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The Ministry of Corporate Affairs (MCA) vide General Circular 12/2020 dated March 30, 2020 has introduced the Companies Fresh Start Scheme, 2020 (CFSS-2020) to facilitate the companies registered in India, to complete their pending compliances, irrespective of duration of default, by filing the necessary document on MCA Portal including but not limited to annual filings, without being subject to a higher additional fees on account of delay.
CFSS-2020 would come into force on April 01, 2020 and would remain in force till September 30, 2020. It would grant immunity from launching of prosecution or proceedings from imposing penalty on account of delay associated with certain filings, in addition to exemption from imposition of additional fees. The MCA clarified that only normal fees would be applicable on filings made by the Companies on MCA Portal, during the currency of CFSS-2020. Further, CFSS-2020 also gives an opportunity to defaulting inactive companies to get themselves declared as ‘dormant company’ under the provisions of the Companies Act, 2013 (Act). The highlights of CFSS-2020 are as follows:
a. Applicability – Any company which has made a default in filing of any documents, statement, returns, etc. including annual filings on MCA Portal (Defaulting Company) is permitted to file belated documents in accordance with CFSS-2020.
b. Immunity from prosecution and additional fine – Every Defaulting Company would be required to pay normal fees while filing the belated documents during the currency of CFSS-2020 and no additional fees would be payable. The MCA clarified that the immunity from the launch of prosecution or proceedings for imposing penalty would be provided only to the extent of delayed filings. Any substantive violation of law, such as any proceedings involving interests of any shareholder or any person qua the company or its directors or key managerial personnel would not be covered by such immunity.
c. Application for issue of immunity certificate and effect thereof – Every company which has filed belated documents under CFSS-2020 would be required to file a declaration in e-Form CFSS-2020 in respect of documents so filed under CFSS-2020 for issuance of an immunity certificate by the jurisdictional ROC, after the closure of CFSS-2020 and after the belated documents are taken on record or approved by the jurisdictional ROC, but not after the expiry of six months from the date of closure of CFSS-2020. After granting the immunity, the jurisdictional ROC would withdraw the prosecution(s) pending, if any, before the concerned court(s) and the proceedings of adjudication of penalties under the Act.
d. CFSS-2020 for inactive companies – The defaulting inactive companies, while filing belated documents can, simultaneously, either, (i) apply to get themselves declared as ‘dormant company’ under the Act by filing e-Form MSC-1; or (ii) apply for striking off its name by filing e-Form STK-2.
e. Additional time for filing appeals – CFSS-2020 also provides the additional time for filing appeals before the concerned Regional Directors against imposition of penalties, if already imposed.
Introduction of CFSS-2020 by the Indian Government is a welcome initiative as it will reduce the compliance burden of the Defaulting Companies during COVID-19 crisis and will also provide them with an opportunity to make a fresh start as fully compliant entities.