Companies Fresh Start Scheme (CFSS) 2020 :- A New Chance for Fresh Start

Introduction:

As we know that not only India but the whole world is struggling to fight against the COVID-19 pandemic. We have seen that the government of India is supporting business houses and companies by way of extending deadlines of various statutory requirements and deferment of various dues.

During this fight against COVID-19, Ministry of Corporate Affairs has recently come out with a scheme namely ‘’Fresh Start’’ or ‘’Companies Fresh Start Scheme, 2020 (CFSS 2020)’’ under which No additional fees shall be charged from the companies during the period starting from 1st April 2020 till 30th September 2020 in respect of any documents, return or statement that is required to be filed with MCA-21 registry. So, in this article, we will discuss in detail exactly what ease has been provided by the Ministry of corporate affairs by this circular.

CFSS-2020:

Why it is said as a Fresh Start:

It is the opportunity provided by the Ministry of Corporate Affairs to the defaulting companies and provided them a one time opportunity to make their defaults good without payment of any additional fees or penalties during this moratorium period starting 1st April 2020 till 30th September 2020. Companies need to pay only nominal fees which will not only reduce their financial burden but also give them a chance to make all their default clean in the next 6 months period by getting immunity from all actions for their defaults.

Important Definitions in the Circular applicable for this Scheme:

• Defaulting Company means a company defined under The Companies Act, 2013, and which has made a default in filing of any of the documents, statements, returns, etc including annual statutory documents on the MCA – 21 registries.
• Designated Authority means the registrar of companies having jurisdiction over the registered office of the company.
• Inactive Company means the company which is not carrying on any business or operation or has not made any significant accounting transaction during the last two financial years or the company who has not filed its financial statements and annual returns for the last two financial years.

Non Applicability of Fresh Scheme in Certain cases:

In Circular 12/2020, there are certain cases mentioned on which the Fresh Scheme is not applicable or the companies falling under that criteria are not allowed to take advantage of this scheme. Following are the cases:

1. To the companies against whom action has already been taken by the designated authority to strike off their name from the register of companies under section 248 of The companies Act, 2013.
2. Where the company itself has already made an application to strike off their names from the register of companies.
3. Where the companies have been amalgamated under the scheme of compromise or arrangement under the Act.
4. Where the company has already before this scheme filed for obtaining status of Dormant company under section 455 of the Act.
5. To Vanishing companies.
6. Where there is default regarding increase in authorized capital ( Form SH-7) or there is default regarding charge related documents ( CHG- 1, CHG- 4 , CHG- 8 and CHG- 9 ).

Provision of Immunity under the Scheme:

Immunity from the launch of prosecution or proceedings shall be provided to the defaulting companies only to the extent the default is relating to the delay in submission of any document or return. If there is any proceedings for default on any other matter like: Proceedings in case of complaint by shareholder, etc then no immunity shall be provided for such matters as it is not the case which is related to default due to delay in submission of any return or document with MCA.

Application for issue of Immunity:

The application for seeking the immunity by the government in relation to belated documents needs to be filed electronically in the Form CFSS-2020. No fees shall be charged for filing application of immunity with the government.

This application can be filed by the company after closure of the scheme and after the documents for which immunity is being asked are filed by the company or taken on record or approved by the designated authority as the case may be. It may be noted that under any circumstances, The application for seeking immunity can’t be filed after expiry of 6 months from the closure of the scheme.

Circumstances where Immunity shall not be provided:

In the following circumstances, No company can enjoy the benefit of immunity if they fall under any of the three mentioned cases

• In cases where the matter is already pending before the court of Law.
• In cases where the management disputes of the company are pending before the court of law.
• Also, No immunity shall be provided in case order for conviction or penalty has been passed by adjudicating authority or by court under the Act and no appeal against such order has been preferred against such order of court or adjudicating authority as the case may be, before this scheme has come into force i.e. 1st April, 2020.

 Order granting Immunity:

After the Form- CFSS 2020 has been filed by the company online, an immunity certificate shall be issued by the designated authority under this scheme after the authority is satisfied with the claim and declaration made in the Form: CFSS-2020.

Consequences of getting Immunity under the Scheme:

When the Immunity has been granted to the company under the scheme, the concerned Designated authority shall withdraw all the prosecutions pending before the concerned authorities. But the proceedings that shall need to be withdrawn should be those relating to the default for submission of the documents or statements and not for any other default for which immunity is not allowed under the scheme. So, accordingly immunity shall be provided from the designated authority without any further action pending on their part. 

Special Provision for Inactive Companies under the Scheme:

This fresh start scheme also provides major benefit to defaulter inactive companies. Every Defaulting inactive company can along with filing of documents under this scheme, can also apply for any of the following two options as per their choice:

• Apply to get themselves declared as Dormant Company under section 455 of the Act. This option can be availed by filing the Form  MSC-1 electronically by depositing a nominal as prescribed for this form, or
• Apply for striking off their names from the register of companies. This option can be availed by electronically filing the Form SKT-2 along with deposit of nominal fees prescribed for this form.

Conclusion:

After discussing each and every aspect of the Fresh Start Scheme opportunity provided by the government, we can conclude that it is the golden opportunity for all the defaulting companies to not only make their default goods by submit documents and getting immunity from any prosecution but also they are getting the opportunity to get this opportunity without any additional fees or penalty.

And after all this, those who have not availed the benefit of the scheme latest by 30th September, 2020, the designated authority shall take action against those defaulting companies under the act for the defaults of non submission by them.