NEWSFLASH – Fresh start to Companies and LLPs

In view of the pandemic COVID-19, the Ministry of Corporate Affairs (“MCA”), has introduced the Companies Fresh Start Scheme, 2020 (“Company Scheme”) and revised the LLP Settlement Scheme, 2020 (“LLP Scheme”) to provide both companies and limited liability partnerships (“LLPs”)., irrespective of the duration of default, thereby make a fresh start as a fully compliant entity. The Company Scheme and the LLP Scheme give companies and LLPs a chance to make good filing related defaults, thereby giving them an opportunity to make a ‘fresh start’. The gist of both the schemes is set out below.

PART A- Company Scheme

1. The Company Scheme shall come into force on 1st April 2020 and shall remain in force till 30th September 2020.

2. A defaulting company is permitted to file belated documents which were due for filing on any given date.

3. The Company Scheme provides immunity to companies as regards prosecution and an additional penalty for not filing of belated documents. There will be no immunity on any consequential proceedings involving the interest of its shareholders or directors or key managerial personnel etc., as provided under the Company Scheme. Further, there will be no immunity in cases where:

  1. an appeal is pending before a court of law and in case of management disputes pending before a court or tribunal.
  2. any court has ordered conviction in any matter or an order imposing penalty has been passed by an adjudicating authority under the Companies Act, 2013 (“Companies Act”) and no appeal is preferred against such order before the Company Scheme came into force.

4. The application for seeking immunity in respect of belated documents filed under the Company Scheme may be made electronically to the Registrar of Companies (“ROC”) (without any fee) not later than6 months from the date of closure of the Company Scheme.

5. The application for seeking immunity in respect of belated documents filed under the Company Scheme may be made electronically to the Registrar of Companies (“ROC”) (without any fee) not later than 6 months from the date of closure of the Company Scheme.

  1. companies against which final notice for striking off has already been issued;
  2. companies which have made an application for striking off to the ROC;
  3. companies amalgamated under a scheme of compromise or arrangement;
  4. companies which have applied for dormant status under Companies Act before the introduction of the Company scheme;
  5. vanishing companies; and(f) documents pertaining to increase in authorised share capital and charge related documents.

6. After granting immunity the designated authority shall withdraw prosecution proceedings and proceedings for adjudication of penalties, except in cases stated in 3(b) above.

7. The defaulting inactive companies while filing due documents under the Company Scheme can either:

  1. apply for dormant status under the Companies Act, or
  2. apply for striking off of the company.

PART-B- LLP Scheme

1. The LLP Scheme came into force on 1st April 2020 and shall remain in force till 30th September 2020.

2. Any defaulting LLP is permitted to file belated documents which were due for filing, till 31st August 2020.

3. Defaulting LLPs need to avail this LLP Scheme by filing documents which have not been filed or registered in time, on the payment of fees as payable for filing such document or return, without payment of additional fees.

4. Defaulting LLPs which have filed their said belated documents till 30th September 2020 and made good the default shall not be subjected to prosecution by ROC for such defaults.

5. The LLP Scheme shall not apply to:

  1. the filing of documents except for the following documents:
  • Information regarding limited liability partnership agreement and changes to it, if any;
  • Notice of appointment, cessation, change in name/ address/ designation of a designated partner or partner and consent to become a partner/ designated partner;
  • Statement of Account & Solvency (Annual or Interim);
  • Annual Return of LLP;
  1. LLPs which have made an application for striking off.

6. At the conclusion of the LLP Scheme, the designated authority shall take necessary action against the LLPs which have not availed the said scheme and are in default in filing these documents in a timely manner.