The Ministry of Corporate Affairs (MCA) had introduced a scheme namely Companies Fresh Start Scheme, 2020 in exercise of its powers under Section 460 read with Section 403 of Companies Act, 2013. The Companies Fresh Start Scheme or the Scheme was rolled out by MCA to help the companies who had defaulted in filing their returns, financial statements and other filings such as MGT-14 etc.
In order to help the defaulting companies become compliant, this scheme was introduced on 1st April, 2020 and was initially valid till 30th September, 2020. But in the wake of increasing COVID cases, the Ministry has decided to extend the time till the year end i.e. 31st December, 2020. The LLP settlement scheme introduced by MCA under circular 13/2020 also got extended till December, 2020.
As a statutory provision, Companies Act, 2013 under section 403 requires all companies to file their Annual Return and Financial Statements. Apart from this several other statements, documents, returns etc. are required to be filed on the MCA21 electronic registry within the prescribed time and the companies making default in filing the returns are charged for penalty or interests.
Advantages of the scheme: The Scheme benefits the defaulting companies by not charging any interest and allows them to take a fresh start by filing the returns. It also immunes the company from any proceedings against imposition of penalty on account of delay.
Highlights of the Scheme:
Applicability: The Scheme is applicable to any defaulting company or any dormant company. Through the scheme, the defaulting companies are permitted to file their previous documents which they defaulted in filing on the due date.
Fee: The nominal fees will be charged for the filing of belated document as mentioned under Companies (Registration Offices and Fee) Rules, 2014. No additional charges will be charged.
The scheme provides immunity to the company against proceedings by prosecution in respect to penalty for delayed filing of returns. Immunity for 6 months will be provided to the companies who will subscribe to the scheme. No fees will be charged for subscription under this scheme.
The scheme states about withdrawal of appeal against any prosecution launched or the proceedings for imposing penalties initiated.
The scheme also gives an opportunity to inactive companies whom we generally term as ‘dormant companies’ under section 455 of the Companies Act to remain on the register of the companies with minimal compliance requirements just by filing an application at a nominal fee.
Exclusions: The scheme will not be applicable to
a. The companies who have received final notice for removing the company name by the Companies Act 2013.
b. To companies who have applied for Corporate insolvency resolution Process or Liquidation or Insolvency
c. To companies who have merged with some other company.
This scheme was introduced by the central government in the time of this financial distress to help the companies in easy business. It tends to reduce compliance burden and other risks.
Here’s the link to the scheme: https://www.mca.gov.in/Ministry/pdf/Circular12_30032020.pdf
We are corporate law experts in Gurgaon, Delhi and Mumbai. The author of this article is Pushkar Thakur, Managing Partner at Corrida Legal. Pushkar is an ex AVP, Legal, Nomura and has led the legal teams at corporates namely Emaar India and Drake & Scull India. Pushkar is an expert in corporate law, contracts, litigation, employment law and data protection. Reach out to him on LinkedIn at: https://www.linkedin.com/in/pushkarthakurcorridalegal/ or pushkar.thakur@corridalegal.com. In case of urgent issues, you may call him at +91-8826680614.