MCA Company Law Settlement Scheme (CLSS) 2014 for two months 15-08-2014 to 15-10-2014

A Company Law Settlement Scheme provides for an opportunity to the defaulting companies to make their default good by filing such belated returns/documents and become a regular compliant in future. The compliance is required to be made within the period of the scheme with reduced late fees than otherwise applicable and with immunity from prosecutions. Earlier in 2011 also a Company Law Settlement Scheme 2011 was launched.

Company Law Settlement Scheme CLSS 2014
The Companies Act, 2013 lays down more stringent penal consequences for defaulting companies.For example, section 451 prescribes twice the fine for repeated second default within a period of three years. Further the provisions of s ection 164(2) disqualify a directors from being appointed re-appointed in case the company has not filed financial statements or annual returns for any continuous period of three financial years.

Despite that it was observed  that a large percentage of companies have not filed their statutory documents which makes them liable for penalties and prosecution for s uch non-compliance. Also there are large number of companies which after their incorporation did not commence any activity or business and are inactive or laying defunct/dormant. Section 455 prescribes the making of an application to the Registrar for declaring such companies as “dormant company”. The provisions of section 455 enable such inactive companies to remain on the Register of Companies with minimal compliance requirements.

Ministry of Corporate Affairs (MCA) acting on the representations of stakeholders has decided to introduce a settlement scheme namely "Company Law Settlement Scheme 2014" (CLSS-2014). The circular no 34/2014 dated 12-08-2014 contains the details of the scheme.

Period of Company Law Settlement Scheme CLSS 2014
The CLSS-2014 has been offered for a period of two months. The scheme shall come into force on the 15-08-2014 and s hall remain in force up to 15-10-2014.

Silent Features/Procedure of CLSS-2014

(a) Which documents the scheme cover?

The scheme CLSS-2014 shall apply to the following belated documents only

1.      Form 20B- Form for filing annual return by a company having share capital

2.      Form 21A - Particulars of Annual return for the company not having share capital.

3.      Form 23AC, 23ACA, 23AC-X8Rl and 23ACA-XBRL - Forms for filing Balance Sheet and Profit & Loss account.

4.      Form 66- Form for submission of Compliance Certificate with the Registrar.

5.      Form 238- Form for Intimation for Appointment of Auditors.

(b) Cases not covered by the scheme

The scheme does not apply to:

1.      to companies against which action for striking off the name {section 560(5) Companies Act, 1956} has already been  initiated.            

2.      where any application has already been flied by the companies for action of striking off name

3.     where applications  have  been  filed for  obtaining  Dormant  Status  under section 455 of the Companies Act, 2013

4.      to vanishing companies. (Read More about vanishing companies) Click Here >>

(c) Who can apply?

Any defaulting company can apply for annual documents which were due for filing up to 30 ^th June, 2014.

(d) Benefits:

     1.     Condonation of the delay in filing the Annual Returns or financial statements.

     2.     Grant of the immunity for prosecution.

     3.     Reduced charging of additional fee @ 25% of the actual additional fees payable.

     4.     Non applicability of disqualification of directors u/s 164(2)(a) 

     5.    Opportunity to Inactive companies to get their companies declared as 'dormant company' in as imple application at reduced fee.

(e) What will happen to existing appeals filed by company against prosecution launched?

     The applicant company before filing application under the scheme is required to withdraw the appeal and furnish proof of such withdrawal along with the application.

(f)  Options for inactive companies:

     The defaulting inactive companies, while filing ClSS-2014 can, simultaneously, either:

1.      apply to get themselves declared as Dormant Company by filing e-form MSC-1 at 25% of the fee for the said form;  or

2.      apply for striking off the name of the company by filing e- Form FTE at 25% of the fee payable on form FTE.

(f)  Application and grant of Immunity

After filing of belated documents, the application seeking immunity in respect of such documents filed under the Scheme is to be made electronically In the e-Form CLSS-2014. The said e-form shall be be available onthe MCA21 portal from 1 ^st September, 2014. The CLSS-2014 should be filed not later than three months from the date of closure of the Scheme. There shall not be any fee payable on this Form. The RoC shall consider the application and upon being satisfied shall grant the Immunity certificate In respect of documents filed under this Scheme