The Ministry of Corporate Affairs (MCA) has announced that Schemes that were introduced in response to massive economic disruptions caused by COVID-19 pandemic with a view to ease the compliance burden and doing business in India during these tough times have been further extended till December 31, 2020.
The various Schemes that have been extended by MCA till December 31, 2020 are:
- Companies Fresh Start Scheme, 2020
- LLP Settlement Scheme, 2020
- Scheme for relaxation of time for filing forms related to creation or modification of charges under the Companies Act, 2013
MCA has also notified that companies have been allowed to conduct EGMs (Extraordinary General Meetings) and Board meetings through video conferencing or other audio-visual means till end of this year.
The Schemes have been extended in view of the fact that large scale disruptions caused by the COVID-19 pandemic have continued beyond what was previously anticipated and several companies have suffered huge losses and are still recovering from the economic distress.
Companies Fresh Start Scheme, 2020
The MCA had introduced a new Scheme known as the Companies Fresh Start Scheme, 2020, valid from April 01, 2020 to September 30, 2020 (now extended to December 31, 2020) to enable companies to make good their previous defaults and make a fresh start on a clean slate. Under the Fresh Start Scheme, 2020:
- Any company which has defaulted in filing any document, return, statement, etc. with MCA21 registry are eligible can file any form, statement or return etc., which was required to be filed under the Act but the Company has defaulted in filing the said form, return etc.
- Such belated forms can be filed on payment of normal fees as prescribed under the Companies (Registration Offices and Fees) Rules, 2014. No additional fee shall be payable. Thus, filing related defaults can be made good irrespective of duration of default.
- Not only no additional fees or penalty shall be levied while making such delayed filings, the entity will also have immunity from initiating any proceedings for imposing a penalty in connection with such delayed filings.
- The Scheme is not applicable for default in filing of Form SH-7 (increase in authorised capital) and charge related forms (CHG-1 (registration of creation or modification of charge), CHG-4 (satisfaction of charge), CHG-8 (condonation of delay), CHG-9 (registration of creation for modification of charge for debentures) or for companies amalgamated under a scheme of arrangement or compromise or where an application has been made to strike off the name of the company from the RoC, or for obtaining a dormant status and vanishing companies.
- If a Defaulting Company or its officer in default has preferred an appeal against any notice, complaint or order passed by an adjudicating authority or court, then the Defaulting Company or its officer in default, as the case may be, is first required to withdraw such appeal before filing an application for issue of immunity certificate under this Scheme. The proof of withdrawal should be filed along with the application made under the Scheme.
Read more about Companies Fresh Start Scheme 2020 here.
LLP Settlement Scheme, 2020
The MCA had also introduced a new scheme known as LLP Settlement Scheme, 2020 valid from April 01, 2020 to September 30, 2020 which has now been further extended to December 31, 2020. The Ministry took note that many LLPs were not filing statutory documents like Information regarding creation of charges, appointment of partners, etc. Thus, the Scheme was introduced give the defaulting LLPs to make ensure compliances with all statutory laws applicable to them. Ministry of Corporate Affairs came up with this scheme for condonation of delay and to wave off additional fee in filing statutorily required documents with the Registrar.
- Initially the Scheme was applicable only with respect to defaults in Form 3, Form 4, Form 8, Form 11, however, by a subsequent circular the Scheme was modified and extended to all documents or forms which are required to be filed in the MCA-21 registry under the provisions of the LLP Act, 2008 and the rules made thereunder.
- The Scheme extends to all statutory filings that were due for filing till August 31, 2020. Initially the Scheme was applicable only to belated filing upto October 31, 2019 but it was extended vide General Circular No. 13/2020
- All defaulting LLPs only need to pay a statutory filing fees (as prescribed under the Limited Liability Partnership Act, 2008) per such belated document. No additional fees shall be payable by the defaulting LLP’s for filing of any belated documents.
- Any LLP availing the benefits of the LLP Scheme and make good the defaults shall get immunity against prosecution by the Registrar for such defaults. Though, such immunity is only with respect of prosecution for non-filing of belated documents with MCA-21 and not with violating other substantive provision of law.
The complete list of forms that can be eligible for additional fee waiver under the Companies Fresh Start Scheme, 2020 and the LLP Settlement Scheme, 2020 is available here
Scheme for Relaxation of time for filing forms related to creation or modification of charges under the Companies Act, 2013
The MCA had introduced Scheme for Relaxation of time for filing forms related to creation or modification of charges under the Companies Act, 2013
Under Section 77 of the Companies Act, 2013, companies are duty bound to register particulars of any charge signed by the company, whether tangible or intangible, within or outside India in Form No. CHG-1 and Form No. CHG-9 along with prescribed fee under Companies (Registration Offices and Fees) Rules, 2014 with the RoC within thirty days of its creation.
Further Section 78 of the Companies Act, 2013 states that if the company fails to register the charge, the person in whose favour the charge is created may apply to the RoC for such registration within a period of 14 days after serving notice to the company.
The Circular states that where the date of creation / modification of charge (as provided under Section 77 of Companies Act, 2013) is before March 01, 2020, but the timeline for filing such form had not expired under section 77, then the period between March 01, 2020 and ending on September 30, 2020 shall not be counted. The period shall be counted from 31st December 2020.
In a case where the date of creation / modification of charge is between 1st March 2020 to 30th September 2O2O, the period shall be counted from 31st December 2020.
Passing Ordinary and Special Regulations under the Companies Act, 2013
MCA had allowed listed companies or companies with 1,000 shareholders or more which are required to provide e-voting facility under the Companies Act, 2013 to conduct EGM through VC/ OAVM and e-Voting vide General Circular No. 14/2020. The Circular prescribes procedure that must be followed by companies which are required to provide e-voting facilities and those that are not required to provide such facilities to conduct such meeting.
All companies using this option are required to maintain a recorded transcript of the entire proceedings in safe custody, and public companies are also required to host this transcript on their website for greater transparency.
All resolutions passed through this framework will be required to filed with the RoC within 60 days, so that such resolutions may be viewed publicly. Other safeguards have also been included in the Circular to ensure transparency, accountability and protection of interests of investors.
The circular dated September 30, 2020 now allows companies to hold such meetings till December 31, 2020.
Conclusion
The further extension of the aforesaid relaxations and schemes will provide greater Ease of Doing Business in India and aid in speedy recovery from economic distress caused to the companies.
References:
http://www.mca.gov.in/Ministry/pdf/Circular14_08042020.pdf
https://www.mca.gov.in/Ministry/pdf/Circular23_17062020.pdf
https://www.mca.gov.in/Ministry/pdf/GeneralCircular06_04032020.pdf
http://mca.gov.in/Ministry/pdf/Circular13_30032020.pdf
http://www.mca.gov.in/Ministry/pdf/GeneralCircularNo.31_28092020.pdf
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