MCA lets businesses to make fresh start on compliance defaults1 min read . Updated: 31 Mar 2020, 01:07 AM IST
An official statement from the ministry said the idea is to give relief to law abiding companies and Limited Liability Partnerships in the wake of the coronavirus pandemic
New Delhi: The Ministry of Corporate Affairs on Monday allowed businesses to make a fresh beginning as fully compliant entities by making good any defaults related to statutory filings, irrespective of the duration of the default.
An official statement from the ministry said the idea is to give relief to law abiding companies and Limited Liability Partnerships (LLPs) in the wake of the coronavirus pandemic.
The opportunity for a fresh beginning is given to companies through the ‘companies fresh start scheme, 2020’ and to limited liability partnerships through revising an existing ‘LLP Settlement Scheme. The schemes seek to incentivize compliance and to reduce compliance burden during the unprecedented public health situation caused by the pandemic, the ministry said.
Both the schemes give immunity to businesses from penal provisions, including imposition of penalties for late submissions. They also offer additional time for filing appeals before the concerned Regional Directors against imposition of penalties, if already imposed. “However, the immunity is only against delayed filings in the MCA 21 (the online portal for making statutory filings) and not against any substantive violation of law," the ministry said.
Businesses can opt for the schemes and take advantage of the one-time waiver of additional filing fees for delayed filings. This option will be available from 1 April for six months upto 30 September. In the case of businesses with long standing defaults, the schemes are likely to be a major relief to get to the right side of law.
Often, entrepreneurs who set up companies and LLPs for business ventures do not commence operations because of various genuine economic reasons but fail to ensure the company either makes all statutory filings or is wound up. This adds to the number of defaulting companies in the registry of companies and LLPs.
Corporate affairs and finance minister Nirmala Sitharaman had last week announced compliance relief to businesses in filing the incorporation report, the need for directors of companies to stay within India for a specified period and for maintaining a reserve of 20% of the deposits maturing in a year. Also, the government raised the payments default threshold for initiating bankruptcy proceedings against companies from ₹1 lakh to ₹1 crore to prevent bankruptcy proceedings getting triggered against micro, small and medium enterprises during the coronavirus pandemic.