Companies Fresh Start Scheme, 2020

Government of India has been making tremendous efforts in clearing backlogs/disputes/appeals under direct and indirect taxes which has resulted in the launched settlement schemes under Direct Tax (Vivaad Se Vishwas Scheme) & Indirect tax (Sabka Vishwas Scheme). On the similar lines, MCA i.e Ministry has come up with the scheme called Companies Fresh Start Scheme 2020 (also called CFSS -2020) vide its General Circular No. 12/2020 for one-time application of condonation of delay of filing the various forms, documents and returns.

Details of the Scheme

CFSS-2020 will be effective from 1st April 2020 and will end on 30th September 2020 which means the companies have been given a period of 6 months approximately to be compliant once again without paying any additional fee for being late in filing the necessary documents, returns and forms. In a nutshell, defaulting companies shall be required to pay only normal fees as per Registration offices and Fees Rules 2014 and no additional fee will be payable of the documents, forms and returns.

In addition, this scheme gives an opportunity to inactive companies to get their companies declared as “dormant company” under section 455 of the Companies Act 2013 by filing e-form MSC-1 at a normal fee or apply for striking off the name of the company by filing e-form STK -2 at the prescribed fee.

The application for seeking immunity in respect of belated documents can be made electronically by filing form CFSS-2020 (this form can be filed without any fee) after the closure of the scheme (but not after the 6 months from the closure of the scheme) and after the documents, forms and returns are taken on file or on record or approved by the Designated Authority (Registrar of Companies).

Impact of filing CFSS-2020 will be that the designated authority shall withdraw the prosecutions before any courts and proceedings pending before adjudicating authority in respect of which the immunity has been granted by the designated authority(Registrar of Companies).

Objectives:

• To enable companies to correct any filing-related defaults and make a fresh start as a fully compliant entity.
• To provide a similar facility to Limited Liability Partnerships (LLPs), the MCA has also revised the ‘LLP Settlement Scheme, 2020.
• The Fresh Start scheme and modified LLP Settlement Scheme will reduce compliance burden during the public health situation caused by COVID-19.
• Both the schemes are a one-time waiver of additional filing fees for delayed filings by the companies or LLPs during the period starting from April 1 and ending on September 30.

Significance:

• The Schemes would significantly reduce the related financial burden especially for those with long-standing defaults thus giving them an opportunity to make a “fresh start”.
• Both the Schemes also contain a provision for giving immunity from penal proceedings, including against imposition of penalties for late submissions.
• It also provides additional time for filing appeals before the concerned Regional Directors against the imposition of penalties, if already imposed.
• The immunity is only against delayed filings in MCA 21 and not against any substantive violation of law.

What is a LLP?

• A Limited Liability Partnership (LLP) is a partnership in which some or all partners have limited liability. It therefore exhibits elements of partnerships and corporations.
• In an LLP, one partner is not responsible or liable for another partner’s misconduct or negligence.
• An LLP is a body corporate and legal entity separate from its partners. It has perpetual succession.
Being the separate legislation (i.e. LLP Act, 2008), the provisions of Indian Partnership Act, 1932 are not applicable to an LLP and it is regulated by the contractual agreement between the partners.

For more information Contact us