India: Introduction of Companies Fresh Start Scheme, 2020 (CFSS)

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published on 2 April 2020 | reading time approx. 2 minutes

  

In pursuance of the Government of India’s efforts to provide relief to law abiding companies and Limited Liability Partnerships (LLPs) in the wake of Covid-19, the Ministry of Corporate Affairs has vide General Circular 12/2020 dated 30th March, 2020 has rolled out a Companies Fresh Start Scheme, 2020 (CFSS). It is a onetime opportunity so as to enable the companies and LLPs to complete their pending compliances by making statutory annual and other filings required to be made under the various provisions of Companies Act, 2013 without any additional fees.

  

  
 

USP of CFSS?

  1. Onetime opportunity so as to enable the companies and LLPs to complete their pending compliances by making statutory annual and other filings required to be made under the various provisions of Companies Act, 2013 (“the Act”) without any additional fees.
     
    For instance:
    Annual filing forms (Form AOC-4, MGT-7), Allotment Returns (Form PAS-3, PAS-4), Directors’ related (Form DIR-12, DIR-3KYC), Registered office related (Form INC-22, INC-22 ACTIVE) etc.
  2. Only normal fee shall be payable.
  3. Grant of IMMUNITY from penal proceedings, including against imposition of penalties for late submissions. (Form CFSS-2020)
  4. Intent to significantly reduce the related financial burden on the companies and LLPs giving them an opportunity to make a “fresh start”.
  5. Additional time period of 120 days is given for filing appeals before the concerned Regional Directors against the order of Adjudicating Authority, in case the last date of appeal falls between 1st March 2020 to 31st May 2020.
  6. The Inactive Company can also convert itself into a Dormant Company. 
  7. The defaulting Inactive Companies may apply for Strike-off from the Register of Companies maintained by Registrar of Companies (“ROC").

 

Enforceability time frame?

1 April 2020 until 30 September 2020.

 

How IMMUNITY helps?

After granting immunity

  • The pending prosecution proceeding shall be withdrawn by the Authorities, if any.
  • Defaults against which immunity has been granted shall be deemed to have completed without any further action by the Authorities.

 

What’s the catch?

The immunity is only against delayed filings and npt against any substantive violation of law.

 
Illustration:  As per section 42(8) of the Act, every company is required to file a return of allotment within the period of 30 days. It also requires that money raised through private placement cannot be utilised unless the return of allotment is not filed with the ROC. Now, under CFSS, immunity shall only be available in respect of proceedings for delay in filing of return of allotment. But NOT for utilising money raised before filing the return of allotment.

 

Any further conditions to avail immunity?

Withdrawal of appeal and furnish proof of the same before filing Form CFSS-2020, as may be filed by the Company/ officer in default against any notice issued or complaint filed or an order passed by the court or competent authority for violation of the provisions of the Act and Companies Act, 1956 in respect of which application is made under CFSS.

 

Who CANNOT avail CFSS?

  • The Company that has already applied for its strike-off to ROC
  • The Company to which the final notice for strike off has already been issued
  • The Companies that have amalgamated under a scheme of arrangement and compromise
  • The Company which has already filed for obtaining Dormant Status
  • A Vanishing Company
  • Where any increase in authorized capital is involved (Form SH-7)
  • Where any charge related filing is involved (Form CHG – 1/4/8/9)

 

What if CFSS is missed?

At the conclusion of CFSS, the concerned ROC shall take necessary action against the Companies/LLPs who have not opted for this scheme and are in non- compliance under the provisions of the Act.

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