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Filing Of Documents By Companies: Examination Of Companies Fresh Start Scheme, 2020

Any company which is established in India has to go through a protracted set of legal procedures before being finally incorporated. A registered company gets a separate legal existence and is capable of exercising all of its rights as an artificial person. A company can sue and can be sued in its personal capacity. A company, whether private, public or one person has to necessarily comply with the provisions incorporated under the Companies Act of 2013.

Filing of documents is not a one way to avoid compliance but it rather continues even after a company gets a certificate of registration. A company has to file annual returns and is required to maintain books of accounts for inspection or auditing as may be required by authorities in exercise of powers under the Companies Act of 2013. The Central Government may issue orders for furnishing the documents and other evidence by exercising its power under the Companies Act, 2013.

Apart from mandating the normal compliance filing within a specified time as required under the Act, the central government may provide additional period of filing the requisite documents and mitigate the legal proceedings for delay in filing the documents. This paper will deal with the provisions of filing of documents and other evidence stipulated by the Companies Act, 2013 and the alternatives provided by Central governments in condoning the delay in filing of documents.

The Companies Act, 2013 stipulates that companies established under the Act are required to file documents necessary for maintaining their on-going affairs. There are various provisions which mandate the filing of a number of documents by the companies. Before going in depth of the provisions, one question arises as to what forms of papers are considered as documents under the Companies Act of 2013.

A Document is any document which is reproduced or derived from returns and documents filed by a company with the registrar whether in paper or an electronic form or something which is computer readable; the document should have been authenticated by registrar for the purpose of the Act and should be admissible during any proceedings as provided under section 397 of the Companies Act of 2013.

The documents which are required to be filed with the registrar are memorandum of association (MOA), articles of associations (AOA) and any alterations associated with them, prospectus, annual returns, balance sheet, particulars of charges, etc.

Section 7 of Companies Act of 2013 has mandatory provisions of filing application with the documents, namely, memorandum of association, articles of association, copy of agreement signed by a company for appointing managerial personnel in addition with a declaration of compliance with the registrar and the sub-section (1) of section 7 requires the companies to maintain and preserve the same.

After the filing of all the relevant documents, the registrar grants them a certificate of incorporation. However, this does not mean that the burden of filing documents in future is mitigated. There are certain other provisions which need the compliance of the companies pertaining to smooth running of their businesses.

Provisions For Indian Companies

The other provisions pertaining to the filing of requisite documents are sections 137, 206, 397, 402, 403, 460, 463. Section 137 of the Act says that the companies shall file the financial statements and all the other relevant documents with the registrar which is adopted by them at their annual general meetings within the period of 30 days. If they fail to adopt the financial statements at the annual general meeting, the same shall be recorded in the next annual general meeting and be filed within the 30 days period. A nominal fee is required to be paid while filing the applications as required under section 403.

Some exceptions are also provided under section 137 to one person company with an additional period of 180 days for them to file the financial statements after the conclusion of their annual general meetings.

Section 206 of the Act gives power to the registrar to ask for furnishing the documents in addition to writing the reasons for the delay within the time specified. The documents can be either filed in manual or electronic form. The documents which are filed electronically shall also comply with the provisions of Information Technology Act, 2008 as mentioned under section 402 of the Companies Act of 2013.

Provisions For Foreign Companies

Chapter 22 (379-394) of the Act contains the provisions for foreign companies. Other sections, 71, 192, and 128 also govern the foreign companies. Section 379 of the Act provides the definition of foreign company. A foreign company is a company in which more than 50% of the paid-up share capital is held by one or more than one citizens of India.

Such a company is also required to comply with the provisions of section 380 of the Act in the form of filing documents such as memorandum of association and articles for association which constituted the company along with providing information of the full address of the registered office, list of directors, secretary, residence of persons residing in India, etc.

Any changes made in the documents filed with the registrar thereafter, shall be notified to him within a period of 30 days. Section 381 provides for the accounts of foreign company and necessary documents which are required to be filed with the registrar.

The nominal fee is also required to be paid in respect of filing any document with the registrar (section 385). In failure of compliance, foreign companies shall be impugned under section 392 with fine of Rs. one lakhs and which may be extended to five lakhs and if the company continues to such redundancy, fine will be charged for every day at the value of Rs. 50,000.

Alternatives By Central Government

There are alternatives which are provisioned under the Act to mitigate the over-burden of companies to comply with the filing of documents. Section 460 grants the power to the central government to extend the time period of filing the documents with the registrar and other documents before the concerned authorities, if the companies fail to file within the period specified. The companies will have to furnish the reasons behind the delay. The Central government has, time and again, provided relief to the officials of the company by condoning the delay in filing various applications or documents in the form of various schemes.

Current Scenario
In the wake of the global pandemic, the central government has tried to mitigate the over-burden of the companies for compliance of filing procedures on account of various pleadings of stakeholders directed towards the ministry of corporate affairs. The central government has brought a scheme, Companies Fresh Start Scheme, 2020 (CFSS) in March 2020. The Central government, in time and again, has been exercising its powers under section 460 for condoning delays and has formulated similar schemes in the past.

Some of the notable schemes are:
  • Companies Law Settlement Scheme, 2010 and Easy Exit Scheme, 2010
  • Companies Law Settlement Scheme, 2014
  • Condonation of delay scheme, 2018

However, in the mentioned schemes above, the central government never normalized the fee which is required to be paid as per section 403. But this time, the central government condoned the additional fee which is required to be paid if delay is done on the part of the companies. Since the Companies Act of 2013, applies to Indian as well as the foreign companies; this act may confer them some relief. This is done actually at the time when the global economies are suffering at the cost of financial crisis.

Some of the features of the scheme are:
  • The companies have an extended period till 31st December, 2020 to file their documents with the authorities.
  • The companies will be charged only the normal fees and not the additional fees.
  • An opportunity has been conferred on the dormant companies for completing their procedure of filing the relevant documents.
  • Immunity from legal proceedings will be covered under the scheme but not on the proceedings already initiated under the Act against the defaulting company.
  • An opportunity shall be given to the defaulting company to withdraw its appeal against any order passed or complaint made by an adjudicatory authority.
  • The companies in default, are given an additional period of 120 days from filing an appeal against the order of any adjudicating authority, if the last date of filing the appeal lied between 1st March 2020 to 31st May 2020.

Exceptions Under The Scheme

  • The immunity under the scheme shall not be granted to the companies involved in management dispute and if such a dispute is pending before a court of law or a tribunal.
  • In case of order of conviction already passed by a tribunal against the defaulting company, no immunity shall be granted under this scheme.

Non-Applicability Of Scheme

Moreover, this scheme is not applicable in the following cases:
  • The action of striking off the name of certain companies has been already initiated by a the authorities.
  • The companies which have voluntarily filed an application for striking off their names before the registrar.
  • The companies which have amalgamated.
  • The applications raised by companies for grant of their dormant status.
  • The companies which are vanishing.
  • The companies which have exceeded against its authorized capital.

Examination Of The Scheme

The scheme has provided immunity to the companies in the wake of the pandemic which is a very good initiative but when the provisions of the Act are to be carefully observed, section 403 already provides for granting additional period of 270 days to the companies which in default in filing any document, fact or information with the reasons recorded in writing along with charging the additional fee for the purpose of delay in filing. This scheme was launched in March and was applicable till the month of September but recently, the government extended the period of filing under the scheme.

The six months period will be calculated as 360 days. This is in violation to the proviso contained under section 403. Since the Central Fresh Start Scheme, 2020 provides for charging only the normal fee, that would simply mean that the powers granted to the central government under section 460 has overriding effect over the provision of section 403. Moreover, the scheme is not applicable to companies which are vanishing. There is doubt as to the conception of vanishing companies. There should not any vagueness as to what companies will be considered as vanishing in nature.

The filing of documents is one of the mandatory provisions under the Companies Act of 2013. Every company has to undergo a set of legal procedures to maintain their transparency and stability in the societal realm. So in order to maintain its transparency and stability, it has to comply with the mandatory provisions contained in the company law. If it fails to furnish documents, it shall come under the aegis of defaulting company and penalized for not comply with the legal procedures.

The alternatives which are provided by the central government are tentative in character and they cannot provide a ground of escape for the companies if they continue to show defiance in filing the documents. These reliefs are provided to help companies overcome the burden of compliance and encourage them to follow the norms. The companies should not misuse this Condonation but should rather strive to follow the laws and avoid unnecessary legal consequences.

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