Companies Fresh Start Scheme, 2020- One time opportunity for Companies to clear defaults

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The Ministry of Corporate Affairs has introduced Companies Fresh Start Scheme,2020 (‘CFSS Scheme’) vide circular no. 12/2020 dated March 30, 2020 under Section 460 of the Companies Act, 2013 (“Act”) read with Section 403.This is in furtherance of the Ministry’s Circular No. 11/2020, dated 24th March. 2020 and in order to facilitate the companies registered in India to make a fresh start on a clean slate, this Ministry has decided to take certain alleviative measures for the benefit of all companies. Salient Features of the Scheme is as follows.

ENFORCEMENT- The scheme shall come into force on 1st April, 2020 and shall remain in force till 30th September, 2020 (both days inclusive).

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.

MANNER OF PAYMENT- Every defaulting company shall be required to pay normal fees as prescribed on the date of filing of each belated document without payment of any additional fees on account of delay.

FORM CFSS 2020-The Form CFSS-2020 is entirely self-declaration-based form to be made electronically.

IMMUNITY- Immunity from the launch of prosecution or proceedings for imposing penalty shall be provided only to the extent such prosecution/proceedings for imposing penalty under the Act pertains to any delay associated with the filings of belated documents. Any other consequential proceedings, including any proceedings involving interests of any shareholder or any other person qua the company or its directors or key managerial personnel would not be covered by such Immunity, meaning not against any substantive violation of law.

IMMUNITY CERTIFICATE- An application for seeking immunity may be filed after documents are filed, taken on record and approved by the the designated Authority (i.e. Registrar of Companies having jurisdiction over the registered office of the company) but maximum within a period of 6 months from the closure of the scheme i.e. maximum by 31st March, 2021. Based on this immunity certificate shall be issued by the concerned ROC.

EFFECT OF IMMUNITY- The designated authority shall withdraw the prosecutions before any courts and proceedings pending before adjudicating authority in respect of which the immunity has been granted by the designated authority.

WITHDRAWAL OF EXISTING APPEAL AND FURNISHING OF PROOF- If defaulting company has filed any appeal against any notice, complaint, order passed by court or by an adjudicating authority, it can file application under this scheme for immunity certificate only after withdrawing such appeal and furnish proof of such withdrawal with the application (CFSS-2020).

SPECIAL CIRCUMSTANCES WITH ORDER OF ADJUDICATING OFFICER WHERE APPEAL COULD NOT BE FILED- Where due to delay of filing any document with the registrar, Order of penalties were imposed by adjudicating officer and no appeal has been filled as on today then:

      • If last date for filing the appeal falls between March 01 to May 31, 2020, 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.

EXCLUSIONS FROM THE SCHEME- CFSS 2020 will not apply to the following:

      1. Where 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;
      2. Companies which have amalgamated;
      3. Companies which has already filed application for obtaining dormant status;
      4. To Vanishing Companies;
      5. Where any increase in authorized capital is involved (Form SH-7) and all charge related documents (CHG-1, CHG-4, CHG-8 and CHG-9);
      6. 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;
      7. 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.

FOR INACTIVE COMPANIES- The scheme gives an opportunity to defaulting inactive companies while filling application under Form CFSS-2020,

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

CONCLUSION-The MCA has earlier introduced Company Settlement Schemes in the year 2010, 2011, 2014, 2018 and now 2020. The Ministry has uploaded the list of 76 “Eligible Forms” in the public domain which waives off additional fees for belated filings which comprises of eforms under the Companies Act 2013, Companies Act 1956 and LLP’s. Once the Scheme is over, the Designated Authority have power to initiate all necessary action against companies who have not availed this scheme and are still in default in filing of required documents as per the provisions. Hence, the current CFSS Scheme is a one-time opportunity to clear all the belated defaults without additional fees.

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