Companies Fresh Start Scheme 2020 by MCA

Ministry of Corporate Affairs (MCA) on March 30, 2020, introduced Companies Fresh Start Scheme 2020 (CFSS 2020/Scheme) vide General Circular No 12/2020 . This Scheme is issued in furtherance of Ministry's Circular No. 11/2020 issued on March 24, 2020 where Companies were granted relaxation in additional fees and extension was granted for various due dates due to COVID-19 outbreak. 

As the name suggests the purpose of the CFSS 2020 is to facilitate companies registered in India to make a fresh start on a clean slate. MCA has decided to take various alleviative measures which will benefit all the companies which are under default especially to the small companies and inactive companies.

In the last few years, vide many amendments in Companies Act, 2013 and rules made thereunder, MCA has made the provisions regarding filing of documents and payment of additional fees very stringent. MCA has not only increased the additional fees on the late filings of documents but also has reduced the prescribed time period for filing of various forms like form MGT-14, CHG-1, etc.

Contrary to what we have seen in the last few years and after the 'Condonation of Delay Scheme of 2018', this CFSS 2020 is a big relief offered to the defaulting companies after a long time.

The details of the Companies Fresh Start Scheme are as follows:

1. Applicability period: This Scheme will come into force on April 01, 2020, and will be effective till September 30, 2020.

2. Applicability criteria: Any company which has defaulted in the filing of any documents, statements, returns including annual statutory documents (AOC-4, MGT-7, AOC-4 CFS) on MCA-21, is permitted to file the belated documents within the applicability period i.e. April 01, 2020 to September 30, 2020.

3. Non-application of the scheme: Following companies cannot avail the benefit of this scheme:

• Companies against which final order for striking off the name u/s 248 of the Companies Act, 2013 has already been issued by the Registrar of Companies;
• Cases were suo-moto strike off application in e-form STK-2 have been filed by the companies;
• Companies which have amalgamated under a scheme of arrangement or compromise under the provisions of Companies Act, 2013;
• Companies which have filed an application for obtaining the dormant status in e-form MSC-1;
• Vanishing Companies;
• To the cases of increase in authorized share capital (filing of e-form SH-7);
• Charge related e-forms (filing of eforms CHG-1, CHG-4, CHG-8 and CHG-9);

4. Fee: Any company filing the belated documents within the applicability period of the Scheme, have to just pay the normal fee as prescribed under the Companies (Registration Office and Fee) Rules, 2014. No additional fees will be levied on these companies.

5. Immunity from Prosecution: Apart from monetary relief, companies making belated filings under this scheme will get immunity from the launch of prosecution or proceedings for imposing penalty only to the extent such prosecution or proceedings for imposing penalty under the Companies Act, 2013 to any delay associated with the filings of belated documents. Immunity from consequential proceedings, if any, will not be granted.

Example: Under section 42(8) of Private Placement, every company is required to file the return of allotment within a period of 15 days from the date of allotment.  Section 42 separately provides that the subscription money should be received by the Company in a separate bank account and should not be utilized before the filing of return of allotment. If a company has violated the provisions of Section 42, the CFSS 2020 scheme will give them immunity only in respect of proceedings for imposing a penalty on account of delay in filing of return of allotment. No immunity will be granted for violation of the other requirements of Section 42.

6. Application for issue of immunity certificate: After filing the belated documents, the company shall make an application for seeking immunity in e-form CFSS-2020, mentioning Service Request Number (SRN) of the e-forms filed by the company under this scheme. The e-form CFSS-2020 shall be filed electronically and no fees shall be payable on filing of this eform. The eform CFSS-2020 does not require certification of any professional. The companies will be able to file this eform CFSS-2020:

• post the closure of the scheme, i.e. post September 30, 2020; and
• post the eforms filed during this Scheme are taken on record or approved by the concerned authorities;

eForm CFSS-2020 cannot be filed after expiry of 6 months from the date of the closure of the Scheme. The Companies seeking immunity shall file the said eform on or before March 31, 2021.  The issuance of immunity certificate will be subject to the conditions mentioned in the point no. 7 and 8 below.

7. Grounds for making application for immunity certificate: If any company which has defaulted in filings of any statutory documents, made good of that default by filing the statutory documents under this scheme, but that company or its officer in default has previously filed any appeal against any notice issued or compliant filed or an order of court or by an adjudicating authority, before any competent authority, shall first withdraw that appeal and furnish proof of such withdrawal in eform CFSS-2020.

8. Additional period for filing of appeal under section 454(6): In cases where penalties have been already imposed by an adjudicating officer in relation to delayed filings, but the company or its officer in default has not made any appeal as on the date of commencement of this scheme, the following relaxation are given:

• If the last date of filing an appeal against the order of the adjudicating authority falls between March 01, 2020 to May 31, 2020 (both days included), an additional period of 120 days shall be given to file such appeal.
• During this additional period of 120 days, prosecution under section 454(8) for non-compliance of the order of adjudicating authority, to the extent it relates to delay in filing of any statutory document in MCA-21, shall not be initiated against the companies and its officer in default.

9. Issue of certificate of immunity: A company satisfying all the conditions mentioned above, will be issued a certificate of immunity by the designated officer, based on the declaration made in eform CFSS-2020.

10. Effect of immunity: After the issuance of certificate of immunity, no prosecution or proceedings can be initiated against the company or its officer in default, so far the non-compliance relates to delayed filing of any statutory document.

Also, post granting of the immunity, the designated authority shall withdraw prosecution or proceedings, if any, pending against the company seeking immunity, before any competent authority in relation to delayed filings only.

11. Scheme for inactive companies: The companies which are inactive, while making filings of the due statutory documents under the CFSS 2020, can simultaneously file after payment of relevant fees, for either:

• getting themselves declared as Dormant Companies under section 455 of the Companies Act, 2013 by filing form MSC-1;
• striking of their names from the register of companies in form STK-2;

Read MCA's official Circular: Companies Fresh Start Scheme, 2020