MCA extends deadline of Companies Fresh Start Scheme and LLP Settlement Scheme
The Companies Fresh Start Scheme, 2020 and the Limited Liability Partnership Settlement Scheme, 2020 were launched by the Ministry of Corporate Affairs in March 2020. These schemes were valid from April 1, 2020 to September 30, 2020. The MCA extended it until December 31, 2020, due to the massive disruption caused by the pandemic.
The CFSS 2020 was created to allow businesses to file their annual documents late due to the pandemic situation. Every year, a company must file annual reports and financial statements with the Registrar of Companies. Apart from that, it must file various other accounts, returns, records, and other information to the MCA21 electronic registry within the time limits set forth in the Companies Act of 2013.
A company’s failure to file these returns or accounts on time would result in higher extra fees. This programme allows businesses to file their annual returns or records without having to pay any extra fees. It also protects the directors from being prosecuted or facing legal action as a result of the hefty penalty levied for lateness.
The LLP Settlement Scheme 2020 was created to relieve the LLP’s enforcement burden as a result of the pandemic. LLPs may file their annual returns under this scheme after the specified time limits in the LLP Act, 2008, by paying the usual fees for such returns. Under this arrangement, no extra fees would be paid to defaulting LLPs who file late documents or returns.
Companies that have gone bankrupt as a result of the COVID-19 pandemic’s lockdown
Following the declaration of the nationwide lockdown last year, National Company Law Tribunals (NCLT) across the country admitted a total of 283 companies into insolvency.
A total of 76 corporate insolvency resolution processes (CIRPs) ended in resolution between April 1, 2020 and December 31, 2020, 128 CIRPs were closed due to withdrawal, appeal, or settlement, and 189 companies went into liquidation.
In addition, from March 25, 2020, the government has temporarily suspended the initiation of CIRP under Sections 7, 9, and 10 of the Code for a duration of six months or any additional period not exceeding one year. The benefit of the suspension applies to all corporate debtor defaults that occur between March 25, 2020 and the end of the suspension period.
Defaults occurring between March 25, 2020, and the end of the suspension time will be treated as ‘non est’ for the purposes of launching a CIRP under the code as a permanent carve out.
The 283 bankruptcies that have been deemed a pandemic relate to defaults that occurred before March 25, 2020.