Analysis of Companies Fresh Start Scheme, 2020 (CFSS-2020)

FCSS-2020

The Corporate Affairs Ministry (MCA) has come up with the ‘Companies Fresh Start Scheme 2020’ to enable companies make good of any filing-related defaults, irrespective of duration of default, and make a fresh start as a fully compliant entity.

To provide a similar facility to Limited Liability Partnerships (LLPs), the MCA has also revised the ‘LLP Settlement Scheme, 2020’, which is in vogue today.

The Fresh Start scheme and modified LLP Settlement Scheme reduce compliance burden during the unprecedented public health situation caused by Covid-19, an official release said.

The Schemes, apart from giving longer timelines for corporates 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.

Companies Fresh Start Scheme, 2020.

In order to facilitate the companies registered in India to make a fresh start on a clean slate, the Ministry of Corporate Affairs  has decided introduced Companies Fresh Start Scheme, 2020.

 

ANNUAL FILINGS BY COMPANIES

Companies Act, 2013 requires all companies to make annual statutory compliance by filing the Annual Return and Financial Statements. Apart from this, various other statements, documents, returns, etc are required to be filed on the MCA21 electronic registry within prescribed time limits. Delay in filing these returns will attract penalty fine and penal actions as per Companies Act.

ONE TIME OPPORTUNITY

In order to give an opportunity to the defaulting companies and to enable them to file the belated documents, MCA has introduced "Companies Fresh Start Scheme, 2020 (CFSS-2020) for condoning the delay in filing the returns  with the Registrar, insofar as it relates to charging of additional fees, and granting of  immunity from launching or prosecution or imposing penalty.

FEE PAYABLE FOR CFSS

Only normal fees for filing of documents in the MCA-21 registry will be payable in such case  during the currency or CFSS-2020. There will not be any additional fee for any documents.

Every defaulting company  shall be required to pay normal recs as prescribed under the Companies (Registration Offices and FCC) Rules, 2014 on the date of filing of each belated document and no additional fee shall be payable.

DORMANT COMPANY

The scheme gives an opportunity to inactive companies to get their companies declared as 'dormant company under Section 455 of the Act  by filing a simple application at a normal fee.

DETAILS  OF CFSS 2020

The scheme shall come into force on the 01.04.2020 and shall remain in force till 30.09.2020

  1. "Defaulting company" means company defined under the  Companies Act, 2013, and which has made default in filing of any or the documents, statement, returns, etc including annual statutory documents on the MCA-21 registry
  2.  Immunity certificate"' means the certificate referred to in subparagraph (viii) of paragraph 6 of the Scheme;
  3. Inactive Company" means a company as defined in Explanation (i) to sub-section (l) of section 455(1) of the Companies Act, 2013;

APPLICABILITY OF CFSS 2020

Any ‘defaulting company’ is permitted to file belated documents which were due for filing on any given date in accordance with the provisions of this Scheme:

Immunity from the launch of prosecution or proceedings for imposing penalty shall be provided only to the extent such prosecution or the proceedings for imposing penalty under the Act pertain to any delay associated with the filings of belated documents.

WITHDRAWAL OF APPEAL, IF ANY

Withdrawal of appeal against any prosecution lunched or the proceedings or imposing penalties initiated: before filing an application for issue of immunity certificate, withdraw the appeal against any prosecution lunched or the proceedings ror imposing penalties initiated  and furnish proof of such withdrawal along with the application.

APPLICATION FOR ISSUE OF IMMUNITY UNDER THE CFSS

An application for seeking immunity in respect of belated documents filed under the Scheme in the Form CFSS-2020, after closure of the Scheme and after the document(s) are taken on file, or on record or approved by the Designated authority as the case may be but not after the expiry of six months from the date of closure or the Scheme. There is no fee payable on this Form.

Provided also that no immunity shall provide in case any court has ordered conviction in any matter, or an order imposing penalty has been passed by an adjudicating authority under the Act and no appeal has been preferred against such orders of the court or of the adjudicating authority.

IMMUNITY CERTIFICATE UNDER CFSS-2020

Based on the declaration made in the Form CFS-S-2020, an immunity certificate in respect of documents filed under this Scheme shall be issued by the designated authority.

 

SCHEME NOT TO APPLY

This scheme shall not apply

  • to companies against which action for final notice for striking off the name u/s 248 of the Act (previously section 560 of Companies Act. 195j has already been initiated by the ROC.
  • where any application has already been filed by the companies for action of striking off the name of the company from the register of companies;
  • to companies which have amalgamated under a scheme of arrangement or compromise under the Act;
  • ­where applications have already been filed for obtaining Dormant Status under section 455 of the Act before this Scheme
  • to vanishing companies;
  • Where any increase in authorized capital is involved (Form SH7)
  • also charge related documents (CHG-I, CHG-A. CHG-8 and CHG-9);

EFFECT OF IMMUNITY

After granting the immunity, the ROC office shall withdraw the prosecution(s) and the proceedings of adjudication of penalties under section 454 of the Act, if any, in respect of defaults against which immunity has been so  granted shall be deemed to have been completed without any further  action.

SCHEME FOR INACTIVE COMPANIES

The defaulting 'inactive companies. while filing documents under CFSS•2020 can, simultaneously, either:

  1. apply to get themselves declared as Dormant Company under section 455 Of the Companies Act, 2013 by filing c-form MSC-I  at a normal fee on said form; or
  2. apply for striking off the name of the company by filing e-Form STK-2 by paying the fee payable on form STK.2.

AFTER THE CFSS – WHAT NEXT?

At the conclusion of the Scheme, the Designated authority shall take necessary action under the Act against the companies who have not availed this Scheme and are in default in filing these documents in a timely manner.

 

DISCLAIMER- This write-up is based on the understanding and interpretation of the author and the same is not intended to be professional advice. 

Regards, 

Shubham Katyal 

ACS, B.COM 

Legal & Secretarial Consultant 

 

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(1) Comments

Mayuresh Narayan

Good informative article