Due to Corona virus (COVID-19) pandemic Ministry of Corporate Affairs, in an attempt to ease matters for the companies, has introduced a new scheme known as the Companies Fresh Start Scheme, 2020 (CFSS).
The idea behind this is to provide a clean slate to all those law-abiding companies, giving them extended time and a certain level of financial relief with regard to compliances considering the current global situation.
Companies Fresh Start Scheme, 2020 (CFSS):
As per the provisions of the Companies Act, 2013, all companies are required to follow statutory compliances annually. This includes the Annual Return, Financial Statements and all the other necessary forms, documents and statements that are specified, within that particular time frame. Non – compliance of the same results in the imposition of penalties and fines. A company that fails to adhere to the compliances is called a defaulting company.
Validity period of Scheme CFSS-2020:
The Scheme shall come into force on the 01.04.2020 and shall remain in force till 30.09.2020.
CFSS-2020 Scheme for Defaulting Companies:
1. Any defaulting company is permitted to file delayed forms (i.e. Annual Return, Financial Statements and various other forms) by paying only normal fees. No additional fees is required to be paid.
2. Immunity against prosecution and proceedings for imposing penalty only where:-
● The prosecution and proceedings arose due to the delay in filing of belated documents
● No other cases covered.
3. In case there is an existing appeal filed by the company against any notice, complaint or order issued with regard to prosecution and proceedings related to the delay in statutory filing then:-
● The company must withdraw the appeal before enrolling itself under the CFSS 2020.
● While applying for the registration under CFSS-2020, the concerned company must furnish the copy of appeal withdrawal along with the application.
4. Where the order has been passed by the adjudicating authority but company has not filed an appeal against the order as on the date of commencement of the scheme:-
● In such case, the company is allowed time period of 120 days to file an appeal before the Regional Director.
● During this period of 120 days no further action shall be initiated against the non-complaint company (if it is related to delay in filling of returns).
5. A company can file CFSS-2020 to avail of the benefits of the scheme:-
● The company will be immune until 6 months from the date of closure of CFSS 2020.
● No fees are charged for filing Form CFSS-2020.
● Immunity certificates will be granted to companies that have their registrations under the scheme.
6. Immunity is not granted where:-
● An appeal is pending in court against the company.
● In 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 scheme came into force.
CFSS-2020 Scheme for Inactive Companies:
The defaulting inactive companies may apply for the CFSS 2020 so as to file the due documents. Additionally, they may also do the following:-
- apply to get themselves declared as Dormant Company u/s 455 of the Companies Act, 2013 by filing of e-Form MSC – 1 at a normal fee on said Form.
- apply for striking off the name of the company vy filling e-Form STK-2 by paying the fee payable on form STK-2.
- Companies whose compliance status has been marked as ACTIVE non-compliant due to non-filing of Active Company Tagging Identities and Verification (ACTIVE) e-form can take benefit of this scheme. The filing fee of Rs 10,000 will not apply.
CFSS-2020 Scheme is Not applicable in certain cases:
This scheme shall not apply:-
- to companies against which action for final notice for striking off the name u/s 248 of the Act (previously u/s 560 of the companies Act 1956) has already been initiated by the Designated Authority.
- where any application has already been filed by the companies for action of striking off the name of the company from the Register of Companies.
- to companies which have been amalgamated under the scheme of arrangement or compromise under the Act.
- where application have already been filled for obtaining Dormant Status u/s 455 of the Act before this scheme.
- to Vanishing companies.
- where any increase in authorized capital is involved (Form SH-7) and also charge related documents (CHG-1, CHG-4, CHG-8 and CHG-9).
Definitions – In this Scheme, unless the context otherwise requires:
(a) ‘Act” means the Companies Act, 2013 and Companies Act, 1956 (where ever applicable);
(b) “Company” means a company as defined in clause (20) of section 2 of the Companies Act, 2013;
(c) “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 on the MCA-21 registry.
(d) ”Designated authority” means the Registrar of Companies having jurisdiction over the registered office of the company;
(e) “Immunity certificate’ means the certificate referred to in subparagraph of paragraph 6 of the Scheme;
(f) “inactive Company means a company as defined in Explanation (i) to sub-section (1) of section 455(1) of the Companies Act, 2013;