What is Companies Fresh Start Scheme 2020?

The Ministry of Corporate Affairs has introduced CFSS 2020

The ministry of corporate affairs (MCA) in an attempt to ease matters for the companies has introduced a new scheme which is Companies Fresh Start Scheme 2020 (CFSS). The MCA has also given the LLP’s a bit of breathing space by proving the LLP settlement scheme.

What is the objective of the Company Fresh Start Scheme (CFSS)?

In this current situation of Covid-19, the whole world is in lockdown and the entire economy of the nation is stagnant in this pandemic. All government regulated bodies which are authorized are doing their best in providing relief to individuals of India. The reason behind bringing Companies Fresh Start Scheme 2020 is to provide a clean slate to all those law-abiding companies, some more time is given to them for a certain level of financial relief regarding compliances in this situation of the pandemic.

When to apply for Company Fresh Start Scheme (CFSS)?

The “Defaulting Companies” can take the benefit of the Company Fresh Start Scheme during the period from 1^st of April 2020 to 30^th of September 2020.

What is the defaulting company?

• The “Defaulting Companies” refers to the company which has failed to file the forms applicable to the company.
• Every company which has defaulted to complete Annual Filing compulsorily by filing of Form AOC-4 – Financial Statements and Form MGT-7 – Annual Return is a defaulting company.

What are the consequences of the non-filing of forms for the defaulting company?

• The “Defaulting Companies” will be struck off by the registrar after issuing a notice.
• Directors relating to “Defaulting Companies” will be disqualified for a period of 5 years and they cannot become the director in any company for that period of 5 years.
• The “Defaulting Companies” will also be liable to pay Additional Fees as Late fees for filing of forms after the due date.

What are the benefits of CFSS 2020 for the defaulting company?

• No additional fees to be paid, only normal fees as prescribed in the companies rules 2014 for all filings of registry MCA 21 is required to be paid.
• Immunity will be granted against the prosecution and proceedings for imposing of penalty only when prosecution and proceedings arose due to the delay in filing of belated return and no other cases are covered.
• List of Forms which can be filed by defaulting companies (Click here to get MCA notification for list of Forms)
• This scheme is available for both private and public companies.
• The company can also file its old annual returns for 3-4 years without a late fee.

What will happen in cases where the court has passed an order against the company?

• If the court has passed an order and the company has not filed any appeal against the same while commencement of this scheme;
• As per Company Law, 120 days are given to the company to file an appeal before the Regional Director.
• During the duration of 120 days, the Defaulting Company should file all the forms pending to be filed, and non-compliance of the order passed by court for delay in filling any documents for the same shall be condoned and no further actions shall be taken against the company.

Whether any application is required to be made for seeking immunity in respect of documents filed under the scheme?

• Yes, The Company is required to file Form CFSS 2020 within six months from 30^th September 2020 i.e. during the period from 01^st October 2020 to 31^st March 2021.
• Immunity certificate shall be granted by the designated authority to companies and no fees to be paid on Form CFSS-2020.
• Immunity will not be granted where there are management disputes pending before any court of law, Conviction has been ordered in any case or an order imposing penalty has been passed by adjudicating authority, no appeal has been made before the scheme came into force.

Whether DIR-3 KYC is covered by the CFSS 2020?

Extended timelines from the 1st of April to the 30th of September are provided by MCA, even the director can grab the opportunity to file the Form DIR-3-KYC and can activate their status of DIN from deactivated and the late filing fee of Rs.5000 will not applicable till the time limit mentioned.

Whether this scheme provide any opportunity for inactive companies?

• The inactive companies can file application to get “Dormant Status” u/s 455 by filing an application in e-form MSC-1 at a normal fee. This provision enables inactive companies to remain on the register of the companies with minimal compliance requirements.
• Apply for striking off the name of the company by filing e-Form STK-2 after filing all the documents which are pending to be filed.

Whether companies can file ACTIVE Form INC-22A in the CFSS 2020?

The extension granted by CFSS 2020 till 30^th September 2020 is also available to file e-Form active, companies need to come forward and file e-Form ACTIVE in INC-22A for the companies which are marked by ROC as ACTIVE non-compliant. The Late filing fee of Rs.10000 will not applicable till 30^th September 2020.

Which companies cannot opt for CFSS 2020?

• Vanishing Companies.
• Companies that are marked for (CIRP) Corporate Insolvency Resolution Process or for liquidation.
• Companies that have already filed an application for striking-off the name of the company from the Register of Companies inForm STK-2along with requisite fees.
• Companies to whom final notice for striking off is issued by designated authority u/s 248 of the Companies Act, 2013.
• Companies that have amalgamated in the scheme of arrangement or compromise.
• Where the application for Form MSC-1 along with prescribed fees has been filed for the dormant status.
• Where an increase in the Authorized Capital is involved (Form SH-7) and Charge related documents (CHG-1, CHG-4, CHG-8, CHG-9).

Whether a foreign company can apply for CFSS 2020?

• This CFSS-2020 is also applicable to Foreign Company.
• Form FC-1, FC-2, FC-3 will be covered under this scheme.
• A subsidiary of a foreign company can also avail the benefit of the scheme.

How can a company under liquidation complete its return filing?

The Holding company can file the return of its Subsidiary which is currently under liquidation, but returns should relate to a period where holding had its normal business.

How can a company which has been struck off by registrar opt for CFSS 2020?

The struck off companies may approach the NCLT for revival. Once the company is revived, the belated documents can be filed.

Whether CFSS 2020 allows refund of additional fees and the penalty paid before the commencement of this scheme?

Companies Fresh Start Scheme 2020 does not allow the refund of the late filing fee and penalty which are already paid on company filings made before March 2020.

Sources

• ICAI FAQ on CFSS 2020. Click here
• List of Form notified by MCA. Click here
• MCA Circular dated 30.03.2020. Click here