Companies Fresh Start Scheme and Revised LLP Settlement Scheme, 2020

Background: The Ministry of Corporate Affairs (MCA), keeping in mind the current Covid-19 situation, introduced two schemes namely, Companies Fresh Start Scheme and the Revised LLP Settlement Scheme, 2020 giving an opportunity to the respective companies and LLPs to complete their pending filings without paying any additional fee. The said Scheme provides immunity from prosecution due default in filing of various returns. The MCA has decided not to extend the same despite the representations given by the Institute of Companies Secretaries (ICSI).

1. What were the various changes introduced by the way of Companies Fresh Start Scheme and revised LLP Settlement Scheme, 2020 by the Ministry of Corporate Affairs for relaxation in filing forms?
The schemes released by the MCA offered relaxation to Companies and Limited Liability Partnerships (LLPs) as it contained filing guidelines for defaulting companies and companies undergoing prosecution for non-filing of various returns. Under this Scheme, the companies and LLPs which had failed in filing required documents and/ or were undergoing prosecution against such default would be exempted from such prosecution post filing of the necessary documents/ forms. Anyone facing a problem in reviving their companies due to the heavy penalties involved in filing could now do so without having to pay any additional filing fees for delayed filing. This Scheme came into applicability on April 1, 2020 and was in force till December 31, 2020.

2. How were these Schemes not fully utilised and how does the non-extension of the same affect various Companies and the Limited Liability Partnerships?
The Schemes were aimed to ease doing business, but due to the outbreak of the COVID-19 pandemic, many revival applications submitted by companies were pending as only urgent matters could be taken up by the Hon’ble National Company Law Tribunal (NCLT). The aim of the Schemes was also not fully achieved as many DIN numbers were not activated, meetings or compliances could not be completed as not everyone had access to easily available technology, the financial burden on many MSMEs along with prosecution of the directors and designated partners also led to scheme not being fully used.

3. How will the extension of these Schemes smoothen the process of revival of Companies and the Limited Liability Partners?
In order to achieve a fast-track process for revival of companies, filing of forms, ease of doing business etc. the Institute of Company Secretaries of India (ICSI) has made a representation and sought extension of the Scheme, which was not accepted by the MCA.

In light of the same, the National Company Law Tribunal Bar Association (NCLTBA) has also written to the MCA to consider extension of the CFSS and other correlated relaxations till March 31, 2021 as the businesses only now coming out of the COVID-19 issues. It will help many companies and LLPs by not requiring them to pay enormous penalties which may help ease their strained financial budgets, and they will be able to comply with the law.

The extension will be in the interest of all the stakeholders and the government.



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