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Currently, the entire world is in a pandemic situation and people are struggling to fulfill their basic necessities. In this situation, regulatory reporting became a huge burden to so many businesses. In light of these events, MCA introduced a scheme where all the companies which have defaulted in previous filings such as Annual returns, financial statements, etc can be settled and make fresh compliance from now on. This Scheme is known as Company Fresh Start Scheme (CFSS) 2020.

Lately, so many professionals were requesting MCA for seeking an extension to this scheme, including the Institute of Company Secretaries of India and UP Merchant Association. 

Let's Dive into the details for the request of such an extension:

What Does CFSS 2020 Include?

As per the provisions of the Companies Act, 2013, all companies are required to follow statutory compliances annually. This includes the Annual Return, Financial Statements, and all the other necessary forms, documents, and statements that are specified, within that particular time frame. Non - compliance of the same results in the imposition of penalties and fines.

A company that fails to adhere to the compliances is called a defaulting company.

The Companies Fresh Start Scheme (CFSS) is applicable between the 1st of April, 2020 and the 30th of September, 2020.

All You Need To Know About Company Fresh Start Scheme (CFSS) 2020

For the Defaulting Companies

  • Shall pay only the normal fees as prescribed by the Companies Rules, 2014 for all filings with the MCA 21 registry. No additional fees to be paid, whatsoever.
  • Immunity against prosecution and proceedings for imposing penalty only where:-
    - The prosecution and proceedings arose due to the delay in filing of belated documents.
    - No other cases covered.
  • In case there is an existing appeal filed by the company against any notice, complaint or order issued with regard to prosecution and proceedings related to the delay in statutory filing, the following steps are to be followed:-
    - Before registering under the CFSS 2020, the appeal filed by the company should be withdrawn.
    - At the time of making the application for the scheme, the company must furnish a copy of such withdrawal along with the application as proof.
  • Where the order has been passed by the court and the company has not filed an appeal against the same as on the commencement of the scheme:-
    - The company is allowed 120 days to file an appeal before the Regional Director.
    - During this period of 120 days, for the non - compliance of the order passed by the court with regard to the delay in filing of any documents for the same shall be condoned and no further action shall be initiated against the company.
  • Form CFSS - 2020 may be filed by the companies under the scheme.
    - The Form provides the companies with immunity for a period of 6 months after the date of closure of the CFSS 2020.
    - No fees to be paid on this particular form.
    - Immunity Certificate shall be granted by the designated authority.
  • Immunity is not granted where:-
    - An appeal is pending in court against the company.
    - In case of management disputes pending before any court of law.
    - Where an order is passed by the court and no appeal has been made before the scheme came into force.
  • Extension granted to file DIR-3/DIR-3KYC: Extended timelines between 1st April 2020 and 30th September 2020 is provided by MCA for the directors' whose DIN is deactivated to come forward and file DIR-3KYC/DIR-3 KYC-Web. The filing fee of Rs 5,000 will not apply.

For the Inactive Companies

The defaulting inactive companies may apply for the CFSS 2020 so as to file the due documents. Additionally, they may also do the following:-

  • Submit an application for Dormant Status under Section 455 of the Companies Act, 2013 by way of filing of e-Form MSC - 1 along with the prescribed fees.
  • Submit an application for striking off the name of the company from the Register of Companies.
  • Extension granted to file e-Form ACTIVE: An extended timeline between 1st April 2020 and 30th September 2020 is provided by MCA for the ‘ACTIVE non-compliant' companies to come forward and file e-Form ACTIVE. The filing fee of Rs 10,000 will not apply.

Non-Applicability of the CFSS 2020

  • Where the action for final notice of striking off the name as per the Companies Act, 2013 has already been initiated by the Designated Authority.
  • Where the company has already filed the Form STK - 2 along with the prescribed fees for the striking off of the name of the company from the Register of Companies.
  • Where the companies have been amalgamated under the scheme of arrangement or compromise.
  • Where the application for Dormant Status has been filed by way of Form MSC - 1 along with the prescribed fees.
  • Vanishing companies.
  • Companies that are marked for the Corporate Insolvency Resolution Process or Liquidation.
  • Where the following are involved:-
    - Increase in the Authorised Capital (Form SH - 7)
    - Charge related documents (CHG - 1, CHG - 4, CHG - 8, CHG - 9)

Revisions Made to the LLP Settlement Scheme 2020

  • The LLP Settlement Scheme 2020 is applicable between the 1st of April, 2020 and the 30th of September, 2020.
  • Applicable to the defaulting LLPs for the filing of belated documents that were due for filing till the 31st of August, 2020.
  • No additional fees charged on the filing of the belated documents other than the normal application fees.
  • No prosecution by the Registrar for those defaulting LLPs who complete the filing of all the belated documents and dues by the 30th of September, 2020.
  • The scheme is not applicable to LLPs who have made the application for the striking off of the name of the LLP from the Registrar as per the LLP Rules, 2009.

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Category Corporate Law, Other Articles by - CA Rajesh Pilleda