Monday 13 April 2020

CONCEPT NOTE ON COMPANIES FRESH START SCHEME, 2020


Introduction of Companies Fresh Start Scheme (CFSS), 2020

In line with existence pandemic of COVID-19 in our country and in order to give boost to the economy through corporate sector, the Indian government have decided to take some effective measures to rise in existing circumstances of global economy slowdown. In order to smoothen the corporate machineries and to protect the economy from the adverse effects created by the pandemic. The government through its various ministries have decided to come up with various circulars and notifications in their respective areas. As part of this initiative Ministry of Corporate Affairs (MCA) has come up with the general circular No. 12/2020 dated 30/03/2020 Companies Fresh Start Scheme, 2020 enabling the companies for a fresh start by removing the stain of non-compliant on the name of the company. Under this Scheme a relief can be sought by those Companies who have committed unintentional contravention of the Companies Act, 2013 (Act 2013) or Companies Act, 1956 (Act 1956) however the relief has been limited to certain kinds of non-compliance only.

Duration of (CFSS), 2020

The Scheme shall be effective w.e.f. April 01, 2020 and valid upto September 30, 2020. A total period of 6 months has been allowed  to the defaulting companies to make their default good pursuant to this scheme.

Meaning of defaulting Company

Defaulting Companies has been defined under the Scheme 2020 as
“means a Company defined under the Act 2013, and which has made a default in filing of any of the documents, statement, returns, etc. including annual statutory documents on the MCA -21 registry”

Applicability of the Scheme

The Scheme shall be applicable only to the defaulting companies in respect of belated documents which were due for filing with MCA 21 Portal. i.e. the scheme is not an enablement to the individuals. For instance, under Section 90 of the Companies Act 2013, Significant Beneficial Owner is required to file form BEN-1 to the reporting Company for its internal record which is not to be filed with MCA portal. However, the reporting company is required to file form BEN-2 with MCA 21 portal.

In such situation, reporting company may file the e-form BEN 2 without any additional fees under the Scheme 2020 but the person required to declare under BEN 1 will be in contravention of the said section similar view can be taken with DIR 2 as well.

In brief, it can be stated that any company which has failed to file any document, e-form, order or declaration with MCA can now file the said documents or e-form etc. under the Scheme 2020.
                 
Immunity

Application for immunity

The period for which application is allowed to be filed by the applicant to obtain certificate of immunity shall commence from the closure of the Scheme and upto 6 months from the closure of the scheme, in respect of the belated documents filed with the MCA during the tenure of the Scheme 2020. The said application can be made in form CFSS-2020 for which no fees is required to be paid by the applicant.

Exception of immunity

It should be noted that the company will be excused only with respect to the penalties or proceedings in relation to the non-filing of the belated documents and certificate will not cover the consequential proceedings involving the interest of the shareholders or any of director or Key Managerial Personnel.

Pre-Condition to apply for immunity

Any appeal that has been filed by the defaulting Company against notice issued or compliant filed or an order passed by the court or by adjudicating authority for violation of the  under the Companies Act, 1956/2013, shall be required to withdraw by the defaulting Company before filing an application to obtain certificate of immunity. The evidence of withdrawal of appeal made shall be required to attach in application form CFSS-2020.

Effect of immunity

After observing the declaration made in the application form CFSS-2020 the designated authority shall issue a certificate of immunity. The Immunity Certificate will restrain any proceedings or action against the Company with respect to defaults for which the certificate has been granted without any further proceedings.

Non-applicability of the Scheme 2020

  • To companies against which action for final notice for striking off the name u/s 248 of the Act 2013 has already been initiated by the Designated Authority;
  • Where an application has already been filed by the companies for the action of striking off the name of the Company form the register of Companies;
  • To companies which have amalgamated under a scheme of arrangement or compromise under the Act 2013;
  • Where applications have already been filed for obtaining Dormant Status under Sec 455 of the Act 2013 before this Scheme 2020;
  • To Vanishing Companies {explanation to sub-rule 1 of Rule 3 of The Companies (Removal of Name of Companies from the Register of Companies) Rules, 2016};
  • Where an increase in authorized capital is involved and charge related documents i.e. (SH 7, CHG 1/4/8 and 9);
  • Where any court has ordered conviction in any matter;
  • An order has been passed by an adjudicating authority under the Act 2013; or (and no appeal has been preferred against the order passed in point no g & h before the Scheme 2020 comes to force)
  • Any appeal pending before the court of law and in case of management disputes of the company pending before any court of law or tribunal.


Benefits in respect of specified forms apart  from regular filings

Last Year in 2019, MCA came with some extra compliances on part of Companies in pursuant to Companies (Amendment) Act, 2019. These Compliances includes the filing of forms such as BEN-2, DIR-3-KYC, DIR-3-KYC, INC-22A (ACTIVe) and MSME, DPT-3 with MCA registry. Now all these forms may be filed by the Company between 1st April, 2020 to 30th September, 2020 without any additional filing fee where applicable by availing the benefits under the said CFSS, 2020. All these forms to be filed apart from the annual filings in form AOC-4/ AOC-4 CFS/ AOC-4 XBRL and MGT-7.

This Article has been Compiled by Akash Gupta (Senior Associate)

You can direct your queries or comments to the author at akash@factumlegal.com


Disclaimer-
The contents of this article should not be construed as legal opinion. This article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. We expressly disclaim any financial or other responsibility arising due to any action taken by any person on the basis of this article.

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