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

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Companies Fresh Start Scheme, 2020 (CFSS 2020)

The MCA, in first instance, issued General Circular No. 11 /2020 dated 24.03.2020 giving many relaxations to the companies and entities registered under the Companies Act, 2013 or rules made thereunder. The major relaxation was waiver of additional fee on almost all ROC Forms irrespective of its due dates. However, the Ministry of Corporate Affairs has, in its latest announcement, and as per General Circular No. 12/2020 dated 30.03.2020, given one more opportunity to all the companies which, till date, have not made compliance with the applicable provisions of the Companies Act, 2013. The major cause of launch of scheme was to ensure that Companies are given a one-time opportunity or chance to MAKE A FRESH START. The scheme launched is called as Companies Fresh Start Scheme, 2020 or CFSS-2020. The main provisions related to its applicability, scope, limitations etc. are as follows:

  1. Statutory Filing: All the companies registered under Companies Act, 2013/1956 are required to file their Financial Statements and Annual Return on annual basis apart from many other statements, documents, return etc. within prescribed time and with prescribed government fees.
  2. Inactive to Dormant Company Status: Under the scheme, any inactive company can declare itself as Dormant Company by filing the simple application in Form MSC-1 with prescribed fee. The Dormant company enables the inactive company to remain on register of companies with minimum compliance requirements with ROC office.
  3. Duration of Scheme: The scheme shall remain open from 01st April, 2020 to 30th September, 2020. It means any company can file any forms except excluded forms during this period without any additional fees.
  4. Defaulting company: The defaulting company means a company which has made a default in the filing of any documents, statements, returns etc. including ROC Annual filing with MCA.
  5. Inactive Company: It means a company as defined in explanation (i) to sub-section (1) of Section 455 of Companies Act, 2013. In other words, “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;
  6. Grant of Immunity Limitation: The MCA has issued the scheme only with scope of condoning the delay in filing the specific ROC Forms with Registrar, insofar as it relates to charging of additional fees. The immunity shall be granted from launching of prosecution or proceedings for imposing penalty due to late filings.

 

Immunity from the prosecution for imposing penalty shall be provided only to the extent such prosecution for imposing penalty under the act relates to any delay associated with the filings of belated documents. Any other consequential proceedings, including any other proceedings which involves matters of any shareholder or any other person qua the company or its directors or key managerial personnel would not be covered by such immunity.

Example: Every company is required to file return of allotment under section 42(8) of Companies Act, 2013 within the prescribed timeframe. However, Section 42(4) also mandates that a company cannot utilize the money raised through Private Placement unless Return of Allotment has been filed with ROC. Therefore, Immunity shall be available only on additional fee on late filing of return of allotment not on utilization of funds before filing return of allotment.

Applicability:

The Company Fresh Start Scheme, 2020 or CFSS-2020 is applicable on defaulting companies only, as mentioned above. The Scheme is applicable on following forms including many other forms:

  • Form MGT-7 (Annual Return)
  • Form AOC-4 (Financial Statement)
  • Form PAS-3 (Return of Allotment)
  • Form ADT-1 (Auditor Appointment)
  • Form DIR-12 (Changes in Directors or KMP)
  • Form MGT-14 (Filing of resolutions, agreements etc.)
  • Form INC-22A (ACTIVE Company)
  • Form INC-20A (Commencement of Business)
  • Form DIR-3KYC (KYC of Directors)

The interested persons can access the complete list of ROC forms on which CFSS-2020 is applicable:

http://www.mca.gov.in/Ministry/pdf/CFSS2020_02042020.pdf

Application for Issue of Immunity Certificate:

After completing all the pending filings, the company shall be required to file Form CFSS 2020 with MCA after the closure of the Scheme. The Form CFSS 2020 shall be filed within 6 months from the date of closure of the scheme. There is no ROC Fee on Form CFSS 2020.

However, this Immunity shall not be applicable in the matter of any appeal or management disputes pending before the court of law. Further, No Immunity shall be given in case where the court has ordered conviction in any manner or an Order Imposing penalty has been passed by an Adjudicating Authority, and no appeal has been filed against such orders, before this Scheme comes into force.

Non-Applicability of CFSS-2020:

The Companies Fresh Start Scheme 2020 shall not be applicable in the following cases:

  • To Companies against which final notice of striking off name u/s 248 (old 560) has been initiated by the ROC.
  • Where the companies have filed form STK-2 or FTE for striking off the name of company.
  • To companies which have Amalgamated under Scheme of Amalgamation
  • The company which has filed application for obtaining the status of Dormant Company u/s 455 before this scheme
  • Vanishing companies
  • In cases, where Increase in Authorized Capital is involved (Form SH-7)
  • Charges related forms for example Form CHG-1, CHG-4, CHG-8 and CHG-9

Scheme for Inactive Companies:

The defaulting inactive companies, while completing due filing under CFSS-2020 can simultaneously, either

  • Apply to obtain status as Dormant Company by filing Form MSC-1
  • Apply for Striking-off the name of company by filing Form STK-2

MCA Action after Scheme:

Once the CFSS-2020 scheme closes on 30th September 2020, the MCA office will take strict action against the companies which have not availed the benefit of this scheme.

Frequently Asked Questions:

We have tried to sum up all the major points of Companies Fresh Start Scheme 2020 or CFSS-2020 in question answer format. Therefore, please find below list of some of major FAQs related to CFSS-2020 in the tabular format: –

 

S No.

Question

Answer

1On which companies the Scheme shall be applicable?The CFSS-2020 scheme is applicable on “defaulting companies” only.
2Which company is called a “Defaulting Company”?The defaulting Company is a Company which is in default in filing of-

–        any document, any statement, or

–        any return including Annual Filing.

3Can you please elaborate the Benefit of the Scheme?The major and significant benefit of the Scheme for defaulting companies is that they can file all mandatory pending forms with RoC without any additional fees.
4What is the validity period of the Scheme?The CFSS-2020 scheme will be in force from April 1, 2020 till September 30, 2020.
5Can you provide a list of forms which are covered under CFSS-2020?There are approximately 54 forms of Companies Act, 2013. The list of forms can be accessed by clicking on the link below:

http://www.mca.gov.in/Ministry/pdf/CFSS2020_02042020.pdf

6What all defaults can be regularized under the CFSS-2020?The defaults only related to filing of documents or forms which are pending to be  filed  with  ROC can be made good under CFSS-2020.
7Is there any condition for availing the benefit of the Scheme?There are two forms after filing of which the benefit of CFSS-2020 can be availed:

 

–        Form DIR-3KYC/ DIR-3KYC WEB. Any company has to ensure that KYC of its directors is completed before availing the benefit of this scheme.

–        Form INC-22A (ACTIVE Form). The company can avail benefit of this scheme only if they have filed Form INC-22A with ROC. The Form INC-22A has to be filed only by companies which are required to do so.

8The Scheme is not applicable on which forms?A list of forms is given below which does not come under this Scheme:

–        The companies against which the final notice of strike off has been initiated u/s 248;

–        The company which has filed Form STK-2 i.e. application for striking off

–        Amalgamated Companies

–        The companies which has filed Form MSC-1 for obtaining the status of Formant company u/s 455.

–        Vanishing companies;

–        Form SH-7 (Increase in authorized share capital)

–        Forms CHG-1, CHG-4, CHG-8 and CHG- 9 for creation and satisfaction  of  charge.

9Is there any other option available to a Strike Off Company under CFSS Scheme?Yes, if a Strike off Company has to avail the benefit of CFSS 2020 then first it requires revival of the Company from the Hon’ble National Company Law Tribunal having jurisdiction by filing an application u/s 252 of the Companies Act 2013. Thereafter, the company can get the benefit under CFSS-2020 for filing of forms without any additional fees.
10Is there any condition for which, the immunity from launching of prosecution for imposing penalty shall be granted?Yes, The Immunity from launching of prosecution or proceedings for imposing penalty shall be granted for the ROC forms which are filed during the duration of the Company Fresh Start Scheme, 2020 i.e. i.e. from 01st April, 2020 till 30th September, 2020.
11What is the benefit of immunity granted by Designated Authority?Once the immunity is granted by ROC office then it shall go for withdrawal of the prosecution(s) pending, if any, before the concerned courts(s) and the proceedings of adjudication of penalties. In other words, it shall be deemed to be completed without any further action on the part of the company.

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