CFSS

Overview of CFSS:

The Ministry of Corporate Affairs (MCA) has introduced a one-time settlement scheme called the Companies Fresh Start Scheme (CFSS) 2020. This scheme is applicable to all companies that have defaulted in filing their annual returns, financial statements, or any other statutory documents with the Registrar of Companies (ROC).

The objective of this scheme is to provide a one-time opportunity to the defaulting companies to make a fresh start by filing their pending documents without paying any additional fees or penalties. The scheme was initially introduced for a period of six months from April 1, 2020, to September 30, 2020, but has now been extended until December 31, 2021.

Provision and rules for companies

The CFSS safeguards business owners from legal actions and penalties. Delays in submitting overdue documents are excused, but no other exceptions are made. Business owners must remit standard charges as per the 2014 Companies Rules, including submissions to the MCA 21 registry. Firms that have initiated legal challenges against their charges must retract these before applying for CFSS and provide a withdrawal notice with their application. Should a firm not contest a judicial ruling, CFSS permits filing an appeal within 120 days. 

There will be no prosecution for such lateness, and related orders will be invalidated. Submitting the CFSS form grants firms a 6-month immunity period. This form is free for business owners, who will receive immunity certificates upon filing. Firms with ongoing legal disputes or those that didn’t appeal before the scheme’s start are not qualified for immunity under CFSS. The Indian government has leniently extended the CFSS application period for individuals with inactive DINs, exempting them from the filing fee.

Conditions for availing CFSS:

To avail of the benefits of CFSS, companies must fulfill the following conditions:

1. The defaulting company must file all pending documents with the ROC during the CFSS period.
2. The defaulting company must withdraw all appeals filed against any notice issued by the ROC regarding the non-filing of any document or non-compliance with any provision of the Companies Act, 2013.
3. The defaulting company must ensure that no order of the court or tribunal has been passed against it for the non-filing of any document or non-compliance with any provision of the Companies Act, 2013.
4. The defaulting company must pay the statutory fees and additional fees for filing the pending documents.

Checklist for CFSS:

Companies that wish to avail the benefits of CFSS must follow the below-mentioned checklist:

1. Identify all pending documents that need to be filed with the ROC.
2. Ensure that the pending documents are complete and accurate.
3. Ensure that all fees and additional fees for filing the pending documents are paid.
4. Ensure that all appeals filed against any notice issued by the ROC are withdrawn.

Rules for inactive companies

Under the CFSS, defaulting firms seeking dormant classification must file e-Form MSC-1 for inactive status. They may also apply to be struck off the Register of Companies. Additionally, they can secure ACTIVE non-compliant status without incurring application charges.

Applicability of CFSS

The CFSS form’s applicability is contingent on specific criteria. It pertains to entities that have not filed their annual returns and financial statements with the company registry, including forms such as AOC-4, AOC-4 XBRL, AOC-4 CFS, and MGT-7.

It also covers institutions unable to submit forms like MGT-14, ADT-1, DPT-3, DIR-12, and Form–20A.

However, the scheme excludes companies removed from the company register and those that have sought deregistration.

Additionally, the CFSS does not extend to companies that have amalgamated, become inactive or initiated the corporate insolvency resolution process. Companies that are untraceable or have submitted forms CHG-1, CHG-4, CHG-8, and CHG-9 are also ineligible.

Key aspects of the CFSS

• Abolishment of penalties and fines mandated by the Companies Act 2013 for eligible firms.
• Complete immunity from penalty payments and legal proceedings for compliant companies.
• Withdrawal of appeals is necessary to access the scheme’s benefits, valid for 6 months.
• Fee waivers for directors and founders filing DIR-3KYC/DIR-3 KYC-Web, and for inactive or dormant companies submitting e-Form MSC-1.

The CFSS was initiated to mitigate the financial strain from the pandemic by providing immunity and fee exemptions. Initially set from April 1, 2020, to September 30, 2020, the application deadline was extended to December 31, 2020.

How to avail CFSS:

To avail of the benefits of CFSS, companies must follow the below-mentioned steps:

1. Login to the MCA portal and file all pending documents using the E-forms available on the portal.
2. Pay the statutory fees and additional fees for filing the pending documents.
3. Withdraw all appeals filed against any notice issued by the ROC.

Documents required for CFSS:

The following documents are required to avail of the benefits of CFSS:

1. Copies of all pending documents that need to be filed with the ROC.
2. Copies of all appeals filed against any notice issued by the ROC.
3. Proof of payment of statutory fees and additional fees for filing the pending documents.

Benefits of CFSS:

The following are the benefits of availing of CFSS:

1. Aiding Pandemic-Affected Companies:
   • The CFSS was introduced to support companies that faced significant challenges during the pandemic. Many businesses suffered losses and financial strain due to the unprecedented COVID-19 situation.
   • By offering relief and flexibility, the scheme aims to revive inactive and financially stressed companies.
2. Penalty Waiver:
   • Under the CFSS, penalties, and fines that companies are typically liable to pay under the Companies Act 2013 are dropped.
   • This waiver provides much-needed relief to companies struggling with compliance-related issues.
3. Immunity from Prosecution:
   • Eligible companies participating in the scheme receive immunity from prosecution related to defaults arising from non-filing of forms.
   • This protection extends to the extent of default connected with late filing.
4. Appeal Withdrawal Benefits:
   • Companies can obtain full immunity and protection from penalties and legal actions by withdrawing any existing appeals.
   • Once the appeal is withdrawn, the benefits of the CFSS become applicable.
5. Time-Limited Benefits:
   • These benefits remain in effect for a specific duration—6 months—until the scheme ceases to exist.
   • During this period, companies can take advantage of the immunity provisions.
6. Simplified Compliance:
   • Directors and founders can file DIR-3KYC/DIR-3 KYC-Web without paying the associated fees.