Introduction: Companies Fresh Start Scheme 2020

Companies and LLP Fresh Start Scheme: In the Circular Dated March 24, 2020, The Ministry Of Corporate Affairs (‘MCA’)  Has Introduced Companies & LLP‘S Fresh Start Scheme, 2020 (‘CFSS Scheme’) Vide  Circular No. 12/2020 And 13/2020 Dated March 30, 2020, Under Section 460 Of The Companies Act, 2013.

The Schemes Is A One-Time Waiver Of Additional Filing Fees For Delayed Filings By The Companies Or LLPS With The Registrar Of Companies During The Currency Of The Schemes, I.E. During The Period Starting From 1^st April 2020 and Ending on 30^th September 2020.

The ‘Companies Fresh Start Scheme 2020’ is To Enable Companies to 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’, The Fresh Start scheme, and modified LLP Settlement Scheme to reduce the compliance burden during the public health situation caused by Covid-19.

Companies Fresh Start Scheme 2020 Objectives

The objective behind this is to provide a clean slate to all those law-abiding companies, giving them extended time and a certain level of financial relief with regard to compliance considering the current global situation.

Especially For Those With Long-Standing Defaults, Thereby Giving Them an Opportunity to Make a “Fresh Start”.

APPLICABILITY

This Scheme is applicable to any “Defaulting Company” and Permitted to file all belated documents which were due for filing without any additional fees. This includes the Annual Return, Financial Statements, and all the other necessary forms, documents, and statements that are specified within the Scheme’s Time frame.

DEFAULTING COMPANIES

The defaulting company” means a company defined under the Companies Act, 2013, and which has made a default in filing of any of the documents, statements, returns, etc. including annual statutory documents (AOC-4 & MGT- 7) on the MCA-21 registry on due time.

CFSS 2020 INCLUDES FOR DEFAULTING COMPANIES

No additional fees to be paid shall pay only the normal fees as prescribed by the Companies Rules, 2014 for all filings with the MCA 21 registry.

Immunity against prosecution and proceedings for imposing penalty only where.
The prosecution and proceedings arose due to the delay in the filing of belated documents.
No other cases are covered.

• In case there is an existing appeal filed by the company against any notice, complaint or order issued with regard to prosecution and proceedings related to the delay in statutory filing, the following steps are to be followed:-
  – Before registering under the CFSS 2020, the appeal filed by the company should be withdrawn.
  – At the time of making the application for the scheme, the company must furnish a copy of such withdrawal along with the application as proof.
• Where the order has been passed by the court and the company has not filed an appeal against the same as on the commencement of the scheme:-
  – The company is allowed 120 days to file an appeal before the Regional Director.
  – During this period of 120 days, for the non – compliance of the order passed by the court with regard to the delay in filing of any documents for the same shall be condoned and no further action shall be initiated against the company.
• Form CFSS – 2020 may be filed by the companies under the scheme.
  – The Form provides the companies with immunity for a period of 6 months after the date of closure of the CFSS 2020.
  – No fees to be paid on this particular form.
  – Immunity Certificates shall be granted by the designated authority.
• Immunity is not granted where:-
  1) an appeal is pending in court against the company.
  2) In case of management disputes pending before any court of law.
  3) Where an order is passed by the court and no appeal has been made before the scheme came into force.
• Extension granted to file DIR-3/DIR-3KYC: Extended timelines between 1st April 2020 and 30th September 2020 is provided by MCA for the directors whose DIN is deactivated to come forward and file DIR-3KYC/DIR-3 KYC-Web. The filing fee of Rs 5,000 will not apply.

INACTIVE COMPANY

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;

CFSS 2020 INCLUDES FOR INACTIVE COMPANIES

The inactive companies may apply for the CFSS 2020 so as to file the due documents. Additionally, they may also do the following:-

• Submit an application for Dormant Status under Section 455 of the Companies Act, 2013 by way of filing of e-Form MSC – 1 along with the prescribed fees.
• Submit an application for striking off the name of the company from the Register of Companies.
• Extension granted to file e-Form ACTIVE: An extended timeline between 1st April 2020 and 30th September 2020 is provided by MCA for the ‘ACTIVE non-compliant companies to come forward and file e-Form ACTIVE. The filing fee of Rs 10,000 will not apply.

NON-APPLICABILITY

1) Where an action for striking-off of the name has already been initiated by the Designated Authority or STK-2 for strike off of the name of Company with ROC has been filed by the companies;

2) Where the companies have been amalgamated under the scheme of arrangement or compromise.

3) Companies that have already filed an application for obtaining dormant status.

4) Vanishing Companies;

5) Companies that are marked for the Corporate Insolvency Resolution Process or Liquidation.

6) Where an increase in authorized capital is involved (Form SH-7) and all charge-related documents (CHG-1, CHG-4, CHG-8, and CHG-9);

7) In the matter of any appeal pending before the court of law and in case of management disputes of the company pending before any court of law or tribunal;

8) 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.

ABOUT REVISIONS IN THE LLP SETTLEMENT SCHEME 2020

• The Time period for LLP Settlement Scheme 2020 Is Between The 1st of April, 2020, And The 30th Of September, 2020.
• Applicable to the defaulting LLPs for the filing of belated documents that were due for Filing till the 31st of August, 2020.
• No Additional Fees Charged on The filing of the belated documents other than the normal application Fees.
• No Prosecution by the Registrar for those defaulting LLP who complete the Filing of all The Belated Documents and Dues by The 30th of September, 2020.
• The Scheme Is Not Applicable to LLPs who have made the application for the striking off of the name of the LLP from the registrar as per the LLP Rules, 2009.

DISQUALIFICATION OF DIRECTORS

• The Disqualification of Directors can’t be resolved through the CFSS 2020. However, as per the MCA information available in the public domain, the 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 are encouraged to become compliant once again in pursuance of the General Circular No. 11 dated 24th March 2020& General Circular No.12 dated 30th March 2020 and file DIR-3KYC/DIR-3KYC-Web/ACTIVE as the case may be between 1st April 2020 to 30th September 2020 without any filing fee of INR 5000/INR 10000 respectively.

CONCLUSION:

• The MCA Has Earlier Introduced Company Settlement Schemes In The Years 2010, 2011, 2014, 2018, And Now 2020.
• Once The Scheme Is Over, The Designated Authority Has the Power To Initiate All Necessary Action Against Companies Who Have Not Availed This Scheme And Are Still Doing In Default In Filing Documents And The Weeding Out Exercise Begins On The Other End.
• Hence, The Current CFSS 2020 Scheme Is A One-Time Opportunity To Clear The Belated Defaults And Make A New Beginning Of The Financial Year 2020-2021.

Note:

“This document had been written to provide updates in simple/ lucid language. The Author shall not be responsible for any decision made based on the content of this document. Care has been taken to produce authentic and reliable information, however, the users are expected to obtain professional advice before implementing.