Sunday, 16 November 2014

MCA announces Company Law Settlement Scheme 2014

MCA announces Company Law Settlement Scheme 2014


The Ministry of Corporate Affairs (MCA), New Delhi has announced the Company Law Settlement Scheme (CLSS) for 2014. In its circular dated 12th August 2014, the MCA has extended an immunity for all companies who have not filed their annual returns provided they file it on or before 15th October 2014. The circular also stipulates that companies filing their annual returns during this scheme period shall pay only 25% of the additional filing fee as against 100%. Further all prosecutions which have already commenced against the directors of such companies who have defaulted in filing their annual returns will be dropped. The scheme also provides for companies to file for and seek to be declared as a dormant company or apply for striking off the name of the company under the Fast Track Exit (FTE) by filing 25% of the filing fee alone. The new Companies Act 2013 (“the Act”) provides for stringent penal provisions against the directors of all defaulting companies with higher additional fees. Under Section 137 of the Act, a fine of Rs.1000/- per day is levied on a company which has not filed its annual returns subject to a maximum amount of rupees ten lakhs. Besides this, the Managing Director and the Chief Financial Officer, or in the absence of a Managing Director or Chief Financial Officer, any other director who is charged with the responsibility of complying with the provisions of Section 137, and in the absence of such a director, every director of the company shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than one lakhs rupees but which may extend to rupees five lakhs or with both. After the enactment of the new Act, the Registrar of Companies (Roc) havecommenced prosecution against several defaulting companies. Companies now have an opportunity to file their annual returns on or before 15th October 2014 and seek to avoid the prosecution faced by its directors, if the prosecution has not already commenced or in cases where the prosecution has commenced avail of the immunity granted by the circular, by filing an application for the issue of immunity in respect of the documents filed under the scheme. The scheme shall not apply to vanishing companies.

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