Key Highlights of Companies Fresh Start Scheme, 2020 (CFSS) introduced by Ministry of Corporate Affairs

Introduction

Minsitry of Corporate Affairs (MCA) has issued a circular 12/2020 dated 30th March 2020 whereby  the Companies Fresh Start Scheme, 2020 (CFSS) was introduced in order to give an opportunity to the defaulting companies or non compliant companies to make a fresh start as fully compliant entities and avoid the consequences of noncompliance of the provision of the Companies Act (“Act”).

CFSS is a scheme to give a a onetime opportunity to the companies to enable them to complete their pending compliances by filing necessary documents in the MCA -21 registry including annual filings without being a subject to a higher additional fees on account of any delay.

CFSS shall came into force on the 1st April 2020 and shall remain effective up to 30th September, 2020 (both days inclusive).

What is a defaulting company?

A Defaulting Company is defined under the CFSS as a company defined under the Act, and which has defaulted in filing of documents, statements, return etc. including annual statutory documents, which were due for filing on any given date, with the MCA-21 Registry.

Benefits of the Scheme

CFSS enables any defaulting company to avail the benefits of the scheme and file its pending documents with the registry, without payment of any additional fee except  normal fees as prescribed under the Act, read with the Companies (Registration Offices and Fee) Rules, 2014.

Furthermore, the defaulting company will be granted immunity from prosecutions or proceedings for penalty imposed/ to be imposed under the provisions of the Act, on account of late filings.

Inactive Companies

The scheme gives an opportunity to inactive companies to get  such an inactive company declared as dormant company by filing simple application at a normal fee. The said provision enables inactive companies to remain on the register of the companies with minimal compliance requirements.

Applicability in cases of Appeal

CFSS also provides for cases where an appeal has been filed or could be filed. In cases, where an appeal has been filed by the company against any notice issued or complaint filed or any order of the court/ tribunal/ adjudicating authorities for violation of provisions of the Act or the 1956 Act, such appeals have to be withdrawn before availing the benefit of CFSS. Proof of such withdrawal of the appeal has to be filed along with the application.

CFSS also contemplates scenarios where penalties were imposed by an adjudicating officer under the Act, and no appeal has been preferred by the concerned company, where the last date of filing the appeal against the order of the adjudicating authority, falls between the March 1, 2020 and May 31, 2020 (both days included). In such cases, the limitation period to file an appeal is extended by another 120 days from the last date it was supposed to be filed.  Furthermore, during such additional time, no prosecution for non-compliance of the order will be initiated against the company.

Exclusions

 CFSS provides for companies and forms in relation to which CFSS will not be applicable, which are as under:

Companies/ cases:

  1. Companies against which an action for final notice for striking off their names under Section 248 of the Act has already been initiated by the Designated Authority;
  2. Companies which have already filed Form STK-2 for striking off of the name of their Companies with the RoC;
  3. Companies which been amalgamated or merged under a scheme of arrangement or compromise in terms of the Act;
  4. Companies which have already filed an application to obtain dormant status under section 455 of the Act, before the CFSS was introduced;
  5. Vanishing companies;
  6. Companies having management disputes pending before any court/ tribunal in India; and
  7. Cases where courts/ tribunals have ordered conviction or passed an order imposing penalty and no appeal has been preferred before April 01, 2020.

How to Apply

Pursuant to filing of all the belated documents for which immunity is being sought by the defaulting company, an application under CFSS has to be made electronically by submitting e-Form CFSS – 2020. This will include the details of all the belated forms filed to be in compliance. It is important to note that no fees is payable for filing of this form.

On filing of the e-Form CFSS – 2020, the Designated Authority shall issue an immunity certificate in respect of the belated documents filed, and will also withdraw any pending proceedings before any court or tribunal.

To Conclude

CFSS is a beneficial scheme, specifically in the current pandemic scenario, providing an opportunity to non-compliant/ defaulting companies, to have a fresh start in terms of their statutory compliances. It also provides respite to inactive companies, who will have an option to either become a dormant company, or get their names struck off from the registers.

Additionally, since there is no additional fees to avail the benefit of CFSS, all defaulting and inactive companies, should definitely consider opting for CFSS and becoming compliant with statutory filings. However, if they fail to do so and continue to be in default, the concerned RoCs having jurisdiction over the companies may take action in terms of the Act.