Immunity dose for Defaulting Companies- Companies Fresh Start Scheme, 2020 (CFSS 2020) | Frequently Asked Questions

Amid all the chaos of COVID-19, MCA and SEBI are issuing notifications, orders, regulations, guidelines and advisories to give relaxations for their mandatory compliance. In additions to these, MCA has come out with Companies Fresh Start Scheme, 2020 (Scheme) with its circular dated March 24, 2020. This Circular termed this scheme a fresh start on a clean start. We call it immunity dose for defaulting companies by the Ministry because after this Registrar of Company(s) will withdraw the prosecution and their compliant health status will become similar to law-abiding companies.

Following are the FAQs of Scheme CFSS-2020:

Q 1. What is the validity of the Scheme? 

Ans. Validity of the scheme CFSS-2020 is for 6 months from 01.04.2020 to 30.09.2020

Q 2. What is the Scheme? 

Ans.  Any defaulting company will be permitted to file belated documents which were due for filing on any given date. The scheme will help all the defaulting companies to complete their pending compliance by filing necessary documents/forms etc. with Ministry including annual filing without any additional fees.

Q 3. On which companies this scheme is applicable? 

Ans. The scheme is applicable on Defaulting Companies.

Q 4. What is the meaning of defaulting companies? 

Ans.  Defaulting Companies means a Company defined under Companies Act, 2013 and companies which has made a default in filing of

         -Any of documents,

         -Any of Statement,

         -Any of Return etc

         -including Annual Statutory documents.

Q 5. What shall be per day additional fees as per Scheme?

Ans.  MCA shall not charge any additional fees within the validity of period i. e 6 months. Only Normal Fees of the Forms shall be required to pay the Companies.

Q 6. What forms, returns etc., can be filed under the Scheme? 

Ans.  All forms including annual forms like AOC-4, MGT-7 can be filed under the Scheme.

However, following forms cannot be filed:

  • SH-7 (only for increase of authorized capital)
  • Charge related Forms (CHG-1, CHG-4, CHG-8 and CHG-9).

Q 7. Non Applicability of the Scheme? 

Ans.  The “Companies Fresh Start Scheme,2020” shall not apply to the following:

  • To companies against which action for final notice for striking off the name has already been initiated.
  • Where any application has already been filed by the companies for action of striking off the name of the companies form ROC
  • The companies which have amalgamated
  • Where application for obtaining dormant status has been filed
  • Vanishing companies
  • Where any increase in authorized capital in involved (Form SH 7)
  • Charge related documents (CHG-1, CHG-4, CHG-8 and CHG-9)

Q 8. What immunities are available under the Scheme?

Ans. Immunity from prosecution to the extent of default connected with non-filing of form; and immunity from proceedings related to adjudication of penalty under Section 454.

However, immunity has not granted from any consequential proceedings including any proceedings involving interests of any shareholder or any other person qua the Company or its Directors or KMP.

For example, immunity against non-filing of form PAS-3 under Section 42, can be availed under the Scheme by filing the Form but immunity from consequential defaults arising on account of default like utilizing of application money without the filing the Form PAS-3, will not be granted.

Q 9. What are the circumstances under which immunity is not available under the Scheme?

Ans.  No immunity shall be available in the following cases:

  • Where any appeal in respect of matter for which immunity is being sought, is pending before any court of law;
  • Where any management dispute is pending before any court of law or tribunal;
  • Where the court has ordered conviction in the matter and no appeal has been filed, before coming into force of this Scheme; and
  • Where penalty has been adjudicated under Section 454 of the Act and no appeal has been filed, before coming into force of this Scheme.

Q 10. What is certificate of immunity?

Ans.  Where prosecution has been initiated against any company and its officers before any court under the Act or where proceeding for adjudication of penalty has been initiated under Section 454 of the Act then the certificate should be obtained in all cases, so that immunity can be availed against any future prosecution or adjudication of penalty proceedings.

Q 11. What is pre-condition for availing immunity?

Ans.  Where the defaulting company has filed any appeal against the order passed by a court or by an adjudicating authority, the applicant shall withdraw such appeal and furnish proof of such withdrawal before filing an application for issue of immunity certificate.

Q 12. Cases in which immunity is not available under the Scheme?

Ans.  No immunity shall be available under the Scheme in the following cases:

  • Where any appeal in respect of matter for which immunity is being sought, is pending before any court of law;
  • Where any management dispute is pending before any court of law or tribunal;
  • Where the court has ordered conviction in the matter and no appeal has been filed, before coming into force of this Scheme; and
  • Where penalty has been adjudicated under Section 454 of the Act and no appeal has been filed, before coming into force of this Scheme.

Q 13. Which form is required to be filed in application for issue of immunity?

Ans.  Once belated filing has been made under the scheme, for availing immunity certificate there is to file eForm CFSS-2020 within 6 months of closure of the Scheme without payment of any fees.

Q 14. Is there any benefit when adjudication order under Section 454 has been passed but no appeal has been filed against the same?

Ans.  Where adjudication order has been passed under Section 454 with respect to any default on account of non-filing of any form, return or statement etc., but no appeal has been preferred to the Regional Director against the said order as on the date of commencement of the Scheme, following benefits have been provided:

  • Where the last date of filing appeal falls between March 01, 2020 and May, 30, 2020, then additional time of 120 days from the last date of filing appeal, shall be allowed to companies and their officers, for filing appeal before the Regional Director; and
  • During the aforesaid period, no action for non-compliance of adjudicating order under Section 454(8) shall be initiated against the company or its officers. 

Q 15. What benefit can be availed by the defaulting inactive companies under the scheme?

Ans.  Defaulting inactive companies, while filing due documents under the scheme can, simultaneously, either:

  • Apply for the status of dormant company u/s 455; or
  • File an application for striking -off their names under Section 248 of the Act.

(All views expressed in the Article are my own and do not represent the opinions of any entity whatsoever with which I have been, am now or will be affiliated.)

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