence and keep ourselves capable for the challenging role we have in serving our clients. Our motto is aligned with the motto of the Institute of Company Secretaries of India as View Full Profile

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