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Company Fresh Start Scheme

The Ministry of Corporate Affairs has introduced Companies Fresh Start Scheme, 2020 commences on 01.04.2020 and will last upto 30.09.2020 that enables companies who had made defaults in filing of necessary forms and documents prior to the scheme to make good all its filing related compliances and enjoy the status of compliant companies in so far as it relates to filing of forms and documents with MCA 21. This scheme has been introduced with the purpose of providing a fresh opportunity to start as a fully compliant entity.

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Company Fresh Start Scheme

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  1. The Ministry of Corporate Affairs has introduced Companies Fresh Start Scheme, 2020 commences on 01.04.2020 and will last upto 30.09.2020 that enables companies who had made defaults in filing of necessary forms and documents prior to the scheme to make good all its filing related compliances and enjoy the status of compliant companies in so far as it relates to filing of forms and documents with MCA 21. This scheme has been introduced with the purpose of providing a fresh opportunity to start as a fully compliant entity. It is a very good move by MCA where companies are provided onetime opportunity to file their pending compliances. There are a number of non-compliant companies who wish to continue the affairs of the company but due to high amount of additional fees, penalties could not proceed. Many recommendations were coming to the government for waiver of additional fees, prosecution and penalties in so far as they relate to filing of important forms and documents with MCA 21 registry. On a very serious note, MCA comes up with a onetime scheme for a new and fresh start of the companies who actually want to setup and continue their business. All about Companies Fresh Start Scheme, 2020 1 What is Company Fresh Start Scheme, 2020? “Company Fresh Start Scheme, 2020″ is a scheme that gives an opportunity to the companies to file their pending returns, statements and any documents with registrar of companies at MCA- 21 registry including statutory annual filings without paying heavy additional fees on account of

  2. any delays. A general circular No. 12/2020 has been issued in this respect by MCA available at the link below – http://www.mca.gov.in/Ministry/pdf/Circular12_30032020.pdf Why CFSS, 2020 has been introduced? 2 The main objective of the scheme is to incentivize compliance and decrease the burden of compliances during COVID-19 outbreak. The Ministry of Corporate Affairs, in pursuance of the Government of India‟s efforts to provide relief to non-complaint companies in the wake of COVID 19, has introduced the “Companies Fresh Start Scheme, 2020” (CFSS-2020) to provide anopportunity to companies to make good any filing related defaults, irrespective of duration of default, and make a fresh start as a fully compliant entity.The USP of the scheme is a one-time waiver of additional filing fees for delayed filings by the companies with the Registrar of Companies during the currency of the Schemes, i.e. during the period starting from 1st April, 2020 and ending on 30th September, 2020. 3 What is the duration of the Scheme? The scheme commences from 01.04.2020 and will last upto 30.09.2020 4 Which companies are covered under this scheme? The scheme is applicable on ‘defaulting company’ who had defaulted in filing of any document, statement, return etc. which were due for filing on any given date and are still pending to be filed on the date of accessing the scheme. Who is a defaulting company? Defaulting company means a company who made default in filing of statements, returns, any of the documents etc including statutory documents which are required to be filed annually on MCA-21 registry. 5 For which companies this scheme is not applicable? The scheme is not applicable to following companies: ▪To companies against which action for final notice for striking off has already been initiated by theDesignated Authority ▪Where any application has already been filed by the companies for action of strikingoff the name of the company from the register of companies. ▪To companies which have amalgamated under a scheme of arrangement orcompromise under the Act. ▪Where applications have already been filed for obtaining Dormant Status underSection 455 of the Act before this Scheme.

  3. ▪Vanishing Companies ▪Where an increase in the authorised capital is involved (Form SH-7) and also charge related documents (CHG-1, CHG-4, CHG-8 and CHG-9) What is Vanishing Company? Vanishing companies are those entities which are registered under companies act and failed to file returns with ROCfor 2 financial years and not maintaining its registered office registered with ROC and none of its directors are traceable. 6 For which period a defaulting company can file the documents? There is not any restriction on time period for which a defaulting company can file the documents. A defaulting company is permitted to file statements, returns, any documents etc including annual statutory documents wherein the default has been made for any period in the past. The default period can be even from the very commencement of the business till the current date. 7 8 Whether additional fee will be charged on filing of forms under the scheme? No Additional fees will be charged on any belated filing of forms. What is the immunity provided under the scheme? This scheme has provided the immunity from any launching of prosecution or proceedings for imposing penalties in so far as they relate to belated filing of any documents and returns with MCA 21 registry. 9 For what defaults immunity is not provided? Apart from proceedings or prosecution for imposing penalty related to belated filing of returns and documents, any other consequential proceedings, including any proceedings involving interests of any shareholder or any other person qua the company for its directors or key managerial personnel would not be covered from the immunity provided under this scheme. 10 How this scheme is applicable for defaulting inactive companies? The inactive defaulting companies have two options while filing necessary documents under CFSS-2020: a)Apply to get the status of Dormant Company by filing e-form MSC-1 at normal fee without any additional fees; or b)Apply for the striking off the name by filing e-form STK-02 at normal fees without any additional fees. What is Inactive Company?

  4. Inactive company means a company which has not been carrying on any business operations or has not made any transactions during the last two financial years, or has not filed financial statements and annual returns during the last two financial years. What is Dormant Company? Where a company is formed and registered under this Act for a future project or to hold an asset or intellectual property and has no significant accounting transaction, such a company or an inactive company may make an application to the Registrar in such manner as may be prescribed for obtaining the status of a dormant company. 11 Whether withdrawal of appeal if any filed against any prosecution launched or proceedings initiated for imposing penalty is required? Yes, withdrawal of appeal is required by defaulting companies to avail the benefit of the scheme. Where the defaulting company or any of its officer has filed any appeal before a competent court against any notice issued by any adjudicating authority in respect of statutory filings and necessary documents under companies act, then the company or the officer in default shall withdraw such appeal and furnish a proof of withdrawal of such appeal. 12 Whether any specific relief measures provided in cases where the order for imposing penalties has been passed but no appeal has been filed? Yes, specific relief measures have been provided to cases where order of penalties have been passed in so far as they relate to filing of document, returns or statements with MCA-21 but no appeal has been filed as on the date of initiation of the scheme. The relief of additional 120 days has been provided for filing the appeal before the concerned authority if last date of filing of appeal falls between 1st March,2020 to 31st May,2020. 13 Whether any prosecution can be initiated for non-compliance of the order during additional period of 120 days? No, prosecution under section 454(8) for non-compliance of order, in so far as it relates to filing of statement, return and any document shall not be initiated against such companies or its officers. 14 Whether defaulting company is required to file any form for seeking immunity under the scheme? Yes, Form CFSS-2020 isrequired to be filed electronically. An immunity certificate will be provided after filing of the said form. 15 What is due date of filing Form CFSS-2020? Form CFSS-2020 can be filed within 6 months from the expiry of the scheme i.e. within six months from 30th September, 2020.

  5. 16 17 Whether there any fees for filing Form CFSS-2020? No, no fees is payable with this form. Whether there are any cases where immunity has not been provided? Yes, Cases where immunity has not been provided are as follows: •In the matter of any appeal pending before the court of law and in case of management disputes of company pending before court or tribunal •Cases where any court has ordered conviction in any matter or an order imposing penalty has been passed under the act, and no appeal has been filed against such orders before this scheme came into force. What will be the effect of immunity under this scheme? All the proceedings or prosecution pending other than specified in the question above before any court or Adjudication Authority in respect of defaults against which such immunity has been granted shall be withdrawn and deemed to be completed andno further action would be taken on part of the Designated Authority. 18 19 What actions can be taken on defaulting companies after the expiry of the scheme? After the expiry of the scheme, the Designated Authority shall take necessary actions as they deem fit under the act against the defaulting companies who have not availed the scheme and are still in default with filing of returns and documents. 20 What are the Forms on which this scheme is applicable? As per Companies Act, a company is required to do annual compliances in the form of filing of annual return and financial statements. The forms where CFSS, 2020 is applicable are as follows: •Form AOC-4/Form AOC-4(XBRL) •Form MGT-7 •Form AOC-4(CFS) •Form AOC-4(NBFC) Apart from the above annual compliances forms, various other statements, returns etc are required to be filed. The Forms where CFSS, 2020 is applicable are as follows: •Form INC-6 •Form STK-2 (subject to conditions) •Form MSC-1(subject to conditions) •Form INC-22 •Form SH-7 (not applicable in case of increase in share capital)

  6. •Form DIR-12 •Form BEN-2 •Form CRA-4 •Form DPT-3 •Form ADT-1 •Form ADT-3 •Form FC-4 21 What are the Forms on which this scheme is not applicable? Some of forms where this scheme is not applicable are as follows: •Form CHG-1 •Form CHG-4 •Form MSC-3 Source:https://www.manishanilgupta.com/blog-details/company-fresh-start-scheme-2020

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