The article is written by CA Chetan Swaroop Monga. He is a practising Chartered Accountant.

Introduction

Government of India has been making tremendous efforts in clearing backlogs/disputes/appeals under direct and indirect taxes which has resulted in the launched settlement schemes under Direct Tax (Vivaad Se Vishwas Scheme) & Indirect tax (Sabka Vishwas Scheme). On the similar lines, MCA i.e Ministry has come up with the scheme called Companies Fresh Start Scheme 2020 (also called CFSS -2020) vide its General Circular No. 12/2020 for one-time application of condonation of delay of filing the various forms, documents and returns.

Background of the Scheme

The Ministry of Corporate Affairs had been receiving various representations from various stakeholders requesting for a scheme wherein the defaulting companies may file the various returns, forms and documents without paying the additional fees on account of being late. The representations were analyzed and the MCA came up with the Companies Fresh Start Scheme 2020. There were large number of defaulting companies which were willing to file the required documents, forms and returns but were reluctant because of the hefty additional fees that they were required to pay for the belated /late filings. After the launch of this scheme companies will be motivated to make all the necessary compliances and start afresh. This is yet another welcome step and is receiving appreciation from various stakeholders.

As per 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, statements, returns etc including annual statutory documents on the MCA 21 registry.

Details of the Scheme

CFSS-2020 will be effective from 1st April 2020 and will end on 30th September 2020 which means the companies have been given a period of 6 months approximately to be compliant once again without paying any additional fee for being late in filing the necessary documents, returns and forms. In a nutshell, defaulting companies shall be required to pay only normal fees as per Registration offices and Fees Rules 2014 and no additional fee will be payable of the documents, forms and returns.

In addition, this 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 or apply for striking off the name of the company by filing e-form STK -2 at the prescribed fee.

The application for seeking immunity in respect of belated documents can be made electronically by filing form CFSS-2020 (this form can be filed without any fee) after the closure of the scheme (but not after the 6 months from the closure of the scheme) and after the documents, forms and returns are taken on file or on record or approved by the Designated Authority (Registrar of Companies).

Impact of filing CFSS-2020 will be that 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(Registrar of Companies).

Some special cases

1. If the defaulting company has filed any appeal against any notice, complaint, order passed by court or by an adjudicating authority, it can file an application under this scheme for immunity certificate only after withdrawing such appeal and furnish proof of such withdrawal with the application (CFSS-2020).
2. Where due to delay of filing any document with the registrar, Order of penalties was imposed by an adjudicating officer and no appeal has been filled as on today then:

• Where the last date for filing appeal falls between 1.03.2020 to 31.05.2020 (both days included), a period of 120 additional days shall be allowed to file an appeal against Regional Director u/s 454(6), provided during such additional period no prosecution shall be initiated against the companies and its directors/officers.

Cases where this Scheme will not apply

• To companies against which action for final notice for striking off the name u/s 248 of Companies Act has already initiated by the designated authority (the RoC).
• Where an application had already been filled by the company for action of striking off the name of the company from the ROC.
• Companies which have amalgamated under a scheme of arrangement or compromise under the act.
• Where an application has already been filled for obtaining the status of Dormant Status.
• To vanishing companies (Vanishing Companies are those companies which had raised funds from public through initial public offers (IPOs) and subsequently failed to comply with the listing/ filing requirements of Registrar of Companies (ROC) and the Stock Exchanges for a period of two years and were not found at their registered office address at the time of inspection done by authorities / Stock Exchange).
• Forms related to increase in authorize capital (SH-7) and charge related documents (CHG-1, CHG-4, CHG-8 and CHG-9).

Other details

Under this scheme, a total of 62 forms will be allowed to be filed with MCA as follows:

• Under Companies Act 1956, 8 forms are allowed to be filed
• Under Companies Act 1956, 54 forms are allowed to be filed.

Details of these forms are now available at MCA home page (http://www.mca.gov.in/MinistryV2/homepage.html)

The Scheme does not absolve the Company or its Officers in Default from any substantial violation of law. The immunity is only with respect to the filing of the belated documents under the Scheme. Example filing of annual return and balance sheet under the scheme will give immunity with respect to the penalty for filing these belated documents. However, if the Annual General Meeting is not convened within the statutorily prescribed time, violation of section/ law for which prosecution or adjudication may be initiated. 

Conclusion

This is a really a pivotal move from the Ministry of Corporate Affairs where it is providing a chance of a lifetime to clear all the backlogs created by the companies and come out of the web and fear of non-compliances. It should be grabbed by the companies at the earliest and they should not even have an iota of doubt about it. Apart from that MCA also intends to clear all past non-compliances in filing of documents. This will give an opportunity to MCA to remove Inactive Company and update its records to monitor and govern few compliant companies only and that too with all updated documents. 

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