Company Law Fresh Start Scheme 2020 (CFSS)

Recently MCA has introduced new scheme through circular no 12/2020 dated 30/03/2020 for providing relief to dormant, inactive companies or the defaulting companies who has made default in filing annual statutory documents and returns in past years. This scheme will commence on 1st April 2020 and continue till 30th September 2020 or any further notification in respect to dates later on . This scheme will enable the defaulting companies to file belated returns without paying any additional fees.

Feature Of Company Law Fresh Start Scheme

1. Every defaulting company shall be required to pay the normal fees for each belated return filed and no addition fees will be paid .
2. Before filing immunity under this scheme , the defaulting company will need to withdraw any appeal filed against any prosecution or proceedings and furnish proof for the same along with the application.
3. The application seeking immunity can me made electronically in the Form CFSS-20. No fees will be paid on this form.
4. Based on the declaration made in the said form an immunity certificate in respect of documents filed under this scheme will be issued by the designated authority.
5. Defaulting inactive companies while filing documents under this scheme can also apply simultaneously for obtaining the dormant status (Form MSE-1) or can apply for striking off the name of the company . (Form SKT-2) by paying normal fees .
6. Extended timelines between 1st April 2020 and 30th September 2020 is provided by MCA for the directors’ whose DIN is deactivated to come forward and file DIR-3KYC/DIR-3 KYC-Web. The filing fee of Rs 5,000 will not apply.
7. There may be certain cases where order is pass by the adjudicating authority imposing penalty for delay in filing of documents but no appeal has been filed by the company or its officers against such order before regional director u/s 456 of the Companies act on date of commencement of this scheme , in such case where last date of filing appeal falls between 1st March 2020 to 31st May 2020 then an additional 120 days will be allowed to all such companies to file an appeal .

Non-Applicability of Scheme

This scheme will not be applicable in following cases:

1. Final action for striking off the name of the company has already been initiated by the designated authority.
2. Where application has been made in Form SKT-2 for striking off the name of the company .
3. The companies which are amalgamated.
4. Application for obtaining the dormant status has been filed.
5. Vanishing companies
6. Where any increase in authorized capital is involve (Form SH-7) or charge related documents (CHG-1, CHG-4, CHG-8 and CHG-9).

Immunity under this scheme

After granting immunity the designated authority will withdraw the prosecutions pending in any court and the proceeding of adjudication of penalties under sec 454 of the act in respect of defaults against which immunity has been granted

Some definitions necessary for knowing this scheme

1. Dormant Company– As per sec 455 of the companies act dormant companies means inactive or inoperative companies. If a company has not filed its annual returns for 2 consecutive years then such company is also called dormant companies.
2. Vanishing Company– A company would be deemed to be a vanishing company, if it is found to have failed to file returns with Registrar of Companies (ROC) or with Stock Exchange (if it continues to be a listed company) for a period of two years, not maintaining its registered office at the address notified with registrar of companies /Stock exchange and none of the directors of the company are traceable.

Conclusion

MCA has taken a very prudent step to save the companies from the web of hefty penalties due to non filing and easy exit .

Regards

Team Palankarta

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