Companies Fresh Start Scheme 2020: Opportunity to file delayed or belated returns with registrar of companies

The Ministry of Corporate Affairs, with the intent to provide relief to companies and ease in doing business, has recently come up with a scheme in the interest of the companies. The scheme is also one of the measures provided by the Government of India in view of the pandemic situation prevalent in the country due to COVID-19.

The scheme is called the Companies Fresh Start Scheme, 2020 introduced by the circular dated 30-03-2020. The scheme is a one time opportunity for the companies to file their belated statutory documents under the Companies Act, 2013 without payment of additional fees, additional penalties and granting immunity from prosecution upon them pertaining to filing of belated returns in certain cases.

Under the said scheme, the companies can file their backlog statutory documents such as annual returns, financial statements, etc. with the Registrar of the Company upon payment of normal fees only and thereby revive back by becoming compliant with the law.

Time Period of Companies Fresh Start Scheme-2020

Companies Fresh Start Scheme, 2020 commences from 01^st April 2020 and will remain in force till 30^th September 2020 which means companies have a period of six months to be compliant without paying additional fees, penalties etc.

Benefit of Companies Fresh Start Scheme-2020

S.no	Particular	Benefits under the Scheme
1.	File Belated documents without additional fees	Any company registered under the companies Act, 2013 and which has made a default in filing any of the documents, statements, returns, etc. including annual statutory documents such as financial statements, annual return within the due date is permitted to file such belated documents with normal fees only i.e. additional fees is waived off.
2.	Obtain immunity from prosecution/ penalty pertaining to delay in filing belated documents	In case there is additional penalty pertaining to filing of belated documents with the Ministry of Corporate Affairs, the scheme grants immunity against such additional penalty. However, immunity from payment of additional penalty is only in respect of filing belated documents. Any other consequential proceedings including any proceedings involving interests of any shareholder/ directors/ key managerial personnel, etc would not be covered by such immunity. Thus, immunity is granted against procedural default but not against substantive infringement of law.
3.	Scheme for Inactive Companies	In case of an inactive 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, the said inactive company needs to apply for either the status of Dormant company or apply for strike off of the Company's name with the Registrar of Companies in order to file belated documents and waiver of additional fees and immunity from additional penalty/ prosecution proceedings.

 

In this respect, it is to be noted that immunity under the Companies Fresh Start Scheme, 2020 will not be granted in the below cases:

1. In matter of any appeal pending before the court of law and in case of management disputes of the company pending before any court of law or tribunal.
   
   
2. In the event any court has ordered conviction in any matter, or any adjudicating body has imposed penalty and no appeal has been preferred against such orders before the Companies Fresh Start Scheme, 2020 came into force.

Circumstances in which Companies Fresh Start Scheme-2020 is not applicable

Companies Fresh Start Scheme, 2020 shall not apply in below cases:

1. Companies against which actions for final notice for striking off the name has already been initiated by the authority
2. Companies which have already been filed for striking off the name of the company from the Register of Companies
3. Companies which are amalgamated
4. Companies which have filed applications for obtaining Dormant Status
5. Vanishing companies
6. Where any increase in authorised capital and charge related documents are involved

How to avail the benefit of Companies Fresh Start Scheme-2020

The procedure to avail the benefit of the said scheme is enumerated in the steps given below:-

Step 1: Filing of Belated return - The default company to file the relevant belated documents with normal fees by 30-09-2020.

Inactive companies to simultaneously apply for Dormant company or for strike off of the name with normal fees.

Default Company to ensure relevant forms and returns filed by the Company has been taken on file or on record or approved by the Registrar of the Company.

Step 2: Withdrawal of Appeal - If defaulting company/ officer in default has filed an appeal against any prosecution or proceedings for penalty initiated against any notice issued or complaint filed or order passed under the Companies Act 2013 in respect of which scheme is availed, the company is required to withdraw the said appeal and furnish the proof before applying for immunity certificate. In case the appeal is not withdrawn, the company cannot avail the benefit of the Companies Fresh Start Scheme, 2020.

Step 3: Filing of Online Application under Companies Fresh Start Scheme, 2020 - After the closure of Companies Fresh Start Scheme, 2020 but not after the 6 months from the closure of the said scheme, the Company is required to file electronically an application in the form Companies Fresh Start Scheme, 2020 for seeking immunity in respect of belated documents filed. i.e. Form Companies Fresh Start Scheme, 2020 is to be filed between 01-Oct-2020 to 31-March 2021 and not later than that else immunity will not be granted. It is to be noted that there is no fee payable on this Form.

The said form is to be accompanied with the details of statutory documents filed under the Companies Fresh Start Scheme, 2020, proof of withdrawal of appeal, details in respect of pending prosecution pertaining to belated documents, etc. and is to be signed digitally with DSC of the Director/ Authorised person of the Company.

Step 4: Immunity Certificate by Registrar of Company – Based on the declaration made in the Form Companies Fresh Start Scheme, 2020 an immunity certificate in respect of the documents filed under this scheme will be issued by the Registrar of Companies .

Step 5: Effect of Immunity - After granting immunity, the Registrar of Companies will withdraw any pending prosecutions before the concerned court(s) and any pending proceedings of adjudication of penalties under the Companies Act, 2013.

However, no immunity will be provided in respect of the matters wherein a court has ordered conviction or an adjudicating body has imposed penalty and no appeal has been preferred against such orders by the Company before the Companies Fresh Start Scheme, 2020 came into force. Consequently, the Registrar of Companies will not withdraw prosecution / penalty proceedings in respect of such matters.

Conclusion

In a nutshell, Companies Fresh Start Scheme, 2020 is a paramount step by the Ministry of Corporate Affairs which has provided a one-time opportunity to revive the companies by filing belated statutory documents without the burden of paying additional fees and penalties. The defaulting companies should straightaway grab this opportunity and become complaint with the law as the Circular 12/2020 lucidly provides that at the conclusion of the Scheme, the Registrar of Companies shall take necessary action under the Companies Act, 2013 against the companies which  have not availed this scheme and are in default of filing relevant documents in a timely manner.