There is a long pending demand to grant immunity from the heavy late filing fee on late filing of fee particularly on the filing of Annual Accounts and Annual Returns to be filed by the companies. Presently the late filing fee is Rs 100 per day each form under annual filing which result in huge amount in case of even 30 days delay. There are several questions customarily not to ask from companies like what was the problem if filing AGM was held on time. However, there are some genuine problems for promoters, particularly for small companies. This scheme helps these non- compliant companies. The present scheme includes many other pending forms also. We will discuss.
The Ministry of Corporate Affairs notified the Companies Fresh Start Scheme 2020 by its General Circular 12/2020 dated 30th March 2020. This circular is in accordance with the announcement made by Minister of Corporate Affairs recently to boost the confidence of companies and also General Circular 11/2020 dated 24 March 2020. This Scheme has two different coverage – facilitate filing for fully functional companies and to facilitate dormant status or strike off for less namesake existence.
Immunity for Default of Not Filing
The Companies Fresh Start Scheme, 2020 is for condoning the delay in filing and there shall be no additional filing fee or late fee. The only normal fee shall be payable under the scheme period.
Period of the Scheme
The scheme shall come into force on 1st April 2020 and shall remain in force 30th September 2020. However, for companies availing this window within the time window for filing application for immunity may be open till 31 March 2021. [Para 6(i) and 6(vii)]
Any company which has made a default in filing of any form (except few) required to be filed with MCA 21 registry is considered as defaulting company under the scheme. These forms may be for filing of documents, statements, returns and reports etc. [Para 6(ii)(c)]
Any defaulting company may file any forms (except few) which were due for filing on any date before or during the period of this scheme. These forms may be for filing of documents, statements, returns and reports etc. [Para 6(iii)]
[Update: MCA website is now hosting the list of the eligible forms here.]
Manner of Filing
Any defaulting company may file any form (except few) as per the normal procedure of filing. The system shall charge only the normal filing fee as applicable on the date of filing. No additional fee shall be payable. [Para 6(iv)]
In the case of “Active non-Compliant” companies, these companies shall be able to file form Active under the scheme subject to all pre-conditional filings.
This scheme is also available for non-corporate forms like DIR-3-KYC and DIR-3-KYC-Web.
This scheme is not applicable for Form SH – 7, CHG- 1, CHG – 4, CHG – 8 and CHG – 9. [Para 6(ix)(f)] This scheme is understandably not applicable to foreign companies. Hence it is not applicable to Form FC – 3 and Form FC-4 etc.
We all know, an additional fee is just a procedural fee for filing a form late. The payment of additional fee make does not grant any immunity from prosecution in the normal course. The present scheme proposes to grant immunity from prosecution which may arise out of the late filing of any form which may be for filing of documents, statements, returns and reports etc.
“The immunity from the launch of the prosecution or proceedings for imposing a penalty shall be provided to the extent such prosecution or proceedings for imposing a penalty under the Act pertains to any delay associated with the filing of belated documents.” [Para 6(iv)]
No other prosecution or proceeding or proceedings will be covered under the scheme.
- Late AGM with late filing – immunity only for filing;
- Utilization of money without filing Return of Allotment – immunity only for filing;
The Circular made it clear that no consequential proceedings involving the interest of any shareholder or any other person qua the company or its directors or key managerial personnel would be covered under immunity granted under this Scheme.
Process for Application for Issue of Immunity
First step: All companies shall file belated documents means pending forms. Immunity shall be granted only for the forms filed under the scheme.
Second Step: Such Forms shall be taken into the record or approved by the designated authority which means the Registrar of Companies.
Third Step: File Form CFSS-2020 electronically. There shall not be any fee payable on the Form CFSS-2020.
The Form CFSS shall be filed within 6 months of from the date of the closure of the scheme. The date of filing of Form CFSS is not related to the date of filing the belated form filed under the scheme. [Para 6(vii)]
Please ensure that all your belated form was filed well on time and be taken into the record or approved by the Registrar of Companies before filing Form CFSS.
No Immunity in Following Cases:
- In the matter of any appeal pending before the court of law; (we understand the use of “and” here is a mistake)
- case of management disputes of the company;
- any court has ordered conviction and no appeal has been preferred; or
- the Adjudicating Authority has ordered and no appeal has been preferred. [Para 6(vii)]
Order of Immunity
Immunity certificate shall be issued by the Designated Authority – Registrar of Companies. [Para 6(viii)]
Effect of Immunity
After granting the immunity:
- The Designated Authority shall withdraw all pending proceedings under matter covered in the immunity.
- The proceedings of adjudication of penalties under section 454 of the Act shall be deemed to have been completed without any further action on the part of the Designated Authority. [Para 6(x)]
Withdrawal of Appeals
In case of any pending appeal against
- any notice issued or
- complaint filed or
- an order passed by a court or
- an order passed by an adjudicating authority
in respect of which application is going to be made under this scheme, the applicant shall withdraw the appeal before the application. The applicant shall furnish proof of such withdrawal along with the application under the scheme. [Para 6(v)]
Special cases pending for filing appeal
In case of matter pending appeal, where the last date for filing an appeal against the order of the adjudicating authority falls between 1st March 2020 till 31st May 2020, an additional period of 120 additional days shall be allowed for filing the appeal before the concerned Regional Directors.
During such additional period, no prosecution shall be launched for non- compliance of the order of the adjudicating authority against such companies and their officers.
The period of this additional 120 days shall start from the due date of filing the appeal, not from 31st May 2020. This period, in any case, shall expire on 28th September 2020. Companies with a pending appeal shall firstly file an appeal against such order. These companies may before or after filing the appeal shall file relevant belated forms. These companies shall before filing an application for immunity shall withdraw such appeal as we discussed earlier here. Technically, this additional period of appeal is given to the companies to provide moratorium to the adjudicating authorities to launch prosecution under Section 454(8) for non- compliance of the order of adjudicating authority. [Para 6(vi)]
- Companies already strike-off need to get NCLT order to restore itself otherwise it is not a company under the Act;
- Companies against which final notice for strike-off has been initiated;
- Companies which filed an application for strike off;
- Amalgamated companies;
- Companies filed for dormant status; and
- Vanishing companies. [Para 6(ix)]
Scheme for Inactive Companies
The scheme provides for getting inactive companies declared as dormant companies under Section 455. This provision of the scheme shall protect these inactive companies from unwarranted strike off. Once these inactive companies file apply for dormant companies status, these companies shall remain on the register of the companies with minimal compliance requirement as mentioned under Section 455.
These defaulting companies may apply for dormant company status by filing Form MSC-1 with a normal fee.
Alternatively, these defaulting companies may apply for strike-off the name from the Register of Companies by filing Form STK-2 its normal fee.
The Prosecution thereafter
The designated authority shall take necessary action against defaulting companies not availing this scheme and not filing required forms in a timely manner. Such prosecution shall start from 1st October 2020.
Enjoy prosecution moratorium till then.
Aishwarya Mohan Gahrana
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