Companies Fresh Start Scheme
The world at present is undergoing one of the worst pandemics in its history and this has forced countries to shut their economies and patiently wait for this unprecedented time to pass by. While on one hand, governments are issuing orders to ensure the safety and protection of its citizens, on the other hand, they are introducing schemes and policies to stabilize the economy and safeguard their trade and commerce. One such measure is the Companies Fresh Start Scheme, 2020 (hereinafter, ‘CFSS’) which was introduced by the Ministry of Corporate Affairs of India (hereinafter ‘MCA’). It was passed on March 24, 2020, vide circular no. 12/2020 and on March 30, 2020, vide circular no. 13/2020 under Section 460 of the Companies Act, 2013 (hereinafter, ‘Act’) read with Section 403. This was done after taking into account various representations made by the stakeholders who were requesting for an extension to enable them to complete their pending compliances by filing necessary documents in the MCA-21 registry. This included annual filings without being subject to pay higher additional fees on account of any delay. Hence, CFSS aims to condone the delays of filing certain pertinent documents with Registrar as mentioned above and also relates to the waiver of additional fees and also granting of immunity from proceedings to impose a penalty on account of delay associated with these flings.
This Scheme shall be applicable to any “Defaulting Company” and shall commence from April 01, 2020, to September 30, 2020. According to the Companies Act, 2013, “Defaulting Company” means a company which has made a default in filing of any of the documents, statement, returns, etc. including annual statutory documents (AOC-4 & MGT- 7) in the MCA-21 registry as per the due time. The basic rule of the Scheme is that “immunity will be provided to defaulting companies only in case of belated filings by waiving off additional fees however where proceedings involving the interest of any shareholder or its director, or key managerial person or any other person belonging to the company than immunity shall not be provided”.
It is of pertinent consideration to note that CFSS shall not have any retrospective effect. Further, companies that are “inactive” will not be eligible to benefit from the Scheme. Accordingly, “Inactive Company” means 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. The Ministry has also uploaded the list of 76 “Eligible Forms” in the public domain which waives off additional fees for belated filings which comprises of e-forms under the Companies Act 2013, Companies Act 1956 and LLP’s. All these pro-active measures by our Government are laudable and noteworthy and continue to reinforce our faith and belief in the system at these troubled times.