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What is company fresh start scheme

There’s no better time for the defaulting companies than this. The Ministry of Corporate Affairs decided to give all the defaulting companies another chance to improve their filing-related defaults irrespective of the duration.

Further, as per the notification on MCA website, relief is also being given to DIN holders whose DINs were deactivated due to non-filing of DIR-KYC, they can now re-activate the DIN by filing DIR-KYC without paying the late fees of Rs 5000. Also the companies which are marked as “Active non-compliant” due to non-filing of ACTIVE e-form can file the form without paying the late fees of Rs 10,000.

Now let’s see what’s the scheme about and what it has to offer

Companies fresh start scheme

This scheme was introduced vide General Circular No. 12/2020 dated 30/03/2020.

●     About the scheme

The ‘Companies Fresh Start Scheme-2020’ has been introduced by the government for allowing the defaulting companies by enabling them to file the belated documents condoning the delay in filing of documents with the Registrar of Companies. There would be no additional fees during the scheme period and companies would only be required to pay the normal fees, which is sure a big opportunity & advantage.

●     Applicability

The scheme will be applicable from 1st April 2020 and will end on 30 September 2020 for all the defaulting companies to file their belated forms and returns which were due on any previous date.

●     Definitions under the Act

a.    Designated authority: it implies to the Registrar of Companies having jurisdiction over the registered office of the company.

b.    Defaulting company: Under Companies Act, a defaulting company is defined as a company that has defaulted in filing any document, statement or return including annual statutory documents on the MCA-21 Registry.

c.    Inactive company: it implies to a company which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years;

●     Cases where the scheme is not applicable

a.    To the companies, action against whom has already been taken to strike off their name from the companies register as per section 238 of the Act.

b.    Where the application is filed to strike off the companies name from the Register of Companies.

c.    To the companies who have amalgamated

d.    Where the application has already been filed by the company to change its status to that of a dormant company.

e.    To vanishing companies

f.      Where there is an increase in authorized share capital ( Form SH-7 and charge related forms (Form CHG-1, CHG-4, CHG-8 or CHG-9))

●     Payment of fees by the company

The fees for filing for this scheme are normal. No additional fees are charged by the companies to fill belated forms for a period of 6 months.

●     Application in respect of documents filed

If the defaulting company has filed an appeal against the order passed by the court or adjudicating authority, then they must file an application for the issue of an immunity certificate, then withdraw the appeal and furnish the proof of withdrawal.

The immunity certificate shall not be provided in the following cases:

a.    if any appeal is pending before the court of law and in case of management disputes of the company pending before any court of law or tribunal.

b.    In case any court has ordered conviction in any matter or an order imposing any penalty has been passed by an adjudicating authority under the act and no appeal has been preferred against such orders.

●     Scheme for inactive companies

The defaulting inactive companies filing their return under CFSS-2020 can either:

a.    Apply to get themselves the status of Dormant Companies under Section 455 of the Act.

b.    Apply for striking off the name of the company from the Companies Register by filing e-form STK-2.

●     Conclusion

On the conclusion of this Scheme, the Designated Authority might take necessary action under the Act against the companies and Directors who still do not come up & sanitize the defaults made by them. 

Disclaimer: The above post is only for the purpose of academic discussion and should not be construed as any legal opinion in any matter whatsoever.Disclaimer: The above post is only for the purpose of academic discussion and should not be construed as any legal opinion in any matter whatsoever.

Disclaimer: The above post is only for the purpose of academic discussion and should not be construed as any legal opinion in any matter whatsoever.

The author is a CA in practice at Delhi and can be contacted at: E-mail: abhinandansethia90@gmail.com

 

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