MCA Modifies LLP Settlement Scheme, 2020 due to Corona Virus. A comparison between original and modified scheme

Recently, the Ministry of Corporate Affairs which regulates the functioning of corporate sector in india had vide its General Circular No. 06/2020 dated March 04, 2020 launched a one time settlement scheme for the LLPs popularly known as ‘LLP settlement scheme 2020’ (Original Scheme) to grant one time immunity from heavy additional fee and prosecution against the defaulting LLPs.

The underlying objective behind introduction of this scheme was to promote ease of doing business and as a part of the same the government has accorded a very good opportunity to those LLPs which are in default of filing their statutory returns with the registrar.  The original scheme was in itself a very good opportunity for the defaulting LLPs to file their belated returns at minimal additional fee with prosecution waiver.

However in the wake of economic disruptions caused by Corona virus pandemic (COVID -19) the ministry has further issued three more general circulars no. 11/2020 dated March 24, 2020 and 12/13/2020 both dated March 30, 2020 containing some special measures to reduce compliance burden under Companies Act, 2013 and LLP Act, 2008.

The circulars dated March 30, 2020 contains substantial relief measures for both the Companies known as the “Companies Fresh Start Scheme, 2020” as well as the LLPs via modifications to the “Original LLP settlement Scheme, 2020”.

The Fresh Start scheme and modified LLP Settlement Scheme incentivize compliance and reduce compliance burden during the unprecedented public health situation caused by COVID-19. The USP of 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.

Now here we shall discuss the modifications made to the original LLP settlement scheme in a tabulated form:

Original LLP Settlement Scheme VS. Modified LLP Settlement Scheme

Particulars Original Scheme Modified Scheme
Launch Date March 04, 2020 March 30, 2020
Validity Period March 16, 2020 to June 13, 2020 (now up to March 31, 2020 due to launch of modified scheme) April 01, 2020 to September 30, 2020
Cut-off date Documents pending up to October 31, 2019 can only be considered as eligible. Documents pending up to August  31, 2020 can be considered as eligible.
Payment of Normal Fee Yes payable Yes payable
Payment of Additional Fee Rs 10 per day per document for delay subject to maximum additional fee of Rs 5000 per document. No Additional fee as complete waiver granted
Immunity from prosecution Yes Yes
Forms Eligible Applicable only to Form 3, 4, 8 and 11 under the LLP Act and rules. Applicable to all the documents or forms which are required to be filed in MCA-21 registry under the provisions of LLP Act, 2008 and rules
made there under.

Therefore from the above table it is clear that the government has expanded the scope of the original LLP settlement scheme in almost every area to provide more relief to support businesses.  This is a golden opportunity to take advantage of this modified one time settlement scheme without any further delay because it may save lakhs of rupees in unwanted penalties and legal tussles.

“WE WISH YOU TO MITIGATE YOUR FINANCIAL BURDEN IN THESE TURBULENT TIMES WHERE THE BUSINESSES ARE ALREADY FACING SERIOUS ECONOMIC DISRUPTIONS CAUSED BY COVID-19 THREAT ACROSS THE GLOBE” 

Conclusion- This is a very big move by the government to allow defaulting LLPs to make a fresh start by regularizing their compliances at zero additional fees along with immunity from prosecution so as to promote ease of doing business. After the closure of this scheme the registrar may take necessary legal action against those defaulting LLPs which fails to avail benefit under this scheme.

This article is co-authored by Mr. Abhay Kumar Chandalia (Chartered Accountant and Company Secretary) who is founder and director of M/s Share Samadhan Private Limited india’s largest unclaimed investment recovery advisory and Mr. Himanshu Goyal who is a practicing company secretary  dealing with matters related to corporate laws.

The Author CS Himanshu Goyal may be contacted at pcshga@gmail.com.

Disclaimer-Absolute care is taken to prepare this article however inadvertently if any error occurs then the authors shall not be held responsible for any such cause. The content published is only for educational purpose and shall not be construed as rendering of any professional advice in any manner whatsoever. Further the content is an original work of the authors and may be used only after prior written permission.

Author Bio

Qualification: CS
Company: Paisa Lawgic
Location: Delhi, New Delhi, IN
Member Since: 23 Oct 2019 | Total Posts: 15
A Company Secretary and a Post Graduate in financial administration having working hands in Investment Banking, Manufacturing Sector and Company Secretarial Practice. View Full Profile

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