COVID-19: MCA introduces ‘Companies Fresh Start Scheme 2020 and revised LLP Settlement Scheme, 2020
The Ministry of Corporate Affairs has introduced the “Companies Fresh Start Scheme, 2020” and revised the existing “LLP Settlement Scheme, 2020” which was originally notified on 04.03.2020. The schemes were launched with the objective to provide a first of its kind opportunity to both Companies and LLPs to regularise the filings and clear out all the defaults irrespective of duration of default, and make a fresh start as a law abiding entity.
The Fresh Start scheme and modified LLP Settlement reduces compliance burden during the unprecedented public health situation caused by COVID-19. The prime focus of both the schemes is a one-time waiver of additional filing fees for all the delayed filings by the companies or LLPs with the Registrar of Companies during the tenure of the Schemes
Analysis of the CFSS Scheme
In order to consider the request and representation of various stake holder, the Government has come up with a new scheme called as COMPANIES FRESH START SCHEME, 2020 (CFSS-2020) for initial period of 6 months i.e. 01.04.2020 till 30.09.2020 vide its General Circular No.12/2020 on the 30th day of March, 2020. This is opportunity to all defaulted companies to file the all belated documents as fresh started documents without any additional fees.
Applicability of the Scheme: This Scheme shall be available to all the Defaulting Companies
Tenure of the Scheme: The tenure of the scheme starts from 01.04.2020 and end on 30.09.2020.
Benefits of the Scheme: The following benefits shall be available to every Eligible Company participating under the Scheme:
- Exemption from payment of any additional fees;
- Immunity from prosecution to the extent of default connected with non- filing of form; and
- Immunity from proceedings related to adjudication of penalty under Section 454.
Forms Included: The scheme permits to file all belated documents which were due for filing without any Additional Fees except two documents and out of which, some permitted documents are as follows:
- Form MGT 7 (Annual Return)
- Form AOC 4 (Financial Statements)
- Form ADT-1 (Appointment of Auditor)
- Form INC-22A (Active Company Tagging Identities and Verification
- Form INC-20A (Declaration for commencement of business)
- Form PAS-3 (Return of Allotment)
- Form DIR-12 (Particulars of appointment of Directors and KMP and the changes among them)
- Form MGT-14 (Filing of Resolutions and agreements to the Registrar) Forms Excluded : The following forms, however cannot be filed
- Form SH 7 (Increase of Authorised Share Capital)
- Form CHG-1, CHG-4, CHG-8 and CHG-9 (Charge related documents) Non Applicability of the Scheme: The scheme is not applicable for the following class of Companies;
- Vanishing Companies.
- Amalgamated Companies
- Companies filed STK 2 for strike off
- Companies against which action for final notice for striking off the name u/s 248 of the act have already been initiated.
- Companies filed application for obtaining Dormant Status.
- Companies whose appeals if any pending before the Court of law.
- Company having management disputes and pending before any Court of law or Tribunal.
- Companies which are convicted by any Court in any matter and no appeal has been preferred against such orders of the Court before this Scheme has come into force.
- Companies upon which an order passed for imposing penalty by an adjudicating authority under the Act, and no appeal has been preferred against such orders of the Adjudicating Authority before this Scheme has come into force.
Scheme for inactive Companies: Companies can simultaneously apply:
- File an application for obtaining the status of dormant company by filing form MSC 1 with normal fees; or
- File an application for striking -off their names under Section 248 of the Act in form STK 2
The Defaulting Companies shall file the Form CFSB-2020 (entirely self- declaration-based form) after making all default good and after closure of the Scheme but not after the expiry of six months from the date of closure of the Scheme. There are no filing fees of Form CFSB-2020. After submission of Form CFSB-2020 the ROC will issue Immunity Certificate.
Analysis of the LLP Settlement Scheme
The Ministry of Corporate Affairs (MCA) has launched an amnesty scheme for condonation of delays in filings of documents by limited liability partnership (LLPs) firms. The scheme, LLP Settlement Scheme, 2020, was originally notified as on 04.03.2020 which is modified in pursuance of the Government of India’s efforts to provide relief to LLP’s in the wake of COVID 19 on 30.03.2020.
The LLP’s which make good of their default under the said scheme shall not be subjected to prosecution by the registrar of Companies for such defaults.
The LLPs which has not filed their documents within due date with the MCA, can take advantage of the LLP settlement Scheme.
Applicability of the Scheme: This Scheme shall be applicable on all the Defaulting LLP’sfor filing belated documents due till 31st August 2020
Tenure of the Scheme: The tenure of the scheme starts from 01.04.2020 and ending on 30.09.2020.
Benefits of the Scheme: The following benefits shall be available to every Eligible LLP participating under the Scheme:
- Exemption from payment of any additional fees;
- Immunity from prosecution to the extent of default connected with non- filing of form
Forms Included: The scheme permits to file all belated documents and forms which required to be filed with MCA 21 registry under LLP Act and Rules made there under.
Non Applicability of the Scheme: LLP which have voluntary filed application for Striking off the name