Government Provides relief to Companies and LLPs amid COVID-19 – Introduces Companies Fresh Start Scheme, 2020” and revised the “LLP Settlement Scheme, 2020”

Amid all the chaos of COVID-19, a lot of companies are mandatorily required to close their offices and would not be able to meet the mandatory compliance. So in order to provide relief to the Law-Abiding Companies, and Limited Liability Partnerships (LLPs), the Ministry of Corporate Affairs introduces a new scheme namely “Companies Fresh Start Scheme, 2020” and also revised the “LLP Settlement Scheme, 2020” which will provide a first of its kind opportunity to both companies and LLPs to make good any filing related defaults, irrespective of duration of default, and make a fresh start as a fully compliant entity.

What is Companies Fresh Start Scheme, 2020?

All the registered companies are required to make an annual statutory compliance by filing the Annual return and Financial Statements. Apart from these various other documents, returns, statements etc are required to be filed with prescribed fees. And if there is any delay in filing, the companies have to file the same with additional fees / penalties.

Now in order to give opportunity to defaulting and to enable them to file the documents with the MCA, has introduced a scheme namely “Companies Fresh Start Scheme, 2020.”

Important Characteristics of the “Companies Fresh Start Scheme, 2020”

• The Scheme shall come in to force on 01.04.2020 and shall remain in force till 30.09.2020. (Note that the MCA has extended the date of conclusion for CFSS 2020 till 31.12.2020)
• Any defaulting company will be permitted to file belated documents which were due for filing on any given date.
• Every defaulting company shall be required to pay normal fees as prescribed under the law.
• The companies will be granted immunity from the prosecution or proceeding for imposing penalty only to the extent of any delay associated with the filings of belated documents.
• The scheme will allow the inactive companies to get the dormant status easily for the company. All they have to do is file a simple form with nominal fees.

Application of the “Companies Fresh Start Scheme, 2020”

The scheme shall apply to the following forms:

• Form MGT 7– Annual returns
• Form AOC 4– Financial Statements
• Other forms to be filed with ROC like – Form MGT 14, PAS 3, ADT 1

Know: Important Statutory due dates for Company Annual filing

Non Applicability of the Scheme

The “Companies Fresh Start Scheme,2020” shall not apply to the following:

• To companies against which action for final notice for striking off the name has already been initiated.
• Where any application has already been filed by the companies for action of striking off the name of the companies form ROC
• The companies who have amalgamated
• Where application for obtaining dormant status has been filed
• To the vanishing companies
• Where any increase in authorized capital in involved (Form SH 7)
• Charge related documents (CHG-1, CHG-4, CHG-8 and CHG-9)

Manner of payment of the fees

Only the normal fees would be required to pay by every defaulting companies on the filing of every belated document and no additional fees shall be payable.

Scheme Companies fresh start Scheme, 2020 to the Inactive companies

• If the defaulting companies are inactive at the time of filing the due documents under this scheme, may apply for the status of ‘dormant company’ by filing a simple form namely FORM MSC 1 at normal fees or,
• Apply for the striking off the companies name from the ROC by filing the form SKT 2 along with normal fees prescribed for the same.

Effect of the Scheme

• No additional fees would be levied on any return filed by the company under the scheme.
• The companies will be granted with the Immunity Certificate
• ROC shall withdraw any pending prosecution regarding such forms and proceedings of adjudication of penalties.
• Company shall withdraw any appeal against any prosecution so launched.
• However, if the company does not avail the said scheme and is in default in filing the due documents, the designated authority shall take necessary action under the Act.

What is Revised- “LLP Settlement Scheme, 2020”?

Earlier in March, 2020 MCA introduced an “LLP Settlement Scheme,2020 to promote the ease of doing business and also to cleanse the system. it provided the LLPs a one-time relaxation in payment of additional fees and immunity from prosecution. Now due to COVID 19 chaos, the MCA has further revised the “LLP settlement Scheme, 2020”.

Important changes in the “LLP Settlement Scheme, 2020”

• The Scheme shall come in to force on 01.04.2020 and shall remain in force till 30.09.2020. (Note that the MCA has extended the date of conclusion for LLP Settlement Scheme, 2020 till 31.12.2020)
• Any defaulting LLP will be permitted to file belated documents which were due for filing on any given date.
• Every defaulting LLP shall be required to pay normal fees as prescribed under the law.
• The LLP will be granted immunity from the prosecution or proceeding for imposing penalty only to the extent of any delay associated with the filings of belated documents.
• However, It would permit a “one-time condonation of delay in Late filing statutorily required documents of LLP” with the Registrar of Companies.
• The scheme shall be concluded after 31.12.2020 as extended.
• However, the fact remains the same that It is a “one-time condonation of delay” in Late filing statutorily required documents of LLP” with the Registrar of Companies.

Application of the “Revised LLP Settlement Scheme”

The scheme shall apply to the following forms:

• Form 3: Information with regard to limited liability partnership agreement and changes, if any, made therein.
• Form 4: Notice of appointment, cessation, change in name, address, designation of a designated partner or partner and consent to become a partner or designated partner.
• LLP Form 8: Statement of Account & Solvency (Annual or Interim).
• LLP Form 11: Annual Return of Limited Liability Partnership (LLP).

Know: The important Statutory due dates for LLP Annual filings

Non- applicability of the “Revised LLP settlement Scheme, 2020”

• This Scheme shall not apply to LLPs which have made an application in Form 24 to the Registrar, for striking off its name from the register as per provisions of Rule 37(1) of the LLP Rules, 2009.

Effects of the Revised LLP Settlement Scheme, 2020

• No additional fees would be levied on any return filed by the LLP under the revised scheme.
• The companies will be granted with the Immunity Certificate
• ROC shall withdraw any pending prosecution regarding such forms and proceedings of adjudication of penalties.

Both the schemes came at the right time which will work as a breather for non filers and late filers of Companies and LLPs. Not only the relaxations has been given in additional fees but also given immunity from prosecutions and proceedings including against imposition of penalties for late submissions.