Companies Fresh Start Scheme, 2020

About The Scheme

To facilitate Indian companies to make a fresh start, MCA has taken certain alleviative measures for the benefit of all companies by exercising its power under section 460 & 403 of the Companies Act, 2013 and introduces the scheme “(CFSS-2020)” with effect from 1st April 2020 to 30th September 2020.

• It should be noted that Companies Act 2013 mandates all companies to make statutory compliance by filing Annual Return and Financial Statements along with various other documents on MCA21 electronic registry within the prescribed time limit. Under this scheme, stakeholders are granted with one-time opportunity to complete their pending compliances including annual filings without any additional fees on account of any delay. It also grants immunity for any prosecution or proceeding against the company for imposing any penalty on account of delay in filing documents.

• The Scheme also provides an opportunity for the inactive company to convert into a dormant company under section 455 of companies act, 2013 by filing form MSC-1 with nominal fees.

Important Definitions under the Scheme

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

• “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.

Applicability

This Scheme shall be applicable to any “Defaulting Company” and shall be commenced from April 01, 2020, till September 30, 2020, and permitted to file all belated documents which were due for filing without any additional fees.

Companies On Which This Scheme Shall Not Apply

• Where an action for striking-off has already been initiated by the Designated Authority or STK-2 for strike off of Company with ROC has been filed by the companies.
• Companies that have amalgamated.
• Companies that have already filed an application for obtaining dormant status.
• To Vanishing Companies.
• 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).
• 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.
• 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.

Key Features of CFSS 2020

• All necessary documents including annual documents of the company can be filed with normal fees only, as additional fees are waived off.
• The inactive company can also take the status of “Dormant Company u/s 455” by filing a simple application in form MSC-1 or can also apply for striking off the name by filing e-form STK-2 with normal fees.
• The Scheme grants immunity to the companies in relation to proceeding for imposing an additional penalty is only against delayed filings in MCA registry and it doesn’t provide immunity to any proceedings involving interests of shareholders or any other person qua the company or its Directors or KMP means not against any substantive violation of the law.
• It further clarifies that where penalties were imposed by an adjudicating officer due to delayed filing, and no appeal has been made before the Regional Director then
• If the last date for filing the appeal falls between March 01 to May 31, 2020, an additional 120 days shall be allowed for filing the appeal, and
• During this additional period, no prosecution shall be initiated against the company or its officers, insofar as it relates to delay in filing.

Procedure for availing the CFSS Scheme

• The defaulting company shall file their overdue documents/returns/other statements as well as statutory Annual Filing documents such as Financial Statements and Annual Returns in respective prescribed e-Forms by paying the normal statutory filing fee without any additional fee as payable as per section 403 of the Act read with Companies (Registration Offices and fee) Rules, 2014 within due immunity period.
• The Defaulting Companies shall file the Form CFSS-2020 after making all default good, as well as all filed document, are taken on file or on record or approved by the Designated authority as the case may and after the closure of the Scheme but not after the expiry of six months from the date of closure of the Scheme. The are no filing fees of Form CFSS-2020.
• The Form CFSS-2020 is an entirely self-declaration-based form. Based on the declaration made in the Form CFSS-2020, an immunity certificate in respect of documents filed under this Scheme shall be issued by the designated authority.

Scheme for Inactive Companies

• The scheme gives an opportunity to inactive companies to get their companies declared as Dormant Company under section 455 of the Companies Act, 2013 by filing e-form MSC-1 at a normal fee on said form.

(Or)

• May file e-form STK-2 for striking off the name of the company by paying the fee payable on form STK-2.

Kindly note that the Company until and unless is operative in nature for the very purpose it has been incorporated under the applicable laws of the land, otherwise, the management would be required either to apply for a Dormant status or Apply for suo motu strike off for the said Company & LLP during the said period of the CFSS 2020 scheme itself.

Conclusion

• The MCA has earlier introduced Company Settlement Schemes in the year 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.