As you all know MCA has introduce Companies Fresh start Scheme, 2020 vide General Circular No. 12/2020 dated 30th March, 2020. We are here to discuss the same.
Let’s start with the introductory para of the Circular stating:
“In furtherance of Ministry’s Circular No. 11/2020, dated 24th March, 2020 and in order to facilitate the Companies registered in India to make a fresh start on a clean slate, this Ministry has decided to take certain alleviative measure for the benefit of all companies.”
“Companies Act, 2013 requires all Companies to make annual statutory compliance by filing the Annual Return and Financial Statements. Apart from this, various other statements, documents, returns, etc. are required to be filed on the MCA21 electronic registry within prescribed time limits. Filing fees for filing such statements, documents, returns, etc. is governed by section 403 of the Companies Act, 2013 read with Companies (Registered Office and fees) Rules 2014.”
“The 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 filing without being subject to a higher additional fees on Account of any delay.”
“In order to give such an opportunity to the defaulting companies and to enable them to file the belated documents in the MCA-21 registry, the Central Government in exercise of powers conferred under section 460 read with Section 403 of the Companies Act, 2013 has decided to introduce a Scheme namely “Companies Fresh Start Scheme, 2020 (CFSS-2020)” condoning the delay in filing the above mentioned documents with the Registrar, insofar as it relates to charging of additional fees, and granting of immunity from launching of prosecution or proceedings for imposing penalty on account of delay associated with certain filing of documents in the MCA- 21 registry will be payable in such case during the currency of CFSS-2020 as per the provisions of Section 403 read with Companies (Registration Office and fee) Rules, 2014and Section 460 of the Act.”
“In Addition, the scheme gives an opportunity to inactive companies to get their companies declared as “Dormant Company” under Section 455 of the Act by filing a simple application at a normal fee. The said provisions enables inactive companies to remain on the register of the Companies with minimal compliance requirements.”
Explanation:
As mentioned in the above paras, the intentions of the Ministry is clear to provide a Onetime Opportunity or immunity to all the Companies to complete all the Compliances at no additional fees or penalty.
It’s like a chance to have a Dip to Ganga for all Companies to rectify all their sins. It also opens door to get registered as Dormant i.e. to remain registered as Company with minimal compliance requirement.
However, Ministry has issued a Press Release on 30th March, 2020 stating:
“the immunity is only against delayed filing in MCA 21 and not against any substantive violation of law.”
That means you can only save yourself from additional fees or penalty on filing of delayed forms not by any substantive violation of law. That will come later in the Article.
Now let us move forward and understand what scheme says:
The scheme shall come into force on the 01.04.2020 and shall remain in force till 30.09.2020
Explanation:
It gives 6 months’ time to the Company to comply with all pending compliances. It seems more than enough. But most of the corporates are closed right now or doing their regular activities from home. Practically for a Company Secretary or any other professional, it will be little difficult to reach directors and convey the same during this lock down. And there is no certainty when this lock down will be over. Even Ministry of Corporate Affairs has also shut down their voice and Ticketing Helpdesk services for the time being. So every professional will be able to do work efficiently as and when the lock down is over.
Second section is about the Definitions:
- Act means Companies Act, 2013 and Companies Act, 1956 (wherever applicable)
Explanation:
As stated in the definition, it clarify that you can undo your non-compliance whether you are non-compliant with Companies Act, 2013 or 1956.
- “Company means a Company defined in clause (20) of Section 2 the Companies Act, 2013,
- “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;
Explanation:
This definition clarifies that it is applicable to both Companies which are already covered under the Definition of Defaulting Company as per Companies Act, 2013 and the Companies which have defaulted in filing.
- “Designated Authority” means the ROC having jurisdiction over the registered office of the Company.
- “Immunity Certificate” means the certificate referred to in sub- Paragraph [viii] (8) of paragraph 6 of the scheme.
- “Inactive Company” means a Company as defined in Explanation (i) to sub-section 1of Section 455(1) of Companies Act, 2013.
Explanation:
Now what is it? Let’s see:
“inactive company” as per Companies Act, 2013 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.
This is covered under Section 455(1) i.e. Section for a Dormant Company. Which talks about who can make application to obtain Dormant Status. So it is for the Companies who wants to have a dormant status under this Scheme.
Applicability part:
It says “Any defaulting Company is permitted to file belated documents which were due for filing on any given date in accordance with the provisions of this scheme:
Explanation:
Defaulting Company as specified in the definition all the Companies which have pending compliances.
Scheme has also specified Manner of payment of normal fees for filing of belated documents and seeking immunity under the scheme:
Every defaulting company shall be required to pay normal fees as prescribed under the Companies (Registered Offices and Fee) Rules, 2014 on the date of filing of each belated document and no additional fee shall be payable. Immunity from the launch of prosecution or proceedings for imposing penalty shall be provided only to the extent such prosecution or the proceedings for imposing penalty under the Act pertain to any delay associated with the filings of belated documents. Any other consequential proceedings, including any proceedings involving interests of the shareholders or any other person qua the Company or its directors or KMP would not be covered by such immunity.
This is the most important point which states that Immunity will be provided against prosecution or proceedings pertaining to any delay associated with the filing of documents not other.
The Scheme has also provide an Example to clarify the same.
For Example under Section 42(8), every Company is required to file a return of allotment within a prescribed time period. However Section 42(4) states that Utilization of Money raised through private placement shall not be made unless the return of allotment has been filed with registry.
Now the immunity under the scheme shall only be available in respect of the proceedings for imposing penalty on account of delay in filing the return of allotment, but not on account of utilization of the money raised through private placement prior to the filing of the return with the registry.
It is clear from the example that the scheme is providing immunity against late filing not any other breach of law in line with the same.
Withdrawal of appeal against any prosecution launched or the proceedings for imposing penalties initiated:
If an defaulting Company, with respect to any statutory filing under the Act, or its officer in default, as the case may be, has filed any appeal against any notice issued or complaint filed or an order passed by a court or by authority for violation of the provisions under Companies Act, 2013 and /or 1956, in respect of which the application is made under the scheme, the applicant shall before filing an application for issue of immunity certificate, withdraw the appeal and furnish proof of such withdrawal along with the application.
It is clear that Company need to withdraw appeal before applying for immunity. But only in relation to delay in filing of document.
Special measures for cases where the order of the adjudicating authority was passed but the appeal could not be filed:
In all cases where due to delay associated in filing of any document, statement or return, etc. in the MCA-21 registry, penalties were imposed by an adjudicating officer under the Act, and no appeal has been preferred by the concerned company or its officer before the RD under Section 454(6) as on the date of commencement of the scheme, the following would apply:-
- Where the last date for filing the appeal against the order of the adjudicating authority under Section 454(6) falls between the 1st March, 2020 to 31st May, 2020 (both days inclusive), a period of 120 additional days shall be allowed with effect from such last date to all companies and their officers for filing the appeal before the concerned RD.
- During such additional period as stated in (A) above, prosecution under section 454(8) for non- compliance of the order of the adjudicating authority, insofar as it relates to delay associated in filing of any document, statement or return, etc. in the MCA- 21 registry shall not be initiated against such companies or their officers;
Explanation:
Now what is Section 454(6):
It states that “ Every appeal under sub-section (5) shall be filed within sixty days from the date on which the copy of the order made by the adjudicating officer is received by the aggrieved person and shall be in such form , manner and be accompanied by such fees as may be prescribed.
Appeal under Sub-section (5) states that Any person aggrieved by an order made by the adjudicating officer under sub-section (3) may prefer an appeal to the Regional Director having jurisdiction in the matter.
Sub Section (3) is a power of adjudicating officer i.e.
The adjudicating officer may, by an order-
(a) impose the penalty on the company, the officer who is in default, or any other person, as the case may be, stating therein any non-compliance or default under the relevant provisions of this Act; and
(b) direct such company, or officer who is in default, or any other person, as the case may be, to rectify the default, wherever he considers fit.]]]
If we summaries the same, If the last date for filing the appeal against the order of the adjudicating authority falls between the 1st March, 2020 to 31st May, 2020 a period of 120 additional days shall be allowed with effect from such last date to all companies and their officers.
If time period ends on 1st March itself. 120 additional days are provided to Company to appeal. I.e. up to July.
Further During such additional period prosecution under section 454(8) for non- compliance of the order of the adjudicating authority, insofar as it relates to delay associated in filing of any document, statement or return, etc. in the MCA- 21 registry shall not be initiated against such companies or their officers.
Application for issue of immunity in respect of document(s) filed under the scheme –
The Application for seeking immunity in respect of belated documents filed under the Scheme may be made electronically in the Form CFSS- 2020, after closure of the scheme and after the documents are taken on file, or on record or approved by the Designated authority as the case may be but not after the expiry of six months from the date of closure of the Scheme. There shall not be any fee payable on this Form.
Explanation:
It is clear one need to file Form CFSS-2020 post closure of Scheme and post all the documents are taken on record for STP Forms, Or Approved for Non-STP Forms but not after expiry of 6 Months from the Closure of the Scheme.
Further
Provided that this immunity shall not be applicable in the matter of any appeal pending before the court of law and in case of management disputes of the Company pending before any Court of law or tribunal:
Provided also that no Immunity shall be provided in case any Court has ordered conviction in any matter, or an order imposing penalty has been passed by an adjudicating authority under the Act, and no appeal has been preferred against such orders of the Court or of the adjudicating authority, as the case may be, before this scheme has come into force.
Explanation:
These two proviso has clearly specified that Immunity is not applicable if the appeal is pending before any court of law or tribunal or there is a management dispute pending In the Company.
Further This immunity will also not applicable if a Court has ordered Conviction in any matter or order passed for imposing penalty and no appeal has been preferred against it before this scheme has come in to force.
We need to link the same to earlier provisions i.e. special measures for the cases where the order of the adjudicating authority was passed but the appeal could not be filed. That provided additional 120 days to the Company whose last date of filing the appeal comes between 01st March to 31st May, 2020. We can say that Immunity will not be provided to the cases in which last date for filing appeal was before 01st March and after 31st May, 2020.
Order by designated authority granting immunity from penalty and prosecution:
Based on the declaration made in the Form CFSS-2020 an immunity certificate in respect of documents filed under the scheme shall be issued by the designated authority.
Non Applicability of Scheme:
This Scheme shall not apply:
- The Company against which action for final notice for striking off the name u/s 248 of the Act or Section 560 of Companies Act, 1956 has already been initiated by the designated authority. i.e Strike off Companies
- Any Application has already been filed by the Company for action of striking off the name of Company from ROC
- Companies which are amalgamated under the scheme or arrangement or compromise under the Act
- Application has already filed to obtain Dormant Status
- Vanishing Companies
- Any Increase in Authorized Capital is involved (Form- SH-7)
And also Charge related documents (CHG-1, CHG-4, CHG-8 and CHG-9)
What will be the Effect of Immunity?
After granting the immunity, the Designated authority concerned shall withdraw the prosecution pending, if any, before the concerned Courts and the proceedings of adjudication of penalty under section 454 of the Act, other than those referred in the second proviso to sub-paragraph (vii) of Paragraph 6 of this Scheme i.e. Court has convicted a company in any matter or penalty has been imposed but appeal has not been filed, in respect of defaults against which immunity has been so granted shall be deemed to have been completed without any further action on the part of the Designating authority.
Scheme for Inactive Company:
The defaulting inactive Companies, while filing due documents under CFSS- 2020 can, simultaneously, either:
- Apply to get themselves declared as Dormant Company under Section 455 of the Companies Act, 2013 by filing e-form MSC-1 at a normal fee on said Form; or
- Apply for striking off the name of the Company by filing e-form STK-2 by paying the fee payable on Form STK-2.
Explanation:
Inactive Company as specified earlier can apply for Dorman Status or striking off simultaneously while clearing earlier dues. Which is also a pre-condition to obtain dormant status or strike off the Company.
At the end of the Scheme Notification states that At the Conclusion of the Scheme i.e. post 30th September 2020, the designated authority shall take necessary action under the Act against the Companies who have not availed this Scheme and are in default in filing these documents in a timely manner.
So it is a First and last opportunity for every Company to rectify all their non – Compliance. We can expect a strict action in near future.
Now let us move on to the Form CFSS- 2020. You required to enter total number of SRNs i.e. SRN of the Document filed under this scheme.
A table is provide below the same. In which you need to enter SRN, Form Number, Date of filing, Date of Event, Normal fees charged, Total fees paid.
Next we need to declare whether any appeal filed by the Company in respect to the documents filed in any Court or Tribunal. If yes, we need to attach proof of withdrawal of Appeal.
Next if there is any prosecution pending in Court you need to provide the details as an attachment.
An authorized officer need to verify that the information given was correct and complete to his/her knowledge.
He/she is authorized by the Board to sign and submit the same.
Company also need to acknowledge or accept that
The Company has failed to comply with the provision of the Act as mentioned in respect of filing of above mentioned documents
The Company has withdraw the appeals pending before any Court or NCLT/NCLAT or RD or any other adjudicating authority.
Director, CEO, CFO or Company Secretary can sign the same.
Further the concerned Officer of Government has power to accept or reject the same.
It is all about the CFSS-2020. Whatever is mentioned in the Article is completely for information purpose. views expressed by me are my personal view and not legal advice. Practice the same after consulting a concerned professional.
If there is any query in relation to the Article, you can mail the same on Info@apodicticsolution.com
