All about the Companies Fresh Start Scheme, 2020 (CFSS-2020)

With the start of a new financial year and in the wake of COVID 19, the Ministry of Corporate Affairs, has introduced the “Companies Fresh Start Scheme, 2020” and revised the “LLP Settlement Scheme, 2020” to provide a first of its kind opportunity to both companies and LLPs to make good any filing related defaults, irrespective of duration of default.

Click here to read on LLP Settlement Scheme 2020.

As the name suggests, the Companies Fresh Start Scheme, 2020 (CFSS-2020) gives companies a one-time opportunity to make a fresh start as a fully compliant entity.

Read on.

#1 – What is CFSS-2020?

Under this scheme, a ‘defaulting company’ can file belated forms with MCA-21.

‘Defaulting company’ means a company which has made default in filing of any forms, documents, statements, returns etc., including annual statutory documents on MCA-21 under the Companies Act, 1956 or the Companies Act, 2013 and the rules thereon.

#2 – What is the fee payable for filing the belated forms?

Such defaulting company can file forms by paying normal fee as prescribed under the Companies (Registration Offices and Fees) Rules, 2014 for the form. This means that no additional fee or penalty needs to be paid for the default in filing forms.

#3 – What is the validity of the scheme?

The scheme is valid from April 1, 2020 to September 30, 2020.

#4 – Which forms can be filed under the scheme?

Any company intending to file forms under this scheme, needs to have “Active” status before filing the belated forms under the scheme.

The companies who have been marked “ACTIVE non-compliant” due to non-filing of ACTIVE eform INC-22A have the opportunity to become ‘ACTIVE compliant’ by filing the form under this scheme without paying fee of Rs. 10,000/-.

Similarly, DIN holders of DINs marked as ‘Deactivated’ due to non-filing of DIR-3 KYC / DIR-3 KYC-Web can re-active their DINs by filing forms without paying fee of Rs. 5,000/-

Approximately 64 forms under the Companies Act, 1956 and Companies Act, 2013 are covered under the scheme. Click here to know the list of forms.

The companies cannot file belated form SH-7 in case of increase in authorised capital and forms CHG-1, CHG-4, CHG-8 and CHG-9 (charge related forms) under this scheme.

#5 – To which companies does this scheme not apply?

1. Companies against which action for final notice for striking off of the name has been initiated by the Registrar of Companies (RoC)
2. Companies against which action from RoC has been taken for strike off the name of the company
3. Companies which have amalgamated under a scheme of arrangement or compromise under the Companies Act, 2013
4. Companies who have filed application for dormant status
5. Vanishing companies
6. Companies where appeal is pending before the court for management disputes

#6 – Are there any advantages to inactive companies?

Yes, the companies which are inactive have the following options:

1. File pending forms under the scheme and become active, including change of status to Active.
2. File pending forms and make an application for strike off of name of the company.
3. File pending forms and make an application for dormant status.

#7 – What happens to the companies against which there is prosecution or proceeding for not filing the forms within the due date?

Once the belated forms are filed, such companies can get immunity from launch of or from pending prosecution or proceeding for imposing penalty by the authorities for not filing or delay in filing the forms.

However, such companies will not get any immunity for compliance associated with such filing of forms involving interest of shareholders.

In other words immunity is only against delayed filings in MCA-21 and for imposing penalty and not against any substantive violation of law.

E.g. If annual return and balance sheet are not file for previous years, the scheme will give immunity only with respect to penalty for filing these belated documents. However if the Annual General Meeting is not held within the prescribed time, it is non-compliance of the provisions of the Companies Act and hence prosecution or adjudication may be initiated against the company for the same.

#8 – How can a company apply for such immunity?

The company has to file Form CFSS-2020 after the closure of the scheme and after the belated forms filed have been taken on record of approved by the RoC. However, the form CFSS-2020 should be filed within 6 months from the closure of the scheme. Immunity will be given only against those forms which are filed under the scheme.

There will be no filing fee for Form CFSS-2020.

Based on the declaration made in Form CFSS-2020, an immunity certificate will be issued by the RoC and the prosecutions or proceedings shall be deemed to be completed without any further action by the RoC.

#9 – What happens to the defaulting companies not availing the scheme?

After the closure of the scheme the RoC will take necessary action under the companies which have not availed this scheme and are in default in filing of forms.

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This scheme provides one-time relaxation to companies for filing pending forms with the RoC without payment of additional fees.

So, use this opportunity to make your company fully compliant. File the pending forms and documents to avoid any prosecution by the Registrar.

If you need assistance in filing forms, you can write to me at kruti@cskruti.com