Practical Aspects of Company Fresh Start Scheme 2020

As per MCA Newsletter for the month of March 2020, only 60% companies were active when this scheme was introduced as on 31st March 2020. Out of this 60%, many comapanies were defaulting in ROC Compliance and had their directors disqualified and KYC left unupdated. Rest 40% constituted:

1. Closed Companies

2. Stike off companies

3. Under liquidation

4. Dormant Companies

After introduction of amnesty schemes in Direct Tax and Indirect Tax such as Vivad se Vishwas scheme 2020 and Sabka Vishwas(Legacy Dispute Resolution) Scheme, 2019, Ministry of corporate affairs has received many representations from various stakeholders requesting for grant of one time opportunity, so as to enable them to complete their pending compliances by filing necessary documents and forms in the MCA-21 registry including annual filings without being subject to a higher additional fees on account of any delay filing.

Thus, recently Ministry has launched a scheme known as “Companies Fresh Start Scheme, 2020” where condoning the fees of delaying filing the above mentioned documents with Registrar, it relates to waiver of additional fees and granting of immunity from launching of prosecution or proceedings for imposing penalty on account of delay associated with certain flings.

OBJECT OF THE CFSS-2020 SCHEME:

The main object of this scheme to  give companies a one-time opportunity to make a fresh start by waiving off the additional fee as charged under section 403 of Companies Act, 2013 and granting of immunity from launching of prosecution and proceedings for imposing penalty on account of delay associated with certain filling. Further, CFSS-2020 also gives an opportunity to defaulting inactive companies to get themselves declared as ‘dormant company’ under the provisions of the Companies Act, 2013 (Act) or file the Form STK-2 for  striking off of name of the Company.

BENEFITS OF CFSS-2020 SCHEME:

The following benefit can avail from CFSS-2020 scheme.

1. Pay only normal fees as prescribed under the Companies (Registration and Office) Rules, 2014 so no additional fees need to pay if filing done up to 30/09/2020.

1. Immunity from launch of prosecution/penalties, pertaining to delay associated with filing of belated documents only. However, any violation of law, such as any proceedings involving interests of any shareholder or any person qua the company or its directors or key managerial personnel would not be covered by such immunity.

1. For Disqualified Directors: If all the directors are disqualified then such company has to first appoint new directors and then after appointment of new director such companies can avail the Scheme.

NON APPLICABILITY OF THE SCHEME:

The scheme will not be applicable in below situation.

1. Companies against which final notice of striking off of the name has been initiated by ROC.

However, a struck off company can avail the benefits of the Scheme after due process of revival from NCLT during the Specified Period. If a company is revived after 30th September, 2020 then such companies can’t avail the benefit of this Scheme.

ii)  Companies which have voluntarily filed STK-2.

iii) Companies which have been amalgamated.

iv) Companies which have already applied for Dormant status i.e. Dormant Companies as specified u/s 455 of the Act.

v) Vanishing Companies**

vi) Forms.

 Form SH-7 related to increase in authorized share capital

 Charge related documents i.e. {CHG-1, CHG-4, CHG-8 and CHG – 9}.

WHAT IS MEANING OF VANISHING COMPANIES:

There is no formal definition as per Companies Act, 2013 but pursuant to General Circular No. 2/2010, it was defined as:

A company registered under the Companies Act, 1956 and listed with Stock Exchange which, has failed to file its returns with Registrar of Companies and Stock Exchange for a consecutive period of two years, and is not maintaining its registered office at the address notified with the Registrar of Companies or Stock Exchange and none of its Directors are traceable

WHAT FORMS WHICH CAN BE FILED UNDER THE COMPANIES FRESH START SCHEME, 2020. :

The forms which are subject to additional fee under section 403 of Companies Act, 2013 are eligible for filing under CFSS, 2020 and are divided into.

Annual Based Forms:

• Annual Return- MGT-7
• Financial statement- AOC-4

Event Based forms:

♦Other forms required to be file with ROC Like.

– PAS-3

– MGT-14

– ADT-1

– Any other form.

Except Two Forms. :

– SH-7- Increase in Authorized

– Charge related form (CHG-1, CHG-4, CHG-8 or CHG-9) Capital.

Note: In case of lockdown, documents required for above filing can be digitally signed.

Validity Of The Scheme:

1st April, 2020 to 30th September, 2020 (“Specified Period”).

COMPANIES FRESH START SCHEME FOR INACTIVE COMPANIES:

Inactive companies can complete there filing process under CFSS, 2020 and can simultaneously, either: Apply to get themselves registered as Dormant Company by filing form MSC-1 at a normal fee or Apply for striking off the name of the company by filing form STK-2 by paying normal fee.

GRANTING IMMUNITY FROM PROCEEDINGS AND PROSECUTION UNDER CFSS, 2020:

Defaulting companies will be required to pay only normal fee at the time of filing of belated documents and no additional fee will be charged. Upon filing, immunity will be granted to such company that no prosecution or proceedings for imposing penalty will be initiated against such company related to such delay filing. However, please note that immunity will be granted only with respect to delay and not with respect to any other consequential proceedings including proceedings involving interest of any stakeholders or any other person qua the company or its directors or Key Managerial person would not be covered under the immunity.

CASES WHERE APPEALED COULD NOT BE FILLED:

There can be certain cases where order is passed by adjudicating authority imposing penalty for delay in filing of documents, statements, returns etc. with MCA.

However, no appeal has been filed by the company or its officer against such order before regional director u/s 454(6) of Companies Act, 2013 on date of commencement of scheme. In such case, where last of filing of appeal falls between 1st March, 2020 to 31st May, 2020 (both dates inclusive) then an additional period of 120 days will be allowed with effect from such last date to all the companies or their officers to file their appeal. During such additional period, prosecutions for non-compliance of order shall not be initiated as far as it is related to delay filing of any document, statement or return.

KEY PROVISIONS OF CFSS, 2020:

Under the CFSS 2020 scheme, any company which has failed to file the Annual Returns and Financial Statements or any return or form which are governed under section 403 of the Act, then such defaulting companies can file such belated documents in the MCA-21 registry at a nominal fee as prescribed under the Companies (Registration and Office) Rules, 2014 with the ROC during the currency of the CFSS 2020 i.e. with effect from 1st April 2020 to 30th September 2020.

The defaulting inactive companies can also simultaneously apply for obtaining dormant status under the provisions of section 455 of the Act or apply for striking off the name of the company by filing e-form STK-2, by paying the normal fees as applicable under the Act.

On completion of CFSS 2020 on 30th September 2020, e-form  CFSS-2020 shall be available for filing for companies availing benefit under the scheme and an immunity certificate will be issued by the MCA.

The CFSS 2020 does not apply to companies stroke off by ROC under section 248, companies which have already applied for strike off, companies which have been amalgamated under a scheme of arrangement or merger, companies which have already filed for obtaining dormant status under section 455 of the Act, the vanishing companies and on forms for increase in capital & charge related forms i.e. form SH-7, CHG-1, CHG-4, CHG-8 and CHG-9.

CONCLISION:

CFSS-2020 is very good scheme and welcome step taken by Ministry of corporate affairs, and another good step taken by government in the area of ease of doing business apart from another step taken in the area of direct and indirect tax. Stake holder can take benefit of this scheme by only paying normal fees and easily avoid hefty additional fees. It is expected that lots of companies will take the benefit of this scheme and do their regular compliance and subsequently run the company in a disciplined manner. Make My Filing is leading services provider in the area of corporate compliance, registration and, startup services, etc. at an affordable rate so any of your compliance is pending then you can avail the services of taxtoday.in where you can complete your pending compliance under company fresh start scheme 2020 well within time in affordable cost and without paying any penalty.