Sushma Mathur

Sushma Mathur

The Ministry of Corporate Affairs (MCA) introduced Companies Fresh Start Scheme, 2020 (‘CFSS 2020′ / ‘Scheme’) vide General Circular No. 12/2020 on 30th March, 2020 to facilitate the companies registered in India to make a fresh start on a clean slate. From plain reading of the press release issued by MCA dated 30th March, 2020 it appeared as if the scheme was rolled out to reduce the compliance burden faced by only law-abiding companies during this unprecedented public health issue caused by COVID-19. However, when one dives deep down in CFSS-2020, one gets clarity that it is an amnesty scheme to help long defaulting companies to complete filing related compliances without any additional fees/ penalty / prosecution.

Provisions of the Companies Fresh Start Scheme, 2020 (CFSS-2020) in tabulated form

S. No. Basis Particulars
1.         Validity of the Scheme 1st April, 2020 to 30th September, 2020 (“Specified Period”)
2.         Purpose To give companies a one-time opportunity to make a fresh start by waiving off the additional fee as charged under section 403 of Companies Act, 2013 and granting of immunity from launching of prosecution and proceedings for imposing penalty on account of delay associated with certain filling.

Further, CFSS-2020 also gives an opportunity to defaulting inactive companies to get themselves declared as ‘dormant company’ under the provisions of the Companies Act, 2013 (Act) or file the Form STK-2 for  striking off of name of the Company.

3.         Applicability Any defaulting company* is permitted to file documents which could not be filed on due dates.
*Defaulting Company A defaulting company means a company which has defaulted in filing any documents, statements, returns etc. including annual statutory documents on MCA 21 registry.
Comments 1. The CFSS-2020 is applicable on all the Active Defaulting Companies, irrespective of the duration of the default occurred.

2. If any defaulting company is also an “Active-Non Compliant Company” then such companies are also eligible to file the Form INC-22A without any additional fees and once said form is filed and duly taken on record, thereafter, other belated forms can also be filed under the CFSS-2020.

3. Active Nidhi Companies can also avail the benefits of this scheme.

4.         Benefits (a) Pay only normal fees as prescribed under the Companies (Registration and Office) Rules, 2014 i.e. no additional fees if filing done within Specified Period.

(b) Immunity from launch of prosecution/penalties, pertaining to delay associated with filing of belated documents only.

However, any violation of law, such as any proceedings involving interests of any shareholder or any person qua the company or its directors or key managerial personnel would not be covered by such immunity.

(c) For Disqualified Directors: If all the directors are disqualified then such company has to first appoint new directors and then after appointment of new director such companies can avail the Scheme.

For Example Under-section 42 (8) of the Companies Act, 2013 (“Act”), a company making allotment u/s 42 of the Act is required to file a return of allotment within 15 days from the date of the allotment. However, the proviso to section 42(4) also requires that the utilisation of money raised through private placement shall not be made unless the return of allotment has been filed in the registry. Now, the immunity under the Scheme shall only be available in respect of the proceeding for imposing penalty on account of delay in filing the return of allotment, but not on account of utilization of the money raised through private placement prior to the filing of the return with the registry.

Therefore, no immunity is granted from procedural aspects.

5.         Immunity Certificate After closure of scheme i.e. after 30th September, 2020 and after all filed documents have been taken on record and approved by concerned authority but before the expiry of 6 months from the closure of the scheme. i.e. 6 months from 30th September, 2020, the defaulting company has to file application for immunity certificate in Form CFSS-2020.
6.         E-form CFSS-2020 The e-form CFSS-2020 is entirely self-declaration-based form. There is no fee for filling CFSS-2020. After submission of Form CFSB-2020 and on the basis of self-declaration made, the ROC will issue Immunity Certificate.
  Comments Where the immunity certificate is not obtained by filing CFSS-2020 after filing of all the belated documents, the benefit of the Scheme cannot be availed as waiver from the additional fees, penalty, prosecution, if any.
7.         Effect of Immunity Certificate After granting the immunity certificate, the designated authority** shall withdraw the pending prosecutions/proceedings of adjudication of penalties u/s 454 of the Act and it shall be deemed to have been completed without any further action.
  **designated authority Registrar of Companies, Regional Directors having jurisdiction over the companies.
8.         Cases where immunity  will not be provided

 

a) Any appeal pending before court of law;

b) In case of management disputes pending before the any Court of Law or tribunal;

c) In case any Court has ordered conviction in any matter and no appeal has been preferred before the Scheme came into force;

d) An order imposing penalty has been imposed and no appeal has been preferred before the Scheme came into force.

e) Immunity will not be granted to zero fees forms, as the whole purpose of the scheme is to waive off the additional fees.

Exceptions:

The defaulting company can before filing of the application for issue of immunity certificate, withdraw the appeal filed against any notice issued/complaint filed/order passed by the Court and furnish such proof of withdrawal along with the application.

9.         Special Cases where penalty order was passed by the adjudicating authority and appeal could not be filed as last date of filing appeal falls between 1 March, 2020 and 31 May 2020 (a) A period of additional 120 days allowed from the last date of filing;

(b) During additional period no prosecution for non-compliance of order pertaining to delay in filing of belated documents shall be initiated.

10.     Non – Applicability of the Scheme (a)  Companies against which final notice of striking off of the name has been initiated by ROC;

However, a struck off company can avail the benefits of the Scheme after due process of revival from NCLT during the Specified Period. If a company is revived after 30th September, 2020 then such companies can’t avail the benefit of this Scheme.

(b) Companies which have voluntarily filed STK-2;

(c) Companies which have been amalgamated;

(d) Companies which have already applied for Dormant status i.e. Dormant Companies as specified u/s 455 of the Act

(e)  Vanishing Companies**

(f) Forms:

(i)  Form SH-7 related to increase in authorised share capital

(ii) Charge related documents i.e. {CHG-1, CHG-4, CHG-8 and CHG – 9}

**Vanishing Companies There is no formal definition as per Companies Act, 2013 but pursuant to General Circular No. 2/2010, it was defined as:

A company, registered under the Companies Act, 1956 and listed with Stock Exchange which, has failed to file its returns with Registrar of Companies and Stock Exchange for a consecutive period of two years, and is not maintaining its registered office at the address notified with the Registrar of Companies or Stock Exchange and none of its Directors are traceable.

https://taxguru.in/company-law/mca-introduces-easy-exit-scheme-2010-under-section-560-of-the-companies-act-1956.html

Comments 1. Regarding name availability and resubmission for  which due dates are falling under lockdown period, the same will be dealt separately. Applicant can raise ticket in this regard.

2. Regarding shifting of registered office from one State to another State, if due date of filing of INC 23 form falls under this lockdown period, the same will be tackled separately. It will not be a part of this Scheme.

3. There lies no relaxation in the procedural aspects of any matter. The relaxation is provided only in the form of waiver of additional fees/ launch of prosecution/penalties, if any pertaining to matters related only to belated filing of documents.

4. In case pending forms are not filed during the Specified Period, then such forms will be subject to additional fees, penalty and prosecution as applicable in terms of the provisions of the Act.

5. If company has not filed e-form MGT-14 within 300 days, as specified under the Act then such defaulting companies can file the e-form under the scheme only after filing the application of condonation of delay.

6. Immunity granted under the CFSS 2020 will cover only 76 prescribed forms.

11.     Inactive Companies {as defined u/s 455} Defaulting inactive companies can, while filing due documents under CFSS, simultaneously apply:

(a) for getting the dormant status of the company by filing of e-form MSC-1; or

(b) for getting the name struck off by filing of the e-form STK-2.

Comments The CFSS-2020 is a big relief for all the inactive/ active – non compliant companies as in general it was not possible for inactive/ active – non compliant companies to file for strike off without payment of additional fees.
12.     Activation of DIN & Active status of the Companies 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 rectify their status without any filing fee of INR 5000/INR 10000 respectively.
13.     List of forms eligible for additional fee waiver under the scheme The MCA has uploaded a list of 76 forms (including for Companies & LLPs) for which the benefit of the Scheme can be availed. The list of the forms can be accessed via link mentioned below:

https://taxguru.in/company-law/list-mca-forms-eligible-additional-fee-waiver-company-fresh-start-scheme-2020-llp-settlement-scheme-2020.html

 

Conclusion

There have been various instances where the companies have been levied heavy penalties and prosecution and directors/ Officer in default are prone to serious hardships due to reasons of non-filing/delayed filing of Financial Statements. With a view to provide an aid to all such companies and directors/ officers in default, the CFSS-2020 shall act as amnesty scheme. This scheme is providing timeline of six months to comply with all the pending filing requirements along with reduced financial burden especially for those having longstanding default as no additional fee will be levied on such filings. The provision of granting immunity from penal proceedings on account of delay associated with certain filings with MCA is another major relief. For any clarification or advise, please write back to us at info@bmcadvisors.in.

Disclaimer:

The information contained in this article is general in nature, and should not be construed as legal or other advise. In all cases, the reader must consult with the professional advisors having expertise on the matter. We are not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this site is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information.

Author Bio

Qualification: LL.B / Advocate
Company: BMC Advisors, Advocates
Location: New Delhi, IN
Member Since: 07 Apr 2020 | Total Posts: 2
Sushma, Managing Partner BMC Advisors, Advocates, a full fledged law firm, brings in over 15 years of unmatched experience in the field of corporate law, commercial legislations, startups, mergers and acquisitions. A graduate from prestigious Shri Ram College of Commerce and a Fellow Member of View Full Profile

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