Companies Fresh Start Scheme, 2020 (CFSS-2020)-Brief Analysis

COMPANIES FRESH START SCHEME, 2020 (CFSS-2020): A GREAT OPPORTUNITY FOR NON-COMPLIANT COMPANIES

Need for Introduction of Companies Fresh Start Scheme, 2020 (CFSS-2020)

Companies Act,2013 requires all Companies to make annual statutory compliance by filing the Annual Return & Financial Statements. Ministry has received 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 in the MCA-21 registry including annual filings without being subject to a higher additional fees on account of any delay.
To provide relief from additional fees on account of delayed filing of documents and forms with the ROC, the Ministry of Corporate Affairs (MCA) has come up with the “Companies Fresh Start Scheme 2020 (CFSS-2020)” for an initial period of 6 months from 01-Apr-2020 to 30-Sep-2020 vide its General Circular No.12/2020 dated 30-Mar-2020. This is an opportunity for all defaulting companies to file all belated documents without any additional fees.

Benefits of Companies Fresh Start Scheme, 2020 (CFSS-2020)

This is just like an Amnesty Scheme for all defaulting companies to avail following benefits:

  • Condonation of all additional fees for filing of belated documents;
  • Authority shall provide immunity certificate to Company;
  • Immunity from prosecution;
  • Withdrawal of proceedings of adjudication of penalties u/s 454.

Note: Immunity from Prosecution and Proceeding shall be provided only to the extent such prosecution or proceedings for imposing penalty under the Companies Act pertain to any delay associated with filing of belated documents. Any other consequential proceedings, including any proceedings involving interests of any shareholder or any other person or the company or its directors or key managerial personnel would not be covered by such immunity.

Applicability of Companies Fresh Start Scheme, 2020 (CFSS-2020)
This Scheme will be appropriate on any “Defaulting Company” and will be initiated from 1st of April, 2020 till the 30th September, 2020 and permitted to file all belated documents which were due for filing without any additional fees.

Non Applicability of Companies Fresh Start Scheme, 2020 (CFSS-2020)

  • Companies against which action for final notice for striking off the name u/s 248 of the act have already been initiated by the Designated Authority;
  • Companies which have already filed STK-2 for strike off of Company with ROC;
  • Amalgamated Companies;
  • Companies which have already filed application for obtaining dormant status;
  • Company with an appeal pending before the court of law;
  • Company having management disputes that are pending before any court of law or tribunal;
  • Companies which are convicted by any court in any matter and no appeal has been preferred against such orders of the Court before this Scheme has come into force;
  • Companies upon which an order passed for imposing penalty by an adjudicating authority under the Act, and no appeal has been preferred against such orders of the Adjudicating Authority before this Scheme has come into force.
  • Companies in which Form SH-7 for increase in Authorized Share Capital is pending for filing
  • Companies in which Charge Related Forms CHG-1, CHG-4, CHG-8 & CHG-9  is pending for filing

Time Period to avail Companies Fresh Start Scheme, 2020 (CFSS-2020)

The Scheme shall remain in force for an initial period of 6 months from April 1, 2020 till September 30, 2020. All pending filings have to be done within the currency of the Scheme.

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Definitions

Defaulting company” means a company defined under the Companies Act, 2013, and which has made a default in filing any of the documents, statement, returns, etc. including annual statutory documents (AOC-4 & MGT- 7) on the MCA-21 registry on due time.
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;
Vanishing Company” : A company would be deemed to be a vanishing company, if it is found to have:
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) Not maintaining its registered office of the company at the address notified with the Registrar of Companies/ Stock Exchange; and
d) That None of its Directors are traceable.

Forms Covered under Companies Fresh Start Scheme, 2020 (CFSS-2020)

  • Form MGT-7: Annual Return
  • Form AOC-4: Annual Financial Statements
  • Form INC-22A: Active Company Tagging Identities and Verification (ACTIVE)
  • Form INC-20A: Declaration for commencement of business
  • Form PAS-3: Return of Allotment
  • Form ADT-1: Appointment of Auditor
  • Form MGT-14: Filing of Resolutions and agreements to the Registrar
  • Form DIR-12: Particulars of appointment of Directors and the key managerial personnel and the changes among them

Forms NOT Covered under Companies Fresh Start Scheme, 2020 (CFSS-2020)

  • Form SH-7: Increase in Authorised Share Capital
  • Forms CHG-1, 4, 8, 9: Charger related documents

Filing Fees to be paid to avail benefit of CFSS, 2020 

No fees shall be payable to file e-Form CFSS-2020.Normal filing fees for respective form will have to be paid for filing e-forms during the tenure of the Scheme.

Benefit Provided in the Scheme for Inactive Companies

This scheme also encouraged Inactive companies to start fresh by filing all their pending forms at Normal Fee by:
(i) either to apply for voluntary strike off by filing e-form STK-2; OR
(ii) apply for the status of Dormant Company by filing e-form MSC-1.

Procedure for Claiming  Benefit of CFSS-2020

1. Defaulting companies have to file the overdue documents in respective prescribed e-Forms by paying the normal statutory filing fee without any additional fee within due immunity period.
2. Subsequently file electronically Form CFSS-2020 (yet to be deployed) after making good all the defaults and after closure of the Scheme but not after the expiry of six months from the date of closure of the Scheme. There is no filing fees of Form CFSS-2020. It is a self declaration based form certified by the Director.
3. Following which the ROC will issue an Immunity Certificate.

Special Cases :

1. Where any appeal has been filed and is pending against any notice issued or complaint filed or an order passed by a court or by an adjudicating authority under the Companies Act, 2013 for violation of provisions under the Act or erstwhile in the Act – to avail the benefit of this Scheme, such appeal has to be withdrawn first and the proof of withdrawal has to be attached with the CFSS application.
2. Where no appeal has been filed against any order passed by an adjudicating authority within the requisite timeline  – the timeline to file appeal will be increased to another 120 days from such last date in cases where the last date of filing appeal falls between 1st March, 2020 to 31st May, 2020.
3. In case the filing has not been done because of any management dispute wherein such matter is pending before any court / tribunal.

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