In pursuance of the Government of India’s efforts to provide relief to law abiding companies and Limited Liability Partnerships (LLPs) in the wake of COVID 19, the Ministry of Corporate Affairs, has introduced the ‘Companies Fresh Start Scheme, 2020‘ and revised the existing ‘LLP Settlement Scheme, 2020‘ to provide a first of its kind opportunity to both companies and LLPs to make good any filing related defaults, irrespective of duration of default, and make a fresh start on clean slate as a fully compliant entity. 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 currency of the Schemes, i.e. during the period starting from 1st April, 2020 and ending on 30th September, 2020.
The Schemes, apart from giving longer timelines for corporate to comply with various filing requirements under the Companies Act 2013 and LLP Act, 2008, 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”. Both the Schemes also contain provision 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 in MCA 21 and not against any substantive violation of law.
1. Permitting the companies to file the Pending Documents/Statements/Return including Annual Statutory Documents on MCA website, irrespective of period of default.
2. Default can be related to Non Filing of any Documents/Statements/Return including Annual Statutory Documents on MCA website. There are 66 types of Forms/Documents for which Filing can be done under this scheme. (Appendix-I)
3. Default can be related to Companies Act, 2013 or the erstwhile Companies Act, 1956.
4. Filing can be done from 1st April 2020 to 30th September 2020
5. Only Normal Fee will be charged and no additional Fee will be levied, hence a big relief for the companies those who have not filed the documents.
6. Apart from the waiver of Additional Fee, the CFSS-2020 Scheme also granting the immunity from the launching of Prosecution or Imposing penalty for such non filings.
7. opens this window (CFSS-2020) as a “One Time Relief”, thereby giving one chance to the companies to make the filing related default good. After the expiry of Last Date of the scheme, all the relives as mentioned in points above, will also expire and defaulting companies who files the documents later stage (i.e. Filing done after 30th September, 2020) will be exposed to the levy of heavy additional Fees in addition to normal fee while filing the documents and there may be good chances of imposition of further penalty and launch of prosecution thereafter depending upon the case to case basis.
8. This Scheme only provides immunity from the launching of prosecution or imposing of penalty to the extent such prosecution or penalty relates to the default of belated filing of pending documents. Penalty or prosecution can be launched for any other defaults not related to the belated filing of documents. For example u/s 42(2) co is required to file the return of allotment with in the time prescribed, however proviso to the section 42(4) stipulates that utilization of money raised under private placement of shares cannot be made before the filing of return of allotment. Now, let’s assume that co has raised the money under private placement and not filed the return of allotment and also used the money also before the filing of return. Then immunity from the launching of prosecution or penalty shall be available only the matter related to the filing of return of allotment and NO IMMUNITY SHALL BE PROVIDED FOR THE DEFAULT RELATED TO THE USE OF MONEY BEFORE THE FILING OF RETURN OF ALLOTMENT.
9. Whereas there is launching of prosecution/imposition of penalty by the MCA relating to default of filing of pending documents and against such notice/Order, deflating co filed any appeal before appropriate authority, then before taking the benefit under this scheme, defaulting co shall withdraw such appeal, i.e. company has to withdraw such appeal before filing of CFSS Form.
10. Special measures for cases where order of adjudicating authority was passed but Appeal could not be Field:
In all the cases where due to delay associated in filing of any document, statement, return etc. with MCA, penalties were imposed by the Adj. Officer and no appeal preferred by the such co before RD as on the date of commencement of the scheme, then following would apply:
(a) Where the last date for filing the appeal falls between 01.03.2020 to 31.05.2020, a period of 120 days shall be allowed with effect from such last date to all the companies for filing appeal before RD
(b) During such additional period, prosecution u/s 454(8) for non-compliance of the order of Adj officer, insofar as it is relates to filing of Documents/Statements/Returns shall not be initiated against such company or their officers.
11. DIN holders of DINs marked as ‘Deactivated’ due to non-filing of DIR-3KYC/DIR-3 KYC-Web and those Companies whose compliance status has been marked as “ACTIVE non-compliant” due to non-filing of Active Company Tagging Identities and Verification (ACTIVE) e form, can now file file DIR-3KYC/DIR-3KYC-Web/ACTIVE as the case may be between 1st April, 2020 to 30th September, 2020 without any filing fee of Rs. 5000/- and Rs. 10000/- respectively.
12. The CFSS Form shall only be signed by Director/CEO/CFO/CS, i.e. this form shall not be attested by Practicing Professional.
13. After filing CFSS Form (starting from 1st Oct, 2020 to 31.03.2021), ROC shall issue the Immunity certificate for providing the relief from prosecution/penalty.
14. Advise to the Management of the Companies covered under this scheme, to take the greatest advantage of this scheme and come out form the nightmare of levy of hefty additional fees, Imposing of Penalties, Launching of Prosecution due to such default in various documents filing with the MCA and focus on core areas of the business.
There are some areas of default to which scheme did not apply:
1. Default in Filing of Form SH-7 (For Increase in Authorized Share Capital) and Charge Related Documents (CHG-1, CHG-4, CHG-8, CHG-9)
2. Where the company has already filed the application for striking off its name.
3. Companies which have amalgamated under a scheme of arrangement or Compromise.
4. Where company already filed application and seeks the Status of “Dormant Company” u/s 455 of the CA-2013
5. To the Companies which raise Capital and thereafter ceased to file the statement of returns and their registered offices and directors are not known i.e. scheme not applying to vanishing companies.
6. Companies against which Final notice for Striking off the name from the records u/s 248 of the CA-2013 or u/s 560 of the CA -1956 has been issued.
7. Further, the scheme also did not make the default good in case of “Disqualification of Directors”
8. A practical problem as seen by many professional, that if any company is strike off and it files an application for revival during the concurrency of the scheme and the revival order passed by NCLT after the cut-off Date i.e. after the 30th September, 2020, then whether such company also get benefit under this scheme. As per the 9 page notification and FAQs issued by MCA, this situation is not covered, but however, an inference can be derived that as the company is required to file revival order of NCLT to ROC in INC-28, only then ROC will open the window to file the forms to such defaulting companies, hence if the order of NCLT passed or Company filed the Form INC 28 with ROC after the 30th Sep 2020, then that co cannot take the benefit and it’s all the efforts will be useless if the sole objective of the company for revival was to enjoy the relaxation of the scheme.
1. Limited Liability Partnerships (LLPs) can file the pending documents/Forms with ROC without any Additional fee and also get immunity from levy of Penalty or launching of Prosecution.
2. Benefit under the scheme can be derived irrespective of the period of default.
3. This Scheme applicable from 01st April 2020 up to 30th September 2020.
4. Scheme allowed the LLPs to file its form/Documents which are due to file up to 31st August 2020.
1. Form -3 (With regards to changes in the LLP agreement)
2. Form-4 (With regards to appointment, cessation, change in name/address/designation of partner and consent to become a partner or designated partner.
3. Form -8 (Filing of Accounts Statements)
4. Form-11 (Annual Return of LLP)
1. Where partners made application in the Form 24 for the striking off the name of LLP from the records of the registrar.
Overall, if we see both the schemes broadly, there is a WIN-WIN positions for the all the stakeholders.
-For the Companies and LLP it is an opportunity to make the defaults (which are covered under the scheme) good without any financial burden in the form of levy of heavy additional fees, moreover, it also give the peace of mind by providing that if the company or LLP opt for the scheme, then there will be no imposition of Penalties or launching of prosecution.
– For the Govt. it will be fruitful in the manner that there will be lesser litigations, more compliance abiding companies/LLPs, more updated database, last but not the least, it will also get some revenue which was obstruct for a long time.
-For the General Public it will be beneficial in the form that as there will be updated database so it will become easy to access the public documents from the website of MCA and have better decision making.