Companies Fresh Start Scheme, 2020

The Ministry of Corporate Affairs (“MCA”) vide general circular no. 12/2020 has introduced the ‘Companies Fresh Start Scheme, 2020 (CFSS-2020)’ (“Scheme”) in order to enable the defaulting companies to file belated documents on the MCA-21 registry (“Registry”). The Scheme is effective from April 1, 2020 and will remain in force till September 30, 2020. The Scheme, inter alia, seeks to condone the delay in filing of annual returns, financial statements and other documents required to be filed on the Registry, insofar as it relates to charging of additional fees, and grant immunity from launching of proceedings for imposing penalty on account of such delay. The key provisions of the Scheme are as follows Applicability Any company which has defaulted in filing of documents on the Registry (“defaulting company”) can file belated documents which were due for filing on any given date in accordance with the Scheme. The Scheme shall not apply in the following cases where an action for final notice for striking-off the name of the company has been initiated under section 248 of the Companies Act, 2013 (“Act”) (corresponding to section 560 of the Companies Act,1956); where an application has already been filed by a company for an action of striking off its name from the register of companies; companies which have amalgamated under a scheme of arrangement or compromise under the Act; where an application has already been filed by a company for obtaining ‘dormant status’ under the Act; vanishing companies; and cases involving increase in authorised capital (Form SH-7) and charge related documents (Form CHG-1, CHG-4, CHG-8 and CHG-9). Payment of normal fees and immunity from prosecution Every defaulting company may file its belated documents by paying the normal fees as prescribed and no additional fee shall be payable. Further, immunity from launch of any prosecution or proceedings for imposing penalty will be provided for delay associated with filing of the belated documents. However, any consequential proceedings (including any proceedings involving interests of any shareholder) will not be covered by such immunity. Withdrawal of appeal against proceedings for imposing penalty If a defaulting company has filed any appeal against any notice issued or complaint filed or order passed by a court/ adjudicating authority, in respect of which an application is made under the Scheme, the applicant shall before filing an application for issue of immunity certificate, withdraw the appeal and furnish proof of such withdrawal along with the application. Measures in cases where appeal could not be filed against the order of the adjudicating authority In cases where adjudication order has been passed under section 454 of the Act with respect to any default on account of non-filing of any form, statement or return etc., however, no appeal has been preferred before the Regional Director against the said order as on the date of commencement of the Scheme, following relaxations are provided where the last date of filing of appeal falls between March 1, 2020 and May, 30, 2020, an additional period of 120 (one hundred twenty) days from the last date for filing appeal, shall be allowed for filing the appeal before the Regional Director; and during the aforesaid additional period, no action for non-compliance of the order shall be initiated against the company or its officers. Application for, and effect of, immunity After the documents are filed in accordance with the Scheme, an application for seeking immunity may be filed in the Form CFSS-2020 within 6 (six) months from the date of closure of the Scheme. Upon receiving such application, the designated authority (jurisdictional Registrar of Companies) shall issue an immunity certificate. However, no immunity shall be provided in case any court has ordered conviction/ imposition of penalty and no appeal has been preferred against such order before the Scheme came into force. Further, the immunity shall not be applicable in connection with any pending appeal or any management disputes of the company pending before a court/ tribunal. Upon granting such immunity, the designated authority shall withdraw the proceedings pending before any court in respect of defaults against which immunity has been granted Inactive companies The defaulting inactive companies while filing documents under the Scheme may simultaneously apply to get themselves declared as a dormant company or apply for striking off its name from the register of companies. This update has been contributed by Aastha (Partner) and Kartik Jigyasi (Associate). Download Pdf