The Ministry of Corporate Affairs (MCA) vide General Circular No 12/2020 dated March 30, 2020 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. The USP of the scheme is a one-time waiver of additional fees for delayed filings by the companies with the jurisdictional ROC during the currency of the Scheme, i.e. during the period starting from April 1, 2020 and ending on September 30, 2020. CFSS 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 jurisdictional Regional Directors against imposition of penalties, if already imposed. In this article, I’ve tried to summarize some of the important features of these scheme: The Ministry of Corporate Affairs (MCA) vide General Circular No 12/2020 dated March 30, 2020 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. The USP of the scheme is a one-time waiver of additional fees for delayed filings by the companies with the jurisdictional ROC during the currency of the Scheme, i.e. during the period starting from April 1, 2020 and ending on September 30, 2020. CFSS 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 jurisdictional Regional Directors against imposition of penalties, if already imposed. In this article, I’ve tried to summarize some of the important features of these scheme:
Salient Features of CFSS 2020:
| • | The Scheme shall remain in force from April 1, 2020 till September 30, 2020. All pending filings have to be done within this period. | |
| • | Applicability: 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. Where “defaulting company” means a company defined under the Companies Act 2013, and which has made default in filing of any of the documents, statements, returns, etc including annual statutory filings on MCA-21 registry. | |
| • | Applicability on Foreign Companies: CFSS 2020 is available for foreign companies also. | |
| • | No additional filing fee: Companies will be required to pay normal filing fees and no additional filing fees will be levied by the MCA for late filing on the specified forms. | |
| • | Immunity: Immunity granted against any prosecution or proceedings for imposing penalty associated with delay in filing the Document. However, no immunity is available from other consequential proceedings. For example, Section 42(8) of the CA 2013 mandate a company to file a return of allotment (in Form PAS 3) within 30 days of issuance of securities. However, Section 42(4) of CA 2013 stipulates that the money received under private placement cannot be utilised by the company before filing the return of allotment. Under the Company Scheme, immunity is available from penalties arising from delay of filing of return of allotment, but not for breaching Section 42(4) regarding utilisation of money raised through private placement route prior to filing the return of allotment by the company. | |
| • | Withdrawal of appeal: If any company has filed any appeal against the notice, complaint or order passed by a court or adjudicating authority with respect to default in filing a Document under the Companies Act 2013, then such company will have withdrawn the appeal before filing the application for receiving immunity under the Company Scheme. | |
| • | Extension of time for filing appeal: If any company has not filed any appeal against the order passed by adjudicating authority imposing penalties due to delay in filing Document, and last date of filing appeal falls between March 1, 2020 to May 31, 2020, then such company and their officers will have an additional period of 120 days from such last date for filing the appeal before the concerned Regional Director. Till the expiry of such extended period, the MCA will not initiate any prosecution regarding non-compliance with the order of adjudicating authority relating to delay in filing the Document. | |
| • | Application: The company will have to file an application in E-Form CFSS-2020 for seeking immunity certificate within maximum period of 6 months from the closure of the Scheme. Thereafter, the MCA will issue an immunity certificate. | |
| • | Effect Of Immunity: Upon receipt of the Immunity Certificate by a company, the ROC having jurisdiction over a said company shall withdraw any pending prosecution(s) with respect to any penalty imposed for filing. |
Scheme for inactive companies:
| • | The companies which are inactive, while making filings of the due statutory documents under the CFSS 2020, can simultaneously file after payment of relevant fees, for either: |
| a. | getting themselves declared as Dormant Companies under section 455 of the Companies Act, 2013 by filing form MSC-1; | |
| b. | striking of their names from the register of companies in form STK-2; |
Things to know:
| • | CFSS 2020 scheme is not applicable for the companies which have been automatically struck off due to non-filing of annual documents i.e. Annual Returns. The struck off companies have to approach the NCLT for reviving their companies first and a copy order of NCLT approving for such revival under section 252 of the CA 2013 to be filed in Form No.INC-28. Later on, they can take the benefit of this scheme. | |
| • | The Scheme immune’s only for companies for default in penalties or compliance filings or against proceedings held against the company, it does not cover any proceedings involving the interest of stakeholders, directors or any key managerial personnel of the company. | |
| • | Companies cannot claim additional fee which is already paid by them. | |
| • | For claiming immunity under the scheme towards appeals held against the company passed by an adjudicating authority or any competent court for any violation shall have to be made only after the withdrawal of the appeal and submission of withdrawal of the appeal with the immunity application. | |
| • | If AGM was not held in specified time period then CFSS shall not be applicable, since not holding AGM on time is a violation of the law. CFSS only provides immunity for delayed filing. Accordingly, once the AGM is duly conducted after necessary permission from the jurisdictional ROC, the filings related to the said AGM can be done during the tenure of CFSS. Accordingly, violation, if any, has to be cured first. | |
| • | The Scheme shall not be applicable for matters where any appeal is pending before the court of law or in case of management disputes held before the law. | |
| • | Belated documents have to be filed during the currency of the scheme. If the scheme benefits are availed, such a company has to file the CFSS form on or after October 1, 2020 and before March 31, 2021. | |
| • | There is a separate Scheme for LLPs i.e LLP Settlement Scheme -2020. The currency of Scheme for LLP is also same as of CFSS 2020 i.e April 1,2020 till September 30, 2020.. | |
| • | The Scheme cannot be availed if any penalty or conviction has been passed by any adjudicating authority with a clause that no appeal against such order has to be preferred. | |
| • | The Scheme cannot be availed by companies against which a striking off name order under Section 248 has been issued or if the company has voluntarily applied for striking off name from the register. | |
| • | The Scheme is not applicable for companies under the scheme of amalgamation or has amalgamated or to vanishing companies. |
Procedure:
| • | The defaulting company shall file their overdue documents/returns/other statements as well as statutory Annual Filing documents in respective prescribed Forms by paying the normal statutory filing fee (i.e without any additional fee) within the immunity period. | |
| • | The defaulting Companies shall have to file the e-Form CFSS-2020 (the draft version of the form has been annexed with the MCA Circular) after making all default good and after all the filings are taken on record or approved by the Designated authority as the case may. This form can be filed after closure of the Scheme i.e on or after October 1, 2020 but not after the expiry of six months from the date of closure of the Scheme. There is no filing fees of Form CFSS-2020. The Form e-Form CFSS-2020 would be made available w.e.f 1st October, 2020. | |
| • | The Form CFSS-2020 is entirely self-declaration-based form. After submission of Form CFSB-2020 and on the basis of self-declaration made by Director, the ROC will issue Immunity Certificate. |
The scheme is available with respect to 66 forms which are classified as follows:
| • | >> 56 forms under CA,2013 | |
| • | >> 10 forms under CA,1956 |
Forms specifically excluded:
| • | SH-7 – form to be filed for increase in authorized | |
| • | Forms CHG-1, CHG-4, CHG-8 and CHG-9 for creation, modification and satisfaction of charges |