The Government of India this year introduced a number of methodologies in order to ensure that shell companies do not become a medium of illegal activities like black money and corruption.
From restrictions in the laying down of a number of subsidiary companies to the disqualification of shell companies and their directors. The Government also initiated an action to be taken by the Serious Fraud Investigation Office to investigate the affairs of the companies which were involved in depositing and withdrawing large sums during demonetization and impose appropriate penal actions in the said regard. Amidst such noose tightening, the Ministry of Corporate Affairs (hereinafter referred to as the "Ministry") brings a relief to the defaulting companies and their directors by outlining a draft scheme for condonation of delay.
Over 300,000 Directors were recently disqualified by the MCA for their default in filing company annual returns1. Also, over 200,000 lakh companies were termed as defaulting companies and their names were struck-off from Registrar of Companies (hereinafter referred to as "RoC") for failing to comply with regulatory requirements. The said action by the RoC was taken under the provisions of Section 248 (1) of Companies Act, 2013, which relates to the Power of the Registrar to remove the name of company from the register of companies.
The Department of Financial Services through the Indian Banks Association, had advised banks to take immediate steps to put restrictions on bank accounts of such struck-off companies.
The Ministry has introduced the scheme for condonation of delay, 2018. The Condonation of Delay Scheme will be operational for a period of three months only (i.e. January 1, 2018 to March 31, 2018). The Scheme is an opportunity for the defaulting companies to rectify their negligence. The provisions of the said scheme allow the following with respect to the defaulting companies:
- Temporary activation of the Director Identification Number (DIN) of the disqualified directors to enable them file the overdue documents.
- E-filing of the pending overdue documents by the defaulting company after the payment of the prescribed statutory fees and applicable additional fee.
- Filing of the application seeking coronation of delay along with the requisite fees of INR 30,000/- (approx. USD 467).
The scheme envisages the temporary reactivation of the Director Identification Number (DIN) of the directors associated with the "defaulting company" for the online submission of the below mentioned documents:-
- Form Number 20B/MGT-7- Form for filing Annual Return by a company having share capital.
- Form 21A/MGT-7- Particulars of Annual return for the company not having share capital.
- Form 23AC, 23ACA, 23AC-XBRL, 23ACA-XBRL, AOC-4, AOC-4(CFS), AOC (XBRL) and AOC-4(non-XBRL) – Forms for filing Balance Sheet/Financial Statement and profit and loss account.
- Form 66- Form for submission of Compliance Certificate with the Registrar.
- Form 23B/ADT-1- Form for intimation for Appointment of Auditors.
The concerned Registrar shall then withdraw the prosecution(s) pending if any before the concerned Court(s) for all documents filed under the scheme.
The scheme comes in furtherance of the number of writ petitions filed by the disqualified directors seeking relief against such disqualification. The implementation of such scheme would accord a fair opportunity to the defaulting entities to rectify all the flaws and come within the ambit of legal mainstream.
1 MCA General Circular No.16/2017