Companies Fresh Start Scheme, 2020 (CFSS-2020)

The Ministry of Corporate Affairs (MCA), has introduced the “Companies Fresh Start Scheme, 2020 (CFSS-2020)” to provide an opportunity to Companies to make good any filing related defaults and make a fresh start as a fully compliant entity.

COMPANIES FRESH START SCHEME, 2020 (CFSS-2020):

The salient features of the scheme are as follows:

• Applicability

This Scheme shall be applicable to the Companies to the extent they have made a default in filing of any of the documents/ returns/ e-forms, etc. within the prescribed time period with the Registrar of Companies (RoC) under the Companies Act, 1956 or 2013.

• Effective Period

The scheme shall be in force from 1^st April 2020 to 30^th September 2020.

• Procedure for availing the CFSS Scheme –

Filing of pending documents – The Companies shall file all the pending documents/ returns/ e-forms, etc. during the aforementioned effective period at normal filing fees without payment of any additional fee.

Immunity Certificate–After filing all the pending documents as mentioned above, the Companies may seek Immunity Certificate in respect of the filings made under the scheme in Form CFSS-2020after closure of the scheme but within 6 months from the date of closure of the scheme. There is no fee for filing Form CFSS-2020. 

• Withdrawal of appeal before making application under the scheme–

If any appeal is made by the Companies or its officer in the matter of violation, in respect of which the application is made, the applicant shall withdraw the appeal and furnish proof of such withdrawal along with the application.

• Benefit of Immunity Certificate–

It gives immunity from all the penal proceedings to the extent it relates to delay in filings but not for the other non-compliances under the Companies Act.

Example: Under the Companies Act, 2013, every Company is required to file a Return of Allotment for allotment of securities within a specified time period. Further, the Company shall not utilize the securities application money raised through the issue (under private placement) unless return of allotment is filed. Therefore, immunity under CFSS is only provided against delay in filing of return and not for utilization of money prior to its filing.

• Effect of Immunity – Withdrawal of Prosecutions against the Companies –

After granting immunity certificate, the concerned RoC shall withdraw all the prosecutions/ proceeding pending against the Company in respect of defaults against which immunity has been granted.

• Scheme for Inactive Companies –

An inactive Company means, a Company which has not been carrying on any business operations or has not made any significant accounting transaction during the last 2 (two) financial years or has not filed any financial statements and Annual Returns during the last 2 (two) financial years. Those Companies, while filing all the pending documents under the scheme can simultaneously apply for either of the two options:

Dormant Companies–They may file an application at a normal fee under the Companies Act, 2013 for seeking the status of “Dormant Company” which will enables them to remain on the records of Register of Companies with minimal compliance requirements.

Strike-off – They may file an application at a normal fee under the Companies Act, 2013 for striking their name from the Register of Companies.

• Special measures under the scheme

Extension for filing an appeal – In case of the Companies where the adjudicating authority has already imposed a penalty (in matter relating to delay in filing) and the last date of making an appeal falls between the period commencing from 1^st March 2020 to 31^st May 2020 (inclusive of both the days), the scheme provides additional time of 120 days (from the last date on which an appeal must have been filed) to file appeal before the concerned Regional Directors (RDs) against such imposition of penalties.

• Non-Applicability of the scheme

The scheme is not applicable to the following –

1. Companies against which final notice for striking off the name has already been initiated;
2. Companies which have already filed an application for striking its name;
3. Companies which have amalgamated under the scheme of arrangement or compromise;
4. Companies which have already filed an application for obtaining Dormant status;
5. Vanishing Companies, i.e., the Companies which have failed to file the Returns with the Registrar of Companies (RoC) for two financial years and has not maintained its registered office at the address notified with the RoC and none of its Directors are traceable.
6. Where any increase in Authorized Capital or charge related documents are involved.

Immunity cannot be availed under the following cases –

1. In the matter of management dispute or any appeal pending before any court or Tribunal.
2. If the penalty has been imposed by any adjudicating authority and no appeal is made against it, before the scheme has come into force.
3. The immunity is granted only to the extent of filing the pending documents under the scheme and do not cover/extend other provisions/departments of law.

Conclusion: Necessary action shall be taken by the Authority against the Companies which have not availed this scheme and are in default in filing documents in timely manner.

Links for the notification:

http://www.mca.gov.in/Ministry/pdf/Circular12_30032020.pdf