In line with its circular dated March 24, 2020, MCA has introduced Companies Fresh Start Scheme, 2020 (“Scheme”) vide circular no 12/2020 dated March 3, 2020 under Section 460 of the Companies Act, 2013 (“Act”) read with Section 403. The salient features of the Scheme are given below.
Which companies can take benefit of the Scheme?
Any company which has defaulted in filing any document, return, statement, etc. with MCA21 registry are eligible (“Eligible Company”) to participate in the Scheme except the following:
- Companies against whom action for final notice for striking-off the name has been initiated under Section 248 of the Act; (corresponding to section 560 of the CA,1956)
- Companies which have already filed application for striking-off name under Section 248 of the Act;
- Companies which have been amalgamated under scheme of arrangement or compromise;
- Companies which have filed application for obtaining status of ‘dormant company’ under section 455 of the Act;
- Vanishing companies;
What is the Scheme?
Any Eligible Company 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.
What is the duration of the Scheme?
April 01, 2020 to September 30, 2020
Whether belated filings under Companies Act, 1956 are also covered?
Yes, belated filings under the Companies Act, 1956, can also be filed under the Scheme.
What forms, returns etc., can be filed under the Scheme?
All forms including annual forms like AOC-4, MGT-7 can be filed under the Scheme.
The following forms, however cannot be filed:
- SH-7 (only for increase of authorized capital)
- Charge related Forms (CHG-1, CHG-4, CHG-8 and CHG-9)
What benefits are available under the Scheme?
The following benefits shall be available to every Eligible Company participating under the Scheme:
- Exemption from payment of any additional fees;
- Immunity from prosecution to the extent of default connected with non-filing of form; and
- Immunity from proceedings related to adjudication of penalty under Section 454.
However, immunity has not granted from any consequential proceedings including any proceedings involving interests of any shareholder or any other person qua the Company or its Directors or KMP.
For example, immunity against non-filing of form PAS-3 under Section 42, can be availed under the Scheme by filing the Form but immunity from consequential defaults arising on account of default like utilizing of application money without the filing the Form PAS-3, will not be granted.
Circumstances under which immunity is not available under the Scheme?
An Eligible Company cannot avail any immunity under the Scheme in the following cases:
- Where any appeal in respect of matter for which immunity is being sought, is pending before any court of law;
- Where any management dispute is pending before any court of law or tribunal;
- Where the court has ordered conviction in the matter and no appeal has been filed, before coming into force of this Scheme; and
- Where penalty has been adjudicated under Section 454 of the Act and no appeal has been filed, before coming into force of this Scheme.
Can an Eligible Company which cannot avail immunity under the Scheme still take benefit of the Scheme?
An Eligible Company which cannot avail immunity under the Scheme can still take the benefit of exemption from payment of additional fees arising on account of belated filing.
Whether benefit can be availed under the Scheme if prosecution for non-filing or proceeding of adjudication of penalties has already been initiated under the Act?
Yes. After the requisite belated form, statement, return etc., has been filed under the Scheme, the Eligible Company, after the belated filing has been taken on record, shall file a Form CFSS-2020 within 6 months of closure of the Scheme without payment of any fees. Based on the aforesaid filing, a certificate of immunity will be issued to the Eligible Company.
Once the immunity certificate has been issued, the authorities will withdraw the following:
- Prosecution (if any) pending before concerned court; and
- Proceedings (if any) initiated under Section 454 of the Act for adjudication of penalties.
Whether it is necessary to obtain certificate of immunity?
While the certificate of immunity is specifically required in case where prosecution has been initiated against any company and its officers before any court under the Act or where proceeding for adjudication of penalty has been initiated under Section 454 of the Act but it is advisable that the certificate should be obtained in all cases, so that immunity can be availed against any future prosecution or adjudication of penalty proceedings.
Is there any prerequisite for applying the certificate of immunity?
Yes. The pre-requisites are:
- The belated form, return, statement, etc. has been filed under the Scheme;
- The belated form, return, statement, etc. have been taken on record;
- Where any appeal has been filed by the company or officer who is in default, against any notice issued, or compliant filed, or any order passed by court or any adjudicating authority under the Act, before a competent court or authority for violations of the provisions of the Companies Act, 2013 or Companies Act, 1956, in respect of which application is made under the Scheme, such appeal should be withdrawn and proof of withdrawal is furnished along with application.
Any benefit where adjudication order under Section 454 of the Act, has been passed but no appeal has been filed against the same.
In cases, where adjudication order has been passed under Section 454 of the Act with respect to any default on account of non-filing of any form, return or statement etc., but no appeal has been preferred to the Regional Director against the said order as on the date of commencement of the Scheme, following benefits have been provided:
- Where the last date of filing appeal falls between March 01, 2020 and May, 30, 2020, then additional time of 120 days from the last date of filing appeal, shall be allowed to companies and their officers, for filing appeal before the Regional Director; and
- During the aforesaid period, no action for non-compliance of adjudicating order under Section 454(8) shall be initiated against the company or its officers.
Can inactive companies participate in the Scheme?
An inactive company i.e. a company which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years can also avail the benefit of the Scheme and it can either:
- File an application for obtaining the status of dormant company by filing requisite form with normal fees; or
- File an application for striking -off their names under Section 248 of the Act
What forms can be filed under CFSS-2020?
List of eligible forms can be accessed at the below given link:
What is a ‘Vanishing Company’?
As per explanation provided under Rule 3(1) of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016:
‘Vanishing Company’ means a company, registered under the Act or previous company law or any other law for the time being in force and listed with Stock Exchange which has failed to file its returns with the Registrar of Companies and Stock Exchange for a consecutive period of two years, and is not maintaining its registered office at the address notified with the Registrar of Companies or Stock Exchange and none of its directors are traceable.
Whether a company which have been marked as “under CIRP” or “under liquidation” in MCA21 registry can take benefit of the Scheme?
Yes, such type of company can file its belated forms through appointed Insolvency Resolution Professional or Resolution Professional, as the case may be.
The Registrar has issued a notice for strike-off under section 248 of the Act, however, the status of the company is ‘action initiated for strike-off’ and the final order is not yet issued by the Registrar for Strike-off. Whether such type of company can take benefit of the Scheme?
In case all the directors of a company have been disqualified under section 164, whether such company can take benefit of the Scheme?
In this case, a person should be appointed as director/authorized signatory from backend of respective RoC. Then, such company can file its belated forms under the scheme with digital signature of appointed person.
Whether belated forms DIR-3KYC/ DIR-3 KYC Web/ ACTIVE can be filed under the Scheme?
Yes, ‘Deactivated DIN holders’ and ‘ACTIVE non-compliant companies’ can file forms DIR-3KYC/ DIR-3KYC-Web/ ACTIVE, as the case may be, between the moratorium period without any additional fee of Rs. 5,000/10,000 respectively.
Which type of forms as prescribed under the Companies Act, 1956 can be filed under the Scheme?
The following forms can be filed as prescribed under the Companies Act, 1956:
- 23C – Appointment of Cost Auditors.
- 20B – Annual Return.
- 21A – Annual Return for company having no share capital.
- 23B – Notice by Auditor.
- 23D – Information by cost auditor to Central Government.
- 23AC – Filing balance sheet and other documents with the Registrar.
- 23AC-XBRL – Form for filing XBRL document in respect of balance sheet and other documents with the Registrar.
- Form 66 – Form for submission of Compliance Certificate.
- A-XBRL – Form for filing XBRL document in respect of compliance report and other documents with the Central Government.
Whether belated forms MGT-14 or INC-28 can be filed without condonation of the Central Government under the Scheme?
There is no change in procedure. Therefore, forms MGT-14 and INC-28 cannot be filed without condonation of the Central Government as of now unless the MCA removes the technical requirement of providing the SRN of INC-28 in respective forms which are being filed beyond the prescribed period.
Whether immunity will be available in case a company files its belated forms before the moratorium period?
No, belated forms should be filed in the moratorium period.
Last date for filing form BEN-2 were 31st March, 2020? Whether form BEN-2 can be filed under the Scheme during the moratorium period?
A company can file such form BEN-2 during the moratorium period without additional fees. However, immunity shall be required after closure of the Scheme.
MCA has issued various exemption notifications under section 462 of the Act for a Private Company, Government Company etc. However, such exemptions are available only if a company has not defaulted in filing its financial statements or annual return with the Registrar. Whether, such exemptions will be available after filing of respective forms during the moratorium period?
Yes, such exemptions will be available after filing of respective forms. However, it may be noted that, such exemptions will effective only after filing of all due financial statements and annual returns. For example: a private company has filed its all due financial statements and annual returns by 05th April, 2020, then, such exemptions will be effective from 05th April, 2020.
Can a company get immunity on filing of belated Form MSME I during the moratorium period?
Due date for filing of form MSME I is 31st October and 30th April and such form can be filed without any fee. However, after due dates, a company can file such form without any fee. So, a company can file such form during the moratorium period without any fee. But, there is no clarity that immunity will available or not.
Whether companies which are strike-off can avail the Scheme?
The status of a company while availing the Scheme should be “Active” in the MCA21 registry and therefore companies which are strike-off can’t avail the Scheme unless they are revived under the provisions of the Act during the tenure of the Scheme.
What the Scheme can be availed by Foreign Company registered under Section 380 of the Act?
Yes, such foreign company can also avail the Scheme.
Whether form SH-7 can be filed for purposes other increase in authorized capital like redemption of preference shares under the Scheme?
As per the Scheme, SH-7 can be filed for purposes other increase in authorized capital but the list of eligible forms issued by MCA, doesn’t enlist SH-7 for such other purposes too.
Whether the Scheme can be availed for forms which have been filed but are on resubmission?
Whether form CFSS-2020, is required to be filed form all forms filed during the Scheme beyond the due date?
Whether a single form CFSS-2020, can be filed for all forms filed under the Scheme?
Yes, a single form CFSS-2020, can be filed under the Scheme for all the forms
Whether it is mandatory to complete all pending filings for getting the immunity under the Scheme?
CFSS-2020, needs to be filed for forms filed under the Scheme and therefore immunity will be granted for forms filed under the Scheme. While it is not necessary to file all pending filings but one should avail the opportunity and strive to file the form.
Whether form CFSS-2020 is available for filing?
The form is not yet deployed on MCA website
Our Company is active non-compliant, can we avail the benefits of the Scheme?
Yes, you avail the benefits under the Scheme, after filing Form INC-22A, consequent to which your status will be changed to active non-compliant.
Whether form INC-28 can be filed under the Scheme?
Based on webinar conducted by ICSI, filing of belated forms which require condonation from MCA, shall continue to operate on similar fashion but once the condonation is approved, the form can be filed without additional fees , if filed during the tenure of the Scheme. Therefore as of now form INC-28 can’t be filed under the Scheme.