Opportunity to professionals: Fresh Start Scheme, 2020 & LLP Settlement Scheme, 2020 – Relief to Companies & LLPs
The Companies Act, 2013 and Limited Liability Partnerships Act (LLP Act) 2008 require all Companies/ Limited Liability Partnerships (LLPs) to make annual statutory compliance by filing the Annual Return and Financial Statements. Apart from this, various other statements, documents, returns, etc. are required to be filed on the MCA electronically within prescribed time limits.
As part of its constant efforts to ease of doing business and to reduce the litigation burden from the Companies and/LLPs and in order to encourage the businessman to focus more on the growth of the Company/LLP and organize their internal structure, the Government of India has announced a one-time relaxation to law abiding Companies and LLPs so as to enable them to complete their pending compliances without payment of any additional filing fees. The Ministry of Corporate Affairs (MCA), introduced the “Companies Fresh Start Scheme, 2020” and revised the “LLP Settlement Scheme, 2020” to provide an opportunity to both companies and LLPs to make good their default by filing pending documents and to serve as a compliant entity in future. The Fresh Start scheme and modified LLP Settlement Scheme condone the delay in filing the specified documents with the Registrar, insofar as it relates to charging of additional fees, and granting of immunity from launching of prosecution or proceedings for imposing penalty on account of delay associated with certain filings during the unprecedented lockdown caused by COVID-19. The prominent feature of both the schemes is a one-time waiver of additional filing fees for delayed filings by the companies or LLPs with the Registrar of Companies during the currency of the Schemes, i.e. during the period starting from 1st April, 2020 and ending on 30th September, 2020.
Both the Schemes, apart from giving longer time for corporates/LLPs to comply with various filing requirements under the Companies Act 2013 and LLP Act, 2008, significantly reduce the related financial burden on them, especially for those with long standing defaults, thereby giving them an opportunity to make a “fresh start”. Both the Schemes also contain provision for giving immunity from penal proceedings, including against imposition of penalties for late submissions and also provide additional time for filing appeals before the concerned Regional Directors against imposition of penalties, if already imposed. However, the immunity is only against delayed filings in MCA 21 and not against any substantive violation of law.
Details of the both the Schemes are available vide the Circular nos. 12/2020 & 13/2020 dated 30.03.2020, issued by the Ministry of Corporate Affairs.
The Schemes are not applicable in following cases :
- Non-applicability in case of Companies:
- to companies against which action for final notice for striking off the name u/s 248 of the Companies Act 2013 (previously Section 560 of the Companies Act, 1956) has already been initiated by the Designated Authority.
- where an application has already been filed by the companies in Form STK-2 for striking off the name of the company from the Registrar of Companies.
- to companies which have amalgamated under a scheme of arrangement or compromise under the Act.
- where applications have already been filed for obtaining Dormant Status under section 455 of the Act before this scheme.
- to vanishing companies.
- Where any increase in Authorised Share Capital is involved and also charge related documents
- Non-applicability in case of LLPs:
- LLPs which has 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.
The Government of India is working on giving the businessmen the opportunity to mitigate the pending litigations against their business so that they are able to focus on developing their business and in turn contribute in the growth of the nation’s wealth and GDP of the Country. In the wake of this pandemic outbreak, it is an opportunity on the shoulders of the professionals to help the businessmen by working online and cleaning the pending compliances of the Companies and the LLPs.
Written & Compiled by CA Sunil Kumar Gupta
Founder Chairman, SARC Associates