Companies Fresh Start Scheme, 2020: Immunity against prosecution & proceedings for imposing penalty
Analysis of Companies Fresh Start Scheme, 2020, Immunity scheme 2020 for Non Compliant Companies
Companies registered under Companies Act, 2013 or earlier Act are bound to comply with Act and various rules made there under. Every company requires to file annual return and financial statement every year. Apart from annual statutory compliances every company required to file other statements, documents, return etc to registrar within prescribed time limits. Non compliance of annual returns and other event based information can attract penalties, fines and disqualification of directors, Recently Ministry disqualified huge number of directors for non filing of Annual returns and financial statement. Late filing of such forms attract huge penalties and also attracts prosecutions and proceedings under Companies Act, 2013.
In order to increase compliance and governance, ministry give an opportunity to defaulting companies to file their belated documnets with ROC by introducing an immunity scheme namely "Companies Fresh Start Scheme, 2020 (CFSS 2020)". Companies will not require to pay additional fee for delayed period. CFSS 2020 provides compliance route to both active and inactive companies.
Key features of Companies Fresh Start Scheme, 2020 (CFSS 2020)
Scheme Duration: 01st April, 2020 to 30st September, 2020
Defaulting Company: Any company which has made a default in filing of documents, returns and statements (Including Annual filing)
Applicability: Any defaulting company can file their belated documents between 01st April, 2020 to 30st September, 2020 under this scheme without any additional fee. some of forms covered under Companies Fresh Start Scheme, 2020 (CFSS 2020) are:
MGT-7 (Annual Return),
AOC-4 ( Financial Statements),
ADT-1 (Appointment of Auditor),
DIR-12 (Appointment, change in designation, resignation of Directors and KMPs),
MGT-14 (Filing of Resolution and agreements),
INC-20A (Declaration of commencement of business,
PAS-3 (Return of Allotment),
INC-22A (Active)
Benefit in Scheme/Manner of Payment of Fee: Defaulting companies may file their belated documents with normal fee as prescribed under Company (Registration office and fee) Rules, 2014, No additional fee shall be applicable
Nature of Immunity: Immunity under this scheme shall be provided only to the extent such prosecution or proceedings for imposing penalty under the act pertain to any delay associated with the filing of belated documents. Any other consequential proceedings, including any proceedings involving interests of any shareholder or any other person qua the company or its director or key managerial personnel would not be covered by such immunity. For example under section 42(8) every company is required to file a return of allotment within the period provided there in however the proviso to section 42(4) also requires that the utilisation of money through private placement shall not be made unless the return of allotment has been filed in the registry. Now the immunity under the scheme only be available in respect of the proceedings for imposing penalty on account of delay in filing the return of allotment, but not on account of utilisation of the money raised through private placement prior to the filing of the return of allotment with the registrar.
What if you have filed an appeal against any prosecution or proceeding for imposing penalties initiated by authorities?: If any prosecution or proceeding for imposing penalties initiated by authorities before this scheme against defaulting company and defaulting company has filed an appeal against search notice before a competent court or authority. In respect of such cases the applicant shall withdrawal the appeal and furnish proof of such withdrawal along with the application filing for issue of immunity certificate.
Application for issue of Immunity Certificate : The application for seeking immunity certificate may be made electronically in the Form CFSS-2020. There shall not be any fee payable on this form.
Provided that this immunity shall not be applicable in the matter of 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. No immunity shall be provided in case any court has ordered conviction in any matter, or an order imposing penalty has bee passed by adjudicating authority under the act, and no appeal has been preferred againest such orders, before this scheme has come into force.
When to file form CFSS-2020 (Application for Immunity)?: Form CFSS-2020 may be filed after closure of the scheme, and after the filed documents taken on record or approved by concerned authority, but before the expiry of six month from the date of closure of the scheme.
Grant of Immunity under CFSS-2020 : Based on the declaration made in the form CFSS-2020, an immunity certificate in respect of documents filed under this scheme shall be issued.
Effect of Immunity: After granting the immunity, the designated authority shall withdraw the prosecution pending, if any, before the concerned court and the proceedings of adjudication of penalties under section 454 of the act, in respect of defaults againest which immunity has been granted shall be deemed to have been completed without any further action on the part of authority.
Companies Fresh Start Scheme, 2020 (CFSS 2020) not to apply on certain cases: This scheme shall not cover following cases
To companies against which action for final notice for striking off the name u/s 248 has already been initiated,
Where companies already filed an application for striking of the name of the company from the register of companies,
Where companies have amalgamated under a scheme of arangement or compromise under the Act,
Where companies already filed an application for obtaining Dormant Status under section 455 of the act before this scheme,
To vanishing companies,
Where any increase in authorised capital is involved (Form SH-7),
Where any charge related documents involved (CHG-1, CHG-4, CHG-8 and CHG-9).
Companies Fresh Start Scheme, 2020 (CFSS 2020) for Inactive Companies: The defaulting inactive companies have two option under this scheme:
They can apply to get themselves declared as dormant company under section 455 by filing e-form MSC-1at a normal fee, or
They can apply for stricking off the name of the company by filing e-form STK-2 by paying the prescribed fee.
What if defaulting company not file their belated documents under this scheme?
After the conclusion of the scheme, the Designated authority shall take necessary action against the companies who have not availed the CFSS 2020 (Companies Fresh Start Scheme, 2020) and are in default in filing these documents in a timely manner.
With this scheme government providing huge relief to defaulting companies and also giving a chance to become compliant and avoid prosecution under the provisions of Companies Act in timely manner. Lawfox provide a complete compliance solution for your Company ROC Filing our services include annual and event based ROC compliances, Income tax compliance and GST compliance. Contact us on Lawfoxin@gmail.com or 08949540261 for filing of your belated ROC Forms, returns and documents.
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