Amidst the economic chaos surrounding the Covid 19 pandemic, Companies and LLPs may now breathe a sigh of relief as the Ministry of Corporate Affairs has announced the Companies Fresh Start Up Scheme (CFSS) 2020 and revised the LLP Settlement Scheme 2020. The CFSS is made in a bid to ease compliance burden of Defaulting Companies and LLPs to offer an opportunity to start afresh and become legally compliant entities.
Companies Fresh Start Scheme, 2020 condones delayed filings with Registrar, waives any additional fees and grants of immunity from launching prosecution or proceedings for imposing penalty on account of delay associated with certain flings.
Read the details of CFSS 2020: https://www.mca.gov.in/Ministry/pdf/Circular12_30032020.pdf
Applicability: Who can avail of the CFSS? What is the Duration of CFSS?
“Defaulting company” i.e. any company that has failed to file any mandatory form, statement, returns, including annual statutory documents on due time with the Registrar of Companies may avail of CFSS 2020. CFSS can be availed by a registered company only. An “officer in default” is not absolved from liability through CFSS.
These schemes shall remain effective for a period of 6 months, starting 1st April 2020 and remaining in force until 30th September 2020.
Through CFSS, Defaulting Companies will be able to make their compliances good, without paying any additional fee and there would be no prosecution/ penalty for the Companies which file their pending forms till 30th September, 2020 provided that such prosecution/ penalty is associated with a filing related default. Please take note that no immunity is available for any default other than filing related default.
What does CFSS include?
Amongst other things, CFSS 2020 allows Defaulting Companies to start afresh in the following manner:
- During the Term of CFSS 2020, the companies may be allowed to regularise delays only paying the regular filing fees to ROC and with no additional/delay fee payments complete the pending statutory filing compliances with the ROC (for example: returns, annual filing, financial statements).
- CFSS 2020 affords an opportunity to Inactive Companies to get their companies declared as “Dormant Company”, thereby allowing Inactive Companies to remain on the Register of the Companies with minimal compliance requirements.
- CFSS, 2020 grants immunity towards proceedings for any additional filing fees or penalty at the Registrar of Companies (ROC). However, CFSS does not provide for any immunity cover for proceedings against the company’s directors for violation of any law or proceedings involving shareholders’ interest.
- CFSS, 2020 provides an additional period of 120 days to companies for filing an appeal against penalties imposed by the adjudicating officer for delay in filing any documents, statement or return etc. before the concerned Regional Directors. The additional period would be allowed only if the last date of filing such appeal falls between 1st March 2020 and 31st March 2020.
CFSS and Inactive Companies:
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.
The Defaulting Inactive Companies may apply for the CFSS 2020 to file the due documents. Moreover, they may also opt to do the following:-
- Submit an application for striking off the name of the company from the Register of Companies.
- Submit an application for Dormant Status under Section 455 of the Companies Act, 2013 by way of filing of e-Form MSC – 1 along with the prescribed fees.
- Extension granted to file e-Form ACTIVE: An extended timeline between 1st April 2020 and 30th September 2020 is provided by MCA for the ‘ACTIVE non-compliant’ companies to come forward and file e-Form ACTIVE. The filing fee of Rs 10,000 will not apply.
CFSS does not apply in certain cases
- Where the action for final notice of striking off the name as per the Companies Act, 2013 has already been initiated by the Designated Authority.
- Where the company has already filed for striking off the name of the company under section 248 of the (Companies Act, 2013) vide Form STK – 2 along with the prescribed fees.
- Where the companies have been amalgamated under the scheme of compromise and arrangement
- Where the Company has applied for Dormant Status (under section 455 of the Companies Act, 2013) has been filed by way of Form MSC – 1 along with the prescribed fees before the introduction of CFSS.
- Vanishing companies. i.e. a company that has a) Failed to file returns with Registrar of Companies (ROC) for a period of two years; b) *Failed to file returns with Stock Exchange (SE) for a period of two years (if it continues to be a listed company); c) It is not maintaining its registered office of the company at the address notified with the Registrar of Companies/ Stock Exchange; and d) None of its Directors are traceable.
- Companies that are marked for the Corporate Insolvency Resolution Process or Liquidation.
- Where the following are involved:-Increase in the Authorised Capital (Form SH – 7)Charge related documents (CHG – 1, CHG – 4, CHG – 8, CHG – 9)
Does CFSS waive all kinds of Prosecution and Penalties?
CFSS, 2020 does not grant immunity in the following cases:
- Where an appeal is pending in any court against the company.
- Where there is a case of management disputes pending before any court of law.
- Where an order is passed by the court and no appeal has been made before the CFSS came into force.
- Where an order imposing penalty has been made by the Adjudicating Authority and no appeal is preferred against such order as on 1st April, 2020.
What happens when you avail CFSS?
- Registrar of Companies would provide an immunity certificate to the Company availing of benefits.
- Company would withdraw from any appeal against any prosecution launched.
- Registrar of Companies would withdraw all the prosecution pending regarding such forms/ returns.
- Registrar of Companies would withdraw the proceedings of adjudication of penalties u/s 454.
What happens if you do not avail the scheme?
After 30th September 2020, the ROC would be rightful to initiate all necessary action against companies who remain non compliance. Defaulting Companies would then be liable to not only incur an additional fee but also invite prosecution and penalties.
Know more about how you can avail the Companies Fresh Start Scheme, 2020. Contact Legawise for any further information about the CFSS and how you can benefit from it.