In line with government initiative to ease of doing business & good corporate governance, the Ministry of Corporate Affairs (MCA) has come up with the ‘Companies Fresh Start Scheme 2020’ to enable defaulting companies make good of any filing-related defaults, irrespective of duration of default, and make a fresh start as a fully compliant entity. Earlier similar scheme was announce for LLP called “LLP Settlement Scheme, 2020” and same scheme has been modified due to COVID -19 outbreaks with some changes as stated below.
1. Late Fees waiver
Big relief under both the schemes is a one-time waiver of additional filing fees for delayed filings by the companies or LLPs with the Registrar of Companies during the period of the Schemes and the period starting from 1st April and ending on 30th September 2020. (These schemes are applicable to Forms like AOC-4, MGT-7, ADT-1, LLP Form 8 & LLP Form -11 etc.)
2. Financial aid & Longer Timelines for Compliances
Both the Schemes provides reduction of financial burden on business owner with long standing defaults as well as provides them longer timelines for corporates to comply with various filing requirements under the Companies Act 2013 and LLP Act, 2008, thereby giving them an opportunity and to make a “fresh start” as same is reflected by scheme name.
3. Opportunity for inactive companies
CFSS 2020 provides an opportunity to inactive companies to get their companies declared as “dormant company” under section 455 of the Act, by filling a simple application with normal fees further it can be strike off by filling form STK -2 with applicable fees.
4. Immunity from penalty and proceedings
Further Both the Schemes contains provision for giving immunity from penal proceedings, including against imposition of penalties for late submissions and also provides additional time for filing appeals before the concerned Regional Directors against imposition of penalties, if already imposed. However immunity is not available to the directors or KMP in case of consequential proceedings which involves interest of shareholders or any other person qua the company & any substantive violation of law.
5. Scheme not to apply in certain cases
1. Where company has been strike off under section 248 of Companies Act, 2013 by ROC
2. Where STK-2 has already been filled
3. Companies amalgamated under any scheme
4. Where application has been filled for dormant status u/s. 455 of the act
5. Scheme not applicable in case of increase of Authorised capital (Form SH-7) and Charge related form (CHG -1, CHG4, CHG -8 & CHG-9)
6. In case of LLP
Where Form 24 has already been filed for striking off its name from the register as per provisions of Rule 37(1) of the LLP Rules, 2009.
7. Procedure to avail the scheme
A defaulting company or LLP has to file all the pending documents in their respective forms after paying applicable normal fees without any late fees. Once all the forms are filled company has to fill Form CFSS 2020 (Form yet to be available on portal) in which they need to quote all SRN which filled under the said scheme.
8. After the end of the Scheme
Once the scheme is closed, Designated Authority shall take necessary action under the Act against the defaulting companies or LLP who have not availed this scheme and are in default in filling the pending documents in a timely manner.