By Reetika Wadhwa and Divyansh Trivedi
On March 30, 2020, the Ministry of Corporate Affairs (MCA) vide General Circular no. 12/2020 has released the ‘Companies Fresh Start Scheme 2020’ to enable companies make good of any filing-related defaults, irrespective of duration of default, and thereby make a fresh start as a fully compliant entity amid the COVID-19 outbreak.
To provide a similar facility to Limited Liability Partnerships (LLPs), the MCA has also revised the ‘LLP Settlement Scheme, 2020’.
New Schemes for Start-up Companies by MCA India
Companies Fresh Start Scheme 2020
Applicability of Scheme
This Scheme shall be applicable to any defaulting company and shall be commenced from April 01, 2020 till September 30, 2020. Such companies will now be permitted to file all belated documents which were due for filing without any Additional Fees. The documents that are to be submitted and are exempted from submission are mentioned below:
- Annual Forms:
- Annual Return -MGT-7
- Financial Statements – AOC-4
- Event based Forms:
- INC-22A (Active Company Tagging Identities and Verification (ACTIVE))
- INC-20A (Declaration for commencement of business)
- PAS-3 (return of Allotment)
- ADT-1 (Appointment of Auditor)
- MGT-14 (Filing of Resolutions and agreements to the Registrar)
- DIR-12 (Particulars of appointment of Directors and the key managerial personnel and the changes among them)
- Exceptions under the Scheme:
- Increase in Authorised Share Capital (SH-7)
- Charger related documents (CHG-1, CHG-4, CHG-8 and CHG-9).
Scheme for Inactive Companies
The defaulting inactive companies can, simultaneously, either:
- Apply for dormant status under section 455 of the Companies Act, 2013 by filing MSC-1 to ROCs with nominal fees; or
- Apply for striking off the name of the company from ROCs
Non-Applicability of CFSS Scheme
- To Vanishing Companies.
- Companies which have amalgamated.
- Companies against which action for final notice for striking off the name under Section 248 of the Companies Act, 2013 has already been initiated by the concerned Authority.
- Companies which have already filed application for obtaining Dormant Status.
- Companies which have already filed STK-2 for striking off of Company with Registrar of Companies.
- Companies which have been convicted by any Court in any matter and no appeal has been preferred against such orders before this Scheme came into effect.
- Company having management disputes pending before any Court of law or Tribunals.
- Companies against which an order has been passed for imposing penalty by an adjudicating authority under the Act, and no appeal has been preferred against such orders before this Scheme has come into effect.
- Company having any appeal which is pending before the Court of law.
Benefits of the CFSS Scheme
The scheme aims to protect companies that may possibly be effected by the outbreak of OCVID-19 and gives them a chance for a fresh start. The scheme introduced several positive steps such as grant of condonation for all additional fees on filing belated documents, grant of immunity from prosecution, immunity from proceeding for penalty and the withdrawal of proceedings under Section 454 of the Companies Act, 2013. However, the immunity is only against delayed filings in MCA 21 and not against any substantive violation of law.
If a defaulting company has preferred an appeal against any notice or order passed by an adjudicating or court, then the defaulting company is required to first withdraw such appeal before filing an application of immunity certificate under this scheme. The proof of withdrawal is required to filed along with the application for certificate of immunity. An additional period of 120 days shall be provided from the date on which such appeal shall be filed, if the last date of filing such an appeal falls between March 01, 2020 and May 31, 2020.
The scheme also provides for waiver of additional fee and immunity from prosecution for delayed filings by allowing every defaulting company shall only pay normal fees as prescribed by the Companies (Registration Offices and Fees) Rules, 2014.
Limited Liability Partnership Settlement Scheme
The LLP Settlement Scheme was released vide General Circular no. 13/2020 on March 30,2020. The Scheme is a one-time waiver of additional filing fees for delayed filings by LLPs with the Registrar of Companies during the period starting from April 1 and ending on September 30.
The Scheme, apart from giving longer timelines for LLPs to comply with various filing LLP Act, 2008, significantly reduced the financial burden on them, especially for those with long standing defaults.
The Schemes also contains provisions for giving immunity from penal proceedings, including against imposition of penalties for late submissions and also provide additional time for filing appeals before the concerned Regional Directors against imposition of penalties, if already imposed.
The COVID-19 outbreak has led to a nationwide lockdown which has hampered several businesses. The Government has already relaxed a number of deadlines and legal compliances after taking in consideration the current situation and helplessness of corporate bodies amid this viral outbreak. The Companies Fresh Start Scheme 2020 and Limited Liability Settlement Scheme were also dominated by provisions which are directly related to the aftermath of the spread of the deadly virus. These schemes will boost the hopes of many defaulting and inactive corporates after the outbreak is brought under control.