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In March 2020, the Ministry of Corporate Affairs (MCA) introduced the Companies Fresh Start Scheme, 2020 (CFSS 2020) and the Limited Liability Partnership (LLP) Settlement Scheme, 2020. These schemes were valid from 01.04.2020 to 30.09.2020. Due to the vast disruption caused by the pandemic, it was extended by the MCA till 31.12.2020.
The CFSS 2020 was introduced to condone the delay of the companies in filing their annual documents due to the pandemic situation. A company needs to file the annual returns and financial statements every year to the Registrar of Companies. Apart from this, it also needs to file various other statements, returns, documents, etc. to the MCA21 electronic registry within the time limits mentioned under the Companies Act, 2013.
A delay in filing these returns or statements by a company results in higher additional fees. This scheme gives the companies an opportunity to file their annual returns or documents without paying any additional fees. It also grants immunity to the directors against prosecution or proceedings on the huge penalty imposed on account of delay.
The LLP Settlement Scheme 2020 was introduced to reduce the compliance burden by the LLP due to the pandemic situation. Under this scheme, the LLP’s can file their annual returns after the prescribed time limits mentioned in the LLP Act, 2008 by paying the regular fees prescribed for such returns. No additional fees will be charged for the defaulting LLP’s who file belated documents or returns under this scheme.
The Institute Of Company Secretaries of India (ICSI), in December 2020, requested the MCA for the extension of many schemes introduced by them which provided various relaxations to the corporate and other stakeholders in the times of Covid 19. This letter included the extension of the CFSS and LLP Settlement Scheme also.
The ICSI stated that due to the impact of Covid-19 pandemic, the stakeholders are still facing challenges in undertaking the functions smoothly. The ICSI asked MCA to consider their request favourably and provide further relaxations in the compliances to be followed by the companies and LLP.
The Karnataka State Chartered Accountants Association (KSCAA), in January 2021, requested the Minister of Finance, Smt. Nirmala Sitharaman for extension of CFSS and LLP Settlement Scheme. The companies and professionals faced several technical problems on the MCA portal during the last few days of December while filing forms. This technical problem caused a delay for the companies to complete the various compliances covered under the CFSS 2020 within the prescribed time.
Due to this genuine hardship caused by the technical issues with MCA21 Portal, the KSCAA requested the Finance Minister on behalf of the fellow professionals and companies to extend the CFSS 2020 and LLP Settlement Scheme validity by at least three months, i.e. 31.03.2021.
The National Company Law Tribunal Bar Association (NCLTBA) requested the Minister of Finance, Smt. Nirmala Sitharaman for extension of CFSS and LLP Settlement Scheme in January 2021. The NCLTBA stated several circumstances due to which the corporates could not take the benefits of these schemes. Several companies had filed for revival, but the National Company Law Tribunal (NCLT) could not take it up due to the country’s lockdown situation. As a result, the revival of these companies was not complete, and they could not take the benefit of CFSS.
Due to the lockdown, many offices were closed. Thus, the companies could not prepare the annual documents because of ready documents not being preceded with clients. There were technical glitches on the MCA portal in December, making it difficult to file documents on the MCA21 electronic registry.
Since the companies could not prepare balance sheets due to unavailability of the figures, a huge financial burden will be levied on the companies. The directors will have to face prosecution if the huge compliance costs are not paid, thus increasing litigation. On account of all these circumstances, the NCLTBA requested to extend the CFSS and related schemes, including the LLP Settlement Scheme until 31.03.2021.
MCA ruled out a blanket extension of the CFSS and LLP Settlement Scheme. It found merit in the representations by professions seeking an extension in the schemes. Still, it felt that the pandemic was not a reasonable excuse for the delay in filing the annual documents or returns which should have been completed by December. However, on 15th January 2021, the MCA enabled late filings under CFSS on a case to case basis by introducing the ‘Scheme for condonation of delay for companies restored on the Register of Companies between 1st December 2020 and 31st December 2020 under Section 252 of the Companies Act, 2013’.
This scheme is valid from 01.02.2021 till 31.03.2021. The companies that had filed appeals to restore the company name before the NCLT and disposed of with an order of restoration between 01.12.2020 to 31.12.2020 can benefit from this scheme. The companies which qualify under this scheme can file applications on the MCA portal by paying the regular fees. The companies that come under this scheme need not pay any additional fees for filing e-forms on the MCA portal.
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