Abstract: The Ministry of Corporate Affairs (MCA) is strongly following the word of law since the last two years and has struck off large number of Companies suo moto and has also disqualified their Directors for a period of five years. This is a consequence of non-filing of the Annual Returns (Form MGT -7 and Form AOC – 4) for a consecutive period of three financial years.
As a result, many companies having a good business track record, good corporate governance practices and actively well compliant companies are also in a dilemma as one of their directors is caught up in this situation wherein they have been disqualified for having a directorship in the non-compliant companies which are being struck off by the Registrar of Companies (ROC).
There is a possibility that this well compliant company is a company having the bare minimum directors required as per law leading to the compliances being at stake due to disqualification. This results in a sharp rise in the cost of compliances due to the Additional Fees payable at the time of filing the statutory forms as per Section 403 of the Companies Act, 2013.
Further, there are various companies wherein there is no internal compliance team to ensure that there is timely filing of the statutory forms, given the dynamic changes happening in the legal regime.
Therefore, it is the need of the hour to ensure that these companies working in good faith which have inadvertently not complied with certain filings as per the law (although ignorance of law is not an excuse), are given an opportunity to make good the non-compliances.
Thus, on requests from various stakeholders, MCA has decided to grant this one-time opportunity to the companies and Limited Liability Partnerships (“LLP”) to file all the pending forms without the payment of an additional fees vide COMPANIES FRESH START SCHEME, 2020.
Thus, it is a good opportunity for companies and LLPs to ensure that they have complied with all the provisions without being burdened with additional fees or procedure.
Introduction: The Ministry of Corporate Affairs (“MCA”) vide its General Circular No. 12/2020, introduced the Companies Fresh Start Scheme, 2020 (“Scheme”) for one-time opportunity of condonation of delay in filing of various statutory documents, forms, returns, etc. with the MCA.
Applicability: The Scheme is applicable to any “Defaulting Company”. The Defaulting Company will be permitted to files its belated compliances with the MCA within a period of six months commencing from April 1, 2020 to September 30, 2020, without the payment of any additional fees on account of the delay in filing such form.
However, this Scheme is not applicable in the following circumstances:
1. Where the action for final notice of striking off the name of the Company as per the Companies Act, 2013 has already been initiated by the Designated Authority;
2. Where the company has already filed the Form STK – 2 along (Form for striking off the name of the Company from the Register of Companies) with the prescribed fees;
3. Where the companies have been amalgamated under the scheme of arrangement or compromise;
4. Where the application for Dormant Status has been filed by way of Form MSC – 1 along with the prescribed fees;
5. Vanishing companies;
6. Companies that are marked for the Corporate Insolvency Resolution Process or Liquidation; and
7. Where forms related to increase in authorize capital (Form SH-7) and charge related documents (Form CHG-1, Form CHG-4, Form CHG-8 and Form CHG-9) have been filed.
Immunity Certificate – Procedure and Effect:
1. An application is required to be filed in Form CFSS-2020 in order to seek immunity with respect to the belated documents filed under the Scheme.
2. Such application will be required to be made after closure of the Scheme and the documents are taken on record but before the expiry of six months from the date of closure of the Scheme.
3. On the basis of declaration made in the Form CCFS-2020, w.r.t. the documents filed under the Scheme, an Immunity Certificate will be issued by the Designated Authority, i.e. the concerned Registrar of Companies.
4. If the Defaulting Company has filed any appeal against any notice issued or complaint filed or order passed by a court or any Adjudicating Authority, then the applicant is required to withdraw the appeal and furnish proof of such withdrawal before applying for the Immunity Certificate.
5. The Designated Authority shall withdraw the prosecutions before any courts and proceedings pending before any Adjudicating Authority in respect of which the immunity has been granted by the Designated Authority.
However, immunity under this scheme, shall not be granted in the following circumstances:
1. For any other consequential proceedings, including proceedings involving the interest of the shareholders or any other person, as being the Company or its Directors or Key Managerial Personnel;
2. In matters of any appeal pending before any court or in case of management of disputes of the Company pending before any court or tribunal; and
3. In the event any court has ordered conviction, or any adjudicating body has imposed penalty and no appeal has been preferred against such orders before the Scheme came into force.
Provision for Inactive Companies: Defaulting Inactive Companies, while filing application under Form CFSS-2020, may also file:
1. Form MSC-1 to obtain the status of a Dormant Company.
2. Form STK-2 for striking off the name of company.
Immunity shall only be provided to the extent, it pertains to any delay associated with the filing of belated documents with the MCA, and not for the non-compliance.
An extension has been granted to file e-Form ACTIVE between April 1, 2020 and September 30, 2020 for the ‘ACTIVE non-compliant’ companies. The filing fee of Rs. 10,000 will not apply.
Provisions for Directors: Extension has been granted to file Form DIR-3 and Form DIR-3KYC web. The extended timelines between April 1, 2020 and September 30, 2020 is provided by MCA for the directors whose Director Identification Number (“DIN”) is deactivated to come forward and file such forms. The filing fee of Rs. 5,000 will not apply for this period of six months.
Grant of Additional 120 days to Appeal: In cases where the last date for filing of appeal against the order of Adjudicating Authority falls between March 31, 2020 to May 31, 2020, an additional period of 120 (one hundred and twenty) days will be allowed w.e.f. the last date of filing of appeal. During such additional period, any prosecution for non-compliance of order of the Adjudicating Authority pertaining to delay in filing of documents in the MCA-21 registry will not be initiated against such companies or their officers.