The Ministry of Corporate Affairs introduced the Companies Fresh Start Scheme, 2020 in March 2020 in an effort to facilitate the companies registered in India to make a fresh start on a clean slate. It aims to reduce the financial burden on the companies who suffered due to the COVID-19 led lockdowns. The scheme was initially applicable between April 1 to September 30, 2020 but due to the persisting lockdown, it has been extended to December 31, 2020.
It is to be noted that all companies registered in India are obligated to follow certain norms directed by the government that includes Annual Return filing, filing of financial statements, books of accounts and other business-related documents and statements required by the government. Under normal circumstances, if a company fails to abide by such norms then as a punishment, they are charged penalty or interests. The main purpose of the scheme is to give relief to the companies from such provisions. The key highlights of the Scheme[1] are:
Applicability – Any defaulting company is permitted to file belated documents which were due for filing on any given date in accordance with the provisions of this Scheme. Such companies will be obligated to pay the normal fee that are prescribed by the Companies (Registration Offices and Fee) Rules, 2014. No additional fee shall be payable.
Immunity - Immunity from the launch of prosecution or proceedings for imposing penalty shall be provided only to the extent such prosecution or the proceedings for imposing penalty under the Act pertain to any delay associated with the filings of belated documents. Any other consequential proceedings, including any proceedings involving interests of any shareholder or any other person qua the company or its directors or key managerial personnel would not be covered by such immunity.
The application for seeking immunity in respect of belated documents filed under the Scheme may be made electronically in the Form CFSS-2020 annexed, after closure of the Scheme and after the document(s) are taken on file, or on record or approved by the Designated authority as the case may be but not after the expiry of 6 months form the date of closure of the Scheme.
Withdrawal - If the defaulting company has filed any appeal against any notice issued or complaint filed or an order passed by a court or by an adjudicating authority under the Act, before a competent court or authority for violation of the provisions under the Act of 1956 or 2013, in respect of which the application is made under the scheme, the applicant shall before filing an application for issue of immunity certificate, withdraw the appeal and furnish proof of such withdrawal along with the application.
Immunity not granted - No immunity shall be provided in case any court has ordered conviction in any matter, or an order imposing penalty has been passed by an adjudicating authority under the Act, and no appeal has been preferred against such orders of the court or of the adjudicating authority, before this Scheme has come into force.
Scheme Restrictions - It does not apply to strike off companies, amalgamated companies, companies with Dormant status and vanishing companies as per the provisions of the Act.
Once the Scheme concludes, the Designated authority shall take necessary action under the Act against the companies who have not availed this Scheme and are in default in filing these documents in a timely manner.
Conclusion
The aim of the scheme is to give suffering companies or the ones lagging behind a fresh start. Among many other schemes introduced by the Ministry of Corporate Affairs to facilitate ease of doing business, this is pro-active in nature as it was initiated from the time the pandemic broke in the country and the future seemed uncertain. It continues to help reduce the compliance burden on companies.
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