The Ministry of Corporate Affairs video circular no. 12/2020 dated 30.03.2020 has come up with long awaited Company amnesty scheme with the name “Companies Fresh Start Scheme, 2020” (CFSS, 2020) in respect of overdue statutory filings and compliances by the active Companies. The Ministry has received representations from various stakeholders requesting for grant of a one-time opportunity, hence this scheme has been brought in furtherance of Ministry’s circular no. 11/2020 dated 24.03.2020 as a relief measure to address the COVID-19 threat and in order to facilitate the Companies registered in India to make a fresh start on a clean slate.
This scheme shall enable the defaulting Companies to complete their pending ROC compliances by filing necessary documents in MCA21 registry including annual filings without being subject to additional fees on account of any delay. A ‘defaulting Company’ means a Company which had made any default in filing of any of the documents, statement, returns, etc. including annual statutory documents on the MCA21 registry.
Time Period: The time period given under CFSS-2020 to complete the belated filings is from 1st April, 2020 till 30th September, 2020 (both days inclusive). Under this scheme, no additional fees shall be charged for late filing and only normal fees for filing of documents in the MCA21 registry shall be payable. Unlike the earlier amnesty schemes introduced by MCA, where a certain waiver of additional fees was given, this time there is no need to pay any additional fees whatsoever.
This scheme is also applicable to the foreign Companies, subsidiary Companies of foreign Companies registered in India and also to the Project Offices of foreign Companies in India.
Grant of Immunity: This scheme shall grant the immunity to the defaulting Companies from launching of prosecution or proceedings for imposing penalty on account of delay associated with certain filings. However, the CFSS-2020 does not provide immunity for any other consequential proceedings including any proceedings involving the interests of any shareholders or any other person qua the Company or its directors or key managerial personnel etc. Further no immunity will be granted in matters of any appeal pending before any court or in case of disputes of management of the Company pending before any court or tribunal. Moreover, immunity will not be granted in the event any court has ordered conviction in any matter, or an order imposing penalty has been passed by any adjudicating body and no appeal has been preferred against such orders before this scheme came into force.
Special Measures: As a part of special measures, in cases wherein due to delay in filing of document, statement or return in the MCA21 registry, penalties were imposed and no appeal was preferred by the Company, the same will be dealt with in a manner provided under the scheme. Further, in cases where the last date for filing of appeal against the order of adjudicating authority falls between March 31, 2020 to May 31, 2020, an additional period of 120 days shall be allowed with effect from such last date of filing of appeal. During such additional period, any prosecution for non-compliance of order of the adjudicating authority pertaining to delay in filing of documents in the MCA21 registry shall not be initiated against such Companies or their officers.
Effect of Scheme on Active non-compliant Companies and Directors’ whose DIN is marked deactivated: As per the MCA, the scheme shall also allow filing of INC-22A (Active form) without any additional fees. Once the said form is filed and duly taken on record, the rest of the pending forms can be filed. Further, in case of the directors whose DIN has been marked as deactivated due to non-filing of DIR-3KYC / DIR-3 KYC-Web, the scheme allows to file DIR-3KYC/DIR-3KYC-Web within the validity of the scheme without filing of any additional fees. Once the DIN is activated, rest of the pending forms can be filed. This came as a biggest respite for such Companies which are active non-compliant or where directors’ DIN are deactivated or both.
Scheme for Inactive Companies: In case of inactive Companies, any defaulting inactive Companies can, while filing documents under CFSS-2020, either apply to get themselves declared as dormant Company under Section 445 of the Companies Act by filing e-form MSC-1 or can apply for striking off its name by filing e-form STK-2 on payment of prescribed fees.
Issue of Immunity Certificate: After the filing of all belated documents, statements, returns, etc. up to 30th September, 2020, an application is required to be filed in Form CFSS-2020 annexed with the circular 12/2020, in order to seek immunity with respect to the belated documents filed under CFSS-2020. Such application in Form CFSS-2020 can be made within 6 months from the date of closure of the scheme i.e. on or before 31st March, 2021. Based on the declaration made in Form CFSS-2020 in respect of the documents filed under this scheme, an immunity certificate will be issued by the designated authority. However prior to filing of the Form CFSS-2020, in the event the defaulting Company has filed any appeal against any notice issued or complaint filed or order passed by a court or any adjudicating authority with respect to any statutory filing or its officer in default, it is required to withdraw the appeal and furnish proof of such withdrawal as attachment in the Form CFSS-2020.
Effect of Immunity: As an effect of immunity, after granting immunity, the designated authority shall be required to withdraw any prosecutions pending before the concerned court(s) and any pending proceedings of adjudication of penalties under Section 454 of the Companies Act other than the matters wherein a court has ordered conviction or an adjudicating body has imposed penalty and no appeal has been preferred against such orders before this scheme came into force.
Non-applicability: The CFSS-2020 shall not apply to the following cases: a.Companies against which action of striking off has been initiated by the designated authority; b. where any application has already been filed by the Company for initiation of the action of striking off the name of the Company from the register of the Companies; c. Companies which have amalgamated under a scheme of amalgamation or compromise under the Companies Act; d. where applications have been filed for achieving the dormant status under Section 455 of the Act; e. in case of vanishing Companies and; f. where any increase in authorised share capital is involved (Form SH-7) or charge related documents (Form CHG-1, Form CHG-4, Form CHG-8 and Form CHG-9).
In case, we miss CFSS-2020: Once the scheme is concluded, the designated authority shall take necessary action under the Act against the Companies that have not availed of the scheme and are in default in respect of filing of any of the documents in a timely manner.
The Way Ahead: The CFSS-2020 is an important initiative of the current Indian Government that aims to promote ease of doing business in India and also wants to create the country as a manufacturing hub for Indian and Foreign manufacturing entities through “Make in India”. Every defaulting Company must avail the benefit of this golden opportunity in respect of its eligible overdue filings and come out clean of its pending filings and worries. A thorough year-wise inspection must be made to make themselves aware of any non-compliance relating to any year and the respective form in that respect must be filed within the give time.
Our Assistance: We at DNA & Co. Chartered Accountants, will be happy to help and guide on availing the maximum value out of the one-time CFSS-2020 scheme.
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About the Author: This article has been authored by Nitesh Goel, Managing Partner of M/s DNA & Co. Chartered Accountants who is a fellow member of the Institute of Chartered Accountants of India. He has around 10 years of experience in the field of Assurance, International Taxation, Internal Audits, Bank Audits, Internal Financial Controls, etc. with various Indian & Foreign Multinationals. He also possess specialization in audit of manufacturing sector and working in SAP & ERP environment.
Disclaimer: Absolute Care is taken to prepare this article however inadvertently if any errors occurs then the Author shall not be held responsible for any such cause. The content published is only for educational purpose and shall not be construed as rendering of any professional advice in any manner whatsoever. The readers must exercise their own judgement and refer the original source before any implementation.