source : developmentco

Many companies, especially start-ups, had to face financial crunch and unpredictability due to the Covid-19 pandemic. To help the country deal with the repercussions of a pandemic, the Indian government launched the CFSS scheme in 2020. The Companies Fresh Start Scheme (CFSS) aims to provide financial relief to entrepreneurs suffering from the adverse effects of the novel Covid-19.

Read on to know the provisions of the CFSS and its applicability in 2022.

The Companies Act 2013 laid down certain mandatory requirements for all registered companies. Breaching such policies makes companies liable for penalties. However, the CFSS is designed to offer relief to defaulting corporations.

It considers the disruptions caused by the Covid pandemic and provides immunity to companies failing to comply with notions of the Companies Act. Thus, this scheme includes all such institutions that have failed to follow statutory compliances. These statutes include annual returns, financial statements and audits, etc.

The CFSS aims to safeguard the rights and finances of business organisations, especially during the pandemic. The scheme has multiple provisions to subsidise defaulting entrepreneurs, which have been explained in the next sections.

• CFSS aims to protect entrepreneurs' rights against prosecution and proceedings. Any delays in filing belated documents will not cause trouble. However, no other considerations are accepted.
• Entrepreneurs are liable to pay normal fees under Companies Rules, 2014, which includes filings for MCA 21 registry.
• Companies that have filed petitions or appeals against their prosecutions must withdraw their appeal before applying for CFSS. They must also send a copy of the withdrawal while making such applications.
• If a company has not filed an appeal against a court order, CFSS enables it to do so within 120 days. Companies will not be prosecuted for any delay, and all such orders will be neutralised.
• Filing the CFSS form allows companies to obtain immunity for 6 months. Entrepreneurs can avail of this form without payment and are granted immunity certificates.
• Companies are not eligible for immunity against the pandemic shock if they have opened court cases or management disputes. Companies that have failed to make an appeal before the commencement of this scheme are not eligible to apply.
• The Indian government has socially extended the timeline for CFSS applications for those with deactivated DIN. Additionally, they are also not liable to pay the filing fee.

Defaulting companies who have applied for CFSS must submit applications for dormant status by filling e-Form MSC-1. These companies can file applications for unsubscribing from the Register of Companies. Plus, these companies are also liable for obtaining ACTIVE non-compliant status without paying the application fees.

The applicability of CFSS form is subject to certain conditions. CFSS applies to all institutions that fail to file annual returns and financial statements with the company register. The clause includes documents like AOC-4, AOC-4 XBRL, AOC-4 CFS and Form MGT-7.

The scheme is also applicable for those institutions that could not file Form MGT-14, ADT-1, Form DPT-3, Form DIR-12, Form – 20A, etc.

However, this scheme does not apply to companies struck off from the company register. Firms that have already applied for subscribing out of the register are also not applicable for this scheme.

The CFSS scheme is not applicable for firms that have joined or merged with other firms, have turned dormant or filed for the corporate insolvency resolution process. Vanishing companies or those that have filed for CHG-1, CHG-4, CHG-8 and CHG-9 are also not eligible for this scheme.

• The Companies Fresh Start Scheme aims to help companies that have suffered during pandemic times. It applies to those who have failed to submit documents with the company registers.
• The CFSS scheme drops penalties and fines that firms are liable to pay under the Companies Act 2013.
• Eligible companies can achieve full immunity and protection from payment of penalties and facing prosecutions.
• Benefits of this scheme can be obtained on withdrawal of the appeal. These benefits are applicable for 6 months until the scheme ceases to exist.
• Directors and founders can file DIR-3KYC/DIR-3 KYC-Web without paying the fees. Inactive and dormant companies can fill e-Form MSC-1 with the suggested fees.