All you need to know about Companies Fresh Start Scheme (CFSS), 2020

This year, the world has come to a stand still due to the ongoing situation of Coronavirus (COVID-19) pandemic which is causing a vast amount of destruction on public health and safety. Keeping in view of this, the Ministry of Corporate Affairs (MCA) has tried to ease matters for companies and introduced a scheme which is known as Companies Fresh Start Scheme, 2020 (CFSS). This scheme provides opportunities to defaulted companies who were unable to file important documents like Annual Filling to ROC, to make a fresh start. MCA has provided them extended time and financial relief considering the global situation because of COVID-19.

What is the purpose of Companies Fresh Start Scheme 2020?

In the last two years, MCA has taken a lot of strict measures starting from striking off large number of companies to disqualifying the directors of such companies. This is all due to non-filing of statutory annual return by the companies for the last three consecutive financial years.

However, due to unprecedented situation of COVID-19, there were a lot of requests from various stakeholders to grant them a one-time opportunity so that they can complete their pending compliances by filing necessary documents, as they were facing issues in filing.

Recently, MCA through its power under Section 403 and 460 of the Companies Act, 2013 introduced Companies Fresh Start Scheme (CFSS), 2020 to:

Hence, there was an urgent need to come up with a detailed scheme which can provide extra opportunity to such companies to make their default good.

• Enable defaulting companies to make a fresh start by making good any default related to filing, irrespective of the duration of the default
• Provide longer time to corporates to comply with various filing requirements under the Companies Act, 2013, thus reducing the financial burden in relation to it, especially ti those which have long standing defaults.
• Provide opportunity to inactive companies to get their companies declared as “dormant company” under Section 455 of the Companies Act, 2013 by filing a simple at a normal fee. It will help inactive companies to remain on the register of the companies with minimum compliance requirements.

This scheme shall be into force for the period of 6 months starting from 1^st April, 2020 to 30^th September, 2020.

Applicability of Companies Fresh Start Scheme, 2020

The scheme of Companies Fresh Start Scheme, 2020 is applicable to defaulting companies which has not filed the below specified forms on due date:

• Annual Return (MGT-7)
• Financial Statements (AOC-4)
• MGT-14 (Filing of Resolutions and Agreements with the Registrar)
• PAS-3 (Return of Allotment)
• ADT-1 (Appointment of Auditor)
• INC-20A (Declaration for the commencement of business)
• INC-22A (Active Company)

Hence, under this scheme all the above forms and documents can be filed during the period of 1^st April, 2020 to 30^th September, 2020 on normal fee without any penalty

How to avail the benefit of Companies Fresh Start Scheme, 2020?

To use this scheme and get immunity, the companies will have to

• File an application for the issue of immunity in e-form “CFSS-2020” with ROC on the portal of MCA.
• ROC will approve all the documents within six months of the closure of this scheme.
• On the basis of declaration made in Form CFSS, 2020, immunity certificate in respect of documents which are filed under this scheme, will be issued by the designated authority.
• However, immunity will not be granted in case of any matter of pending appeal before the Court of Law.

Effect of Companies Fresh Start Scheme, 2020

• Companies are not required to pay any additional fees on forms
• The Department will issue an Immunity Certificate to the Company
• ROC will withdraw all such prosecutions which are pending against these forms
• Any proceedings of adjudication of penalties under Section 454 will also be withdrawn by the ROC

Non-Applicability of CFSS, 2020

The scheme of Companies Fresh Start Scheme, 2020 shall not apply in the following cases:

• Companies against which action for final notice for striking off the name under Section 248 of the Companies Act, 203 has already been initiated by the Designation Authority
• Companies which have filled any application for action of striking off the name of the company from the register of companies
• Those companies which have amalgamated under a scheme of arrangement or compromise
• Where an application have been filed by any company for obtaining Dormant Status under Section 455 of the Companies Act, 2013 before CFS, 2020
• Vanishing Companies
• Where any increase in authorized capital is involved (Form SH-7) and also charge related documents like CHG-1, CHG-4, CHG-8 and CHG-9.

Scheme for Inactive Companies

The defaulting inactive companies while filing belated documents under CFSS, 2020 can simultaneously

• apply and get themselves declared as Dormant Company under section 455 of the Companies Act, 2013 by filing e-form MSC-1 at a normal fee on said form
• The company can apply for striking off the name of the company by filing e-form STK-2 by paying the fee payable for form STK-2.

Final Words

After the end of this scheme, The designated authority shall take necessary steps against the companies who have not availed this scheme and have defaulted in filing the required documents in a timely manner.

Legal Window highly recommends to defaulting companies to avail the benefits of CFSS, 2020 as it is a rare opportunity to rectify the mistakes and to give your business a fresh start.