In a bid to provide relief measure to companies and Limited liability partnerships (LLPs), the Ministry of corporate affairs (MCA) has introduced two schemes namely Companies fresh start scheme, 2020 & LLP Settlement scheme, 2020. In this article, we will discuss all the updates and benefits pertaining to the companies fresh start scheme, 2020.
According to Section (403) Companies Act, 2013 every company irrespective of it size, nature of business is required to make certain annual statutory compliance viz. Annual returns, Annual financial statements & various other statements as specified from time to time. These documents are required to be filed on the MCA-21 electronic registry portal.
Key highlights of company fresh start scheme, 2020
- No Higher/additional fees: CFSS, 2020 removes the clause of any additional or late fees which is charged for the delay in their annual filings or any other pending compliance which leads to non-disclosing such returns and the stakeholders opting for un-healthy practices to hide their information.
- No Prosecution/Proceeding: With the help of CFSS, 2020 they will not just get additional fees waiver but granted with immunity from any proceeding for imposing a penalty on account of delay in filing the documents.
- Relaxation for inactive companies: Inactive companies can maintain their presence in the register of companies with minimum compliance requirements since CFSS, 2020 gives them an opportunity to inactive companies to get the tag of “Dormant Company” under the companies act.
- Applicability: CFSS, 2020 shall come into force from 01.04.2020 and remains for a period of 6 months i.e. till 30.09.2020. With this, almost every company will get enough time to make the arrangements and take the complete benefit of the scheme.
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Non-Applicability of Companies fresh start scheme, 2020
CFSS, 2020 shall not be applicable to entities falling under any category mentioned below:
- If the final notice by the adjudicating authority has already been served under section 248 of companies act, 2013.
- If an application for the striking of the companies name from ROC has already been filed by the company with the registrar.
- In case two or more companies have been amalgamated under the companies act, 2013.
- If the application has been filed by the company to get the dormant status under section 455 of the companies act, 2013 prior to companies’ fresh start scheme.
- If a company is titled as “Vanishing company”
- Any increase in authorized capital is the context.
Benefits of Companies fresh start scheme, 2020
- Incentivize compliance & reduce the compliance burden which Companies are facing especially during this time of COVID-19.
- Provides a one-time waiver on additional fees which is charged on companies because of delayed filing.
- Waive off the long-standing defaults, thereby giving the companies a fresh start; which itself signifies the importance of the scheme.
- Immunity from penal proceeding against penalties for a late submission.
- Additional time for filing appeals before the regional directors (RD) against the imposition of penalties.
[NOTE: This is a one-time waiver against additional filing fees for delayed filings]