Introduction
During the Pandemic situation, the Ministry of Corporate Affairs has taken many measures to ease the process of conducting compliances and has introduced many reliefs to the entities. In order to support the companies and to enable them to a fresh start, the MCA vide General Circular No. 12/2020 dated March 30, 2020, introduced a scheme i.e. Companies Fresh Start Scheme 2020 (CFSS 2020).
The MCA vide General Circular dated 28.09.2020 has further extended the scheme period commencing from 01.04.2020 to 31.12.2020 (previously the time frame was 01.04.2020 to 30.09.2020)
What is the Company’s Fresh Start Scheme 2020?
The Scheme is introduced by MCA to Companies incorporated in India including the foreign companies who have Branch or Liaison Office in India, to reduce the compliance burden on them caused due to non-filing of any returns, statements, documents etc with MCA and allow them a fresh start. It is a one time opportunity to complete all pending compliances related to filing in MCA registry. Under the scheme such defaulting companies can file belated returns or documents pending for filing with MCA with Normal Fees and no additional fees shall be payable. Thus filing related defaults can be made good irrespective of the duration of default.
Who is covered under CFSS 2020?
The scheme is applicable to the “defaulting companies” who have pending compliances and have made default in filing of any documents, returns, statements etc., involving higher additional fees on account of delay.
The scheme is available only to “companies in default” and does not cover any “officer in default”.
Non-applicability of CFSS 2020?
The CSFF 2020 scheme will not be applicable where:
- Final Notice to strike off the name of the company under Section 248 of the Companies Act, 2013 has already been initiated by the designated authority.
- The companies have already filed an application for striking off the name of the company from the Register of Companies.
- the companies which have amalgamated under the scheme of arrangement or compromise under the Act.
- application is made to get the Dormant status of the company under Section 455 of the Act, before the introduction of the Scheme.
- to vanishing companies
- increase in Authorised capital (Form SH-7) and charge related documents (CHG-1, CHG-4, CHG-8 and CHG-9)
What is the term of CFSS 2020?
The scheme shall remain in force from 01.04.2020 to 31.12.2020 (initially the scheme was valid for a period from 01.04.2020 to 30.09.2020. MCA vide General Circular No: 30/2020 dated 28.09.2020 further extended the scheme period to from 30.09.2020 to 31.12.2020) The companies shall complete all the pending filings within this timeline.
What kind of delay is covered under ‘default’?
The Scheme provides immunity from such prosecutions or proceedings applicable to the extent that the default is associated with any ‘delay pertaining to the filings of returns or statements or documents’ with the Registrar. The same should not extend to any other compliances associated with such filings which may involve the interest of the stakeholders.
Which forms or returns can be filed under the scheme?
All forms can be filed under the Scheme, except:
- Form SH-7 - for an increase in authorised capital and
- Form CHG-1, CHG-4, CHG-8, and CHG-9 - Charge related forms
The companies are also allowed to file Forms as required under Companies Act, 1956. A detailed list of Forms provided below.
What does CFSS 2020 include for defaulting companies?
Exemption from payment of additional Fees:
The defaulting companies are not required to pay any additional fees but they are required to pay normal fees as prescribed under the Companies (Registration Offices and Fees) Rules 2014 for all belated documents.
Immunity is provided only for the delay associated with filing of return or documents with ROC:
The immunity from such prosecution or proceedings shall be applicable to the extent that the delay is associated with the filing of documents with the Registrar of Companies. The Scheme does not provide immunity for any consequential proceedings involving the interest of stakeholders or directors or key managerial personnel of the company.
Immunity against non-compliance of an order issued, levying penalty for delay in filing returns with MCA but no appeal against such order is filed by the company or its officers before the Regional Director under Section 454(6) of the Act:
If the last date for filing an appeal with Regional Director falls between March 01, 2020 and May 31, 2020 (both days included) then an additional period of 120 days shall be allowed with effect from such last date.
During the additional period as provided above, prosecution under Section 454(8) of the Act for non-compliance of the order of the Adjudicating Authority pertaining only for the delay in filing of returns or documents with the MCA shall not be initiated against such companies or their officers.
If the company had received notice or order for non-filing and the company has filed an appeal against such notice or order or compliant:
In case, there is an existing appeal filed by the company against any notice, order or complaint issued for a delay in statutory filing, then in such case before making an application under the scheme, the company shall withdraw the earlier appeal and produce the copy of withdrawing the appeal as proof of withdrawal while application under the scheme.
What are the pre-conditions for applying for an immunity certificate?
- The company has filed belated forms, returns, statements etc. under the scheme
- Such belated forms, return, statements etc. are taken on record
- Withdrawal of appeal filed against any order or complaint or notice received for non-filing by the company.
How to make an application for an immunity certificate?
The company seeking immunity certificate under the said scheme shall:
- File all the belated returns or documents or statements etc with the Registrar of Companies.
- Such returns shall be approved or shall be taken on record by the concerned authorities before 6 months from the date of closure of the scheme.
- Then an application seeking immunity in respect of belated documents shall be made in Form CFSS -2020 electronically after the closure of the scheme. There shall be no fees payable for this Form.
- Based on the declaration made by the company in Form CFSS 2020, the respective designated authority shall issue the immunity certificate under the CFSS 2020 Scheme.
Under what circumstances, immunity under the scheme is not applicable?
- Any appeal is pending before the court of law.
- In case of any management dispute pending before any court of law or Tribunal
- If any court has ordered conviction in any matter or an order imposing penalty has been passed by the adjudicating authority under the Act, and no appeal is preferred against such orders before the scheme has come into force.
What is the effect of Immunity?
The ROC (Designated Authority) shall withdraw the prosecution(s) pending, if any, before the concerned courts and proceedings of adjudication of penalties under Section 454 of the Act. (Penalties only related to the filing of returns, documents, statements etc.)
Once the immunity certificate is provided, the defaults shall be deemed to be good without any further action by the Designated Authority.
Can Inactive companies avail benefits under the CFSS 2020 Scheme?
The defaulting inative companies, can avail benefit of the scheme. While filing the documents under CFSS 2020 they shall simultaneously either:
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Apply in Form MSC-1 by paying normal fees, to get Dormant Company status under Section 455 of the Companies Act, 2013 OR
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Apply for striking off the name of the company by filing Form STK-2 with normal fees.
Can Active-non compliant companies avail benefit of the scheme?
Yes, the scheme allows companies to file Form INC-22A without late fees and once the same is taken on record by the ROC, companies can proceed with other filing.
In case all the directors of a company have been disqualified under Section 164, whether such company can avail the benefit of the Scheme?
In this case, if a person is appointed as director/authorized signatory from the backend of respective RoC, then, such a company can file its belated forms under the scheme with the digital signature of the newly appointed person.
Can Form DIR-3KYC/ DIR-3 Web based be filed under the Scheme?
Yes, filing of Form DIR-3KYC/DIR-3KYC web based is allowed under the Scheme without additional fees if such form(s) is filed during the tenure of the scheme. Once DIN numbers of the Directors are active, the company can go ahead with further filing.
Can strike off companies avail benefits of the scheme?
Only active companies are allowed to take benefit under the Scheme. However, if the strike-off company revived itself during the tenure of the scheme i.e. 01.04.2020 to 31.12.2020 then only it can avail benefits of the scheme.
Whether a company which has been marked as “under CIRP” or “under liquidation” in the MCA21 registry can avail the benefit of the Scheme?
Yes, such a type of company can file its belated forms through an appointed Insolvency Resolution Professional or Resolution Professional, as the case may be.
Whether belated Form MGT-14 or Form INC-28 can be filed under the Scheme?
As per webinar conducted by ICSI, as of now belated forms such as Form MGT-14 or INC-28 cannot be filed without condonation of delay from the Central Government. Therefore when the condonation is approved, the said forms can be filed without additional fees if filed during the tenure of the Scheme. Therefore as of now Form MGT- 14 or Form INC-28 cannot be filed under the Scheme.
As the last date for filing Form BEN-2 was 31st March 2020? Whether Form BEN-2 can be filed under the Scheme during the moratorium period?
A company can file Form BEN-2 during the moratorium period without additional fees. However, immunity shall be required after closure of the Scheme.
What is a defaulting company?
Defaulting Company means a Company defined under Companies Act, 2013 and which has made a default in filing of:
- Any of Document,
- Any of Statement,
- Any of Return etc.
- Including the Annual Statutory Document
What do you mean by Vanishing Company?
A company would be deemed to be a vanishing company, if it is found to have:
- Failed to file returns with Registrar of Companies (ROC) for a period of two years;
- *Failed to file returns with Stock Exchange (SE) for a period of two years (if it continues to be a listed company);
- It is not maintaining its registered office of the company at the address notified with the Registrar of Companies/ Stock Exchange; and
- None of its Directors are traceable
What is an Inactive Company?
Explanation (i) to Section 455(1) of the Act defines the term “Inactive Company” as “Inactive Company” means a company which has
- not been carrying on any business or operation, OR
- has not made any significant accounting transaction during the last two financial years, OR
- has not filed financial statements and annual returns during the last two financial years.
What is the extended date of CFSS 2020?
The MCA vide General Circular dated 28.09.2020 has further extended the time frame of CFSS 2020 from 30.09.2020 to 31.12.2020. Other requirements of the scheme are unchanged.
Conclusion:
The main purpose behind the introduction of CFSS 2020 scheme is to provide defaulting companies with a chance to make their non-compliances good and reduce the compliance burden on them caused due to non-filing.
The ROC can take necessary action against the companies who have not availed the scheme and are in default for not filing documents in a timely manner.
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