Companies Fresh Start Scheme, 2020

In continuation with the several measures from the Ministry of Corporate Affairs (MCA) during the COVID-19 pandemic, one more major relief has announced by the MCA, vide it's General Circular No-12/2020 dated on 30th March, 2020, through the launching of one-time settlement scheme for the Companies popularly known as “Companies Fresh Start Scheme 2020 (“CFSS-2020”) to grant one-time immunity from hefty fee and prosecution against the defaulting Companies.

This CFSS-2020 has introduced to facilitate the Companies registered in India to make a fresh start on a clean slate by making their defaults good. Under this Scheme, the Companies shall be eligible to complete all their belated filings at a reasonable fee, without any penalty or late fee.

• Effective Date of the Scheme: This Scheme shall be effective from 01st April, 2020 to 30th September, 2020 in which the defaulting Companies can complete their belated filings (any of the documents, statements, returns etc., including annual statutory documents) by paying the normal statutory fee.
• Applicability of the Scheme: This Scheme is applicable to all the defaulting Companies, whose belated filings with the Registrar of the Companies (ROC) was due on any given date in accordance with the provisions of this Scheme.
• Scheme for Inactive Companies: The defaulting inactive companies, while filing due documents under this Scheme can simultaneously apply either for:
  1. declaring themselves as Dormant Company under Section 455 of the Companies Act, 2013 (the Act) by filling Form MSC-1 on MCA
  2. striking off the name of the Company by filing Form STK-2 on MCA

• Forms which cannot be filed under this Scheme: Except below-mentioned forms, all other forms can be filed under this Scheme:
  1. Form SH-7 (Increased in Authorized Capital),
  2. Form CHG-1 (Creation or Modification of Charge),
  3. Form CHG-4 (Satisfaction of Charge),
  4. Form CHG-8 (Application to C.G for extension of time for creation or modification of charge)
  5. Form CHG-9 (Creation or Modification of Charge for Debentures)

• Non-applicability of the Scheme: The Scheme shall not apply in the following cases:
  1. The Companies which are strike off and the Companies against which strike-off action has been initiated by the concerned authority;
  2. The Companies who have applied for strike off of its names from the register of Companies;
  3. Amalgamated Companies under the Scheme of arrangement or compromised under the Act;
  4. The Companies who have applied for obtaining Dormant status under Section 455 of the Act, before the commencement of this Scheme;
  5. Vanishing Companies;
  6. Filing of forms SH-7, CGH-1, CHG-4, CHG-8 and CHG-9;

• Consequential Proceedings under the Scheme: This Scheme protects the Companies from the launching of prosecution or proceedings associated with delay of belated filings with the ROC and shall not cover any other consequential proceedings, including those involving the interest of shareholders or any other person, as being the Company or its directors or Key managerial personnel.

For Example, Immunity shall be provided for delay in filing of Form PAS-3 for allotment of shares and not on account of utilization of money raised through private placement beforethe filing of Form PAS-3 for allotment of shares.

• Withdrawal of appeal or proceeding initiated: The Companies shall require withdrawing all the appeals filed against the order(s) of any competent court or authority made in the matter of statutory filings against the Company, and submit the proof of such withdrawal along with the application form under the Scheme.
• Extension of the last date for filing of an appeal: MCA has extended the last date for filing of an appeal under Section 454(6) of the Act, against the adjudication order scheduled in between 1st March, 2020 - 31st May, 2020 to 30th September, 2020. Therefore, the Companies and their officers who have missed the last date for filing an appeal can file the same before the Regional Director till 30th September, 2020.

Further, no prosecution under Section 454(8) of the Act shall be initiated against the Companies by the adjudicating authority, during such extended last date, for the delay in filing of any documents, forms, statements etc., on MCA.

• Application and granting of Immunity Certificate: The application for immunity can be made after completion of all the belated filings, in the Form CFSS-2020 with no filing fees. However, said the application could not be made after the expiry of 6 (Six) months from the closure of the Scheme. Further, Immunity Certificate shall be granted by the designated authority based on the declaration filed by the Company in Form CFSS 2020.

The designated authority upon the filing of an application in the Form CFSS-2020 shall withdraw all the pending proceedings or adjudications, in the name of the Company and its officers, before the concerned court under Section 454 of the Act, except proceedings or adjudications mentioned as follows:

1. Immunity shall not be applicable, in cases of the pending appeal and the case of management dispute of the Companies pending before the court of law or tribunal;
2. Immunity shall not be granted, in cases of (i) conviction order issued by the court; (ii) penalty order imposed by the adjudicating authority for which no appeal could be preferred, before the announcement of this Scheme.