Company’s Fresh Start Scheme, 2020

Government of India has released several measures granting relaxation to businesses to combat COVID-19 Outbreak, the Ministry of Corporate Affairs (MCA) has also come up with specific measures for Companies and LLP’s.

What Comes First………

The Companies (Registration Offices and Fees) Second Amendment Rules 2018 has been notified on 7th May 2018. Accordingly, in cases where the due date of filings under Section 92 (Annual Return) or 137 (Annual Financial Statement) of the Companies Act, 2013 expires, after 30/06/2018, the additional fee @ Rs.100 per day shall be payable for Delay beyond period provided under Section 92(4) and Section 137 (1) of the Companies Act, 2013 i.e. in respect of Form AOC-4, MGT-7, AOC-4 XBRL and AOC-4 CFS.

In all other cases where the belated annual returns or balance sheet/ financial statement which were due to be filed whether under the Companies Act,1956 (23AC, 23ACA, 23AC XBRL, 23ACA XBRL, 20B, 21A) or the Companies Act, 2013 (MGT-7, AOC-4, AOC-4 XBRL and AOaC-4 CFS) additional fee as per the applicable slab for the period of delay up to 30th June 2018 plus @ Rs.100 per day w.e.f. 1st July 2018 shall become payable.

Situation Arises………

Many Entrepreneurs who set up companies for any purpose, and did not either commence its operations because of their various genuine reasons or has failed to file/ ensure the necessary statutory filings/ documents/ statements, which has resulted in huge penalties and created a heavy financial burden on them.

Approaching to the MCA………

The Ministry of Corporate Affairs has received various representations from various stakeholders requesting for grant of one-time opportunity/ scheme wherein the defaulting companies may file the various returns, forms and documents without paying the additional fees on account of being late. The representations were analysed and in order to facilitate and to make a fresh start MCA has decided to take alternate measures for benefit of all companies.

Introducing the Company’s Fresh Start Scheme, 2020………

The Central Government in exercise of powers conferred U/s 460 read with Section 403 of the Companies Act, 2013 has decided to introduce “Company’s Fresh Start Scheme, 2020”.

The Ministry of Corporate Affairs (“MCA”) vide its circular dated 30th March 2020 has issued “Companies Fresh Start Scheme, 2020” (“CFSS 2020”) and revised the LLP Settlement Scheme, 2020 (“LLP Scheme 2020”)

Highlights of Company’s Fresh Start Scheme, 2020

  • Purpose & Applicability of “Companies Fresh Start Scheme-2020”
  • Non- Applicability “Companies Fresh Start Scheme-2020”
  • Manner of Payment of Fees
  • Last and Final Action to be taken for grant of Immunity Certificate
  • Cases where Immunity Certificates will not be issued by the designated authority granting immunity from penalty and Prosecution
  • Scheme for the Inactive Companies
  • Benefits of CFSS-2020 to LLP’s and changes made in LLP Settlement Scheme 2020
  • After the Conclusion of this Scheme
  • Purpose & Applicability of “CFSS-2020”

Main purpose of this “Scheme CFSS-2020” is to make good all the defaults i.e. necessary filings/ documents/ statements etc. including KYC and ACTIVE (except certain specified forms) of companies, irrespective of their duration and provide a fresh start to them as a fully compliant entity.

This Scheme will boost the compliance chart of somnolent companies and help in reducing financial burden, chances of a company to get strike-off by ROC’s and disqualifications of directors involved therein, during the unprecedented public health situation caused by COVID-19.

This “Scheme CFSS-2020” will provide immunity to defaulting companies which had made a default in filing any document, returns, statements, etc. including KYC and ACTIVE (except certain specified forms) with MCA21

TO PROVIDE A SIMILAR FACILITY TO LIMITED LIABILITY PARTNERSHIPS (LLPS), THE MCA HAS ALSO REVISED THE ‘LLP SETTLEMENT SCHEME, 2020.’

This “Scheme CFSS-2020” is aimed to bring non-compliant Company’s and LLP’s to:

  • Provide with a one-time relaxation in additional fee caused due to default in filing any document, returns, statements, etc. including KYC and ACTIVE (except certain specified forms) with MCA;
  • Provide with 6 month’s period starting from 01st April 2020 till 30th September 2020 to complete filings that were due;
  • Allow defaulting company’s and LLP’s to make a fresh start,to lower financial as well as compliance burden;
  • After compliance, ROC will issue an immunity certificate;
  • The immunity is only with delayed filings on MCA 21 Portal and not across any substantive violation of the law;

This “Scheme CFSS-2020” will apply for the filing of following Specified Forms;

A complete list of forms can be checked at link :- http://www.mca.gov.in/Ministry/pdf/CFSS2020_02042020.pdf

♦ Non- Applicability “Companies Fresh Start Scheme-2020

This “Scheme CFSS-2020” is not applicable to the Company’s and LLP’s

  • Against which action with final notice (STK-5) for striking off for the name U/s 248(4) of the Companies Act, 2013 (corresponding to section 560 of the Companies Act,1956) has already been initiated;  
  • Which have already filed application (STK-2) for Striking-off name U/s 248 of the Companies Act, 2013;
  • Which have been amalgamated under a scheme of arrangement or compromise;
  • Which have filed for obtaining status of Dormant Company under Section 455 of the Companies Act, 2013 before this Scheme;
  • Vanished earlier;
  • Manner of Payment of Fees

No additional fees shall be payable i.e. Only normal fees as prescribed under the Companies (Registration offices and fees) Rule,2014, as applicable on the date of filing of each belated document.

♦ Last and Final Action to be taken for grant of Immunity Certificate

Filing of Form CFSS is necessary to obtain certificate of immunity and can be filed once after closure of scheme period. On the basis of declaration made under the Form CFSS Immunity Certificate in respect of each document filed under the scheme shall be issued. There is no fee applicable for filling of this Form CFSS.

♦ Cases where immunity is not available?

  • 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.

♦ Scheme for the Inactive Companies

The defaulting inactive companies while filing the due documents under Scheme CFSS-2020 can either;

  • Apply to get themselves to be declared as Dormant Company by filing form MSC-1 under section 455 of the Companies Act, 2013 at a normal fee on the said form; or
  • Apply for Striking off the name of the Company by filing form STK-2, by a paying fee as applicable on Form STK-2.
  • Benefits of CFSS-2020 to LLP’s and changes made in LLP Settlement Scheme 2020

LLP’s can now file any kind of belated documents and become compliant (earlier it was only for Form -3, Form-4, Form- 8 and Form-11 only) earlier the Original LLP Settlement Scheme, 2020 was from 16th March 2020 upto 13th June 2020.

During this Scheme CFSS-2020 relaxation for filing is extended from 01st April, 2020 to 30th September, 2020. Under original LLP Settlement Scheme 2020 wherein immunity has been provided for filing documents with normal fees and additional fees at Rs.10/- per day for delay subject to maximum Rs.5000/- additional fees, per documents, however under this revised scheme of LLP’s only normal fee as required to pay for each form required to be filed.

♦ After the Conclusion of this Scheme

After the Conclusion of this Scheme, the Designated Authority shall take necessary action for the Companies who have not availed the benefit of this Scheme and are default in filing the documents on time.

DISCLAIMER: The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

Author Bio

Qualification: CS
Company: Pankaj Grover & Associates, Company Secretaries
Location: Delhi, New Delhi, IN
Member Since: 21 Apr 2020 | Total Posts: 2
Mr. Pankaj Grover is proprietor of Pankaj Grover & Associates and Past Treasurer of Noida Chapter of NIRC of the ICSI. He is a Commerce Graduate (B. Com), Master of Business Administration with Finance specialization (MBA) and a Associate member (ACS) of the Institute of Company Secretaries of View Full Profile

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