MCA notifies relaxation for filings relating to creation or modification of charges
The economic impact of the 2020 coronavirus pandemic in India has been largely disruptive. The lockdown though necessary has led to a disastrous impact on the economy. The Government of India announced a variety of measures to tackle the situation, from food security and extra funds for healthcare and for the states, to sector related incentives and tax deadline extensions.
Representations were also received by the MCA, requesting that the timelines related to filing of certain charge related forms to be suitably relaxed so as to provide a window of compliance for the registration of charges. The Central Government in exercise of its powers under section 460 read with section 403 of the Act and the Companies (Registration Offices and Fees) Rules, 2014 decided to introduce the “Scheme for relaxation of time for filing forms related to creation or modification of charges under the Companies Act, 2013” for the purpose of condoning the delay in filing certain forms related to creation/ modification of charges.
A similar scheme namely the Companies Fresh Start Scheme, 2020 (CFSS-2020) was also introduced earlier:-
- The MCA received representations from the stakeholders to provide a one-time opportunity to file all the pending documents including the annual filing of the company without charging higher additional fees on any delay.
- The MCA came up with the ‘Companies Fresh Start Scheme 2020’ in March 2020 to enable companies make good of any filing-related defaults, irrespective of duration of default, and make a fresh start as a fully compliant entity.
- This Scheme provided immunity to stakeholders who were unable to file specified documents including annual filing to ROCs.
- CFSS 2020 also granted immunity for any prosecution or proceeding against the company on account of delay in filing documents.
- The CFSS 2020 scheme is applicable from 1st April 2020 to 30th September 2020.
What documents are present with the MCA?
- The Companies Act provides for, and casts an obligation on companies incorporated under the Act, to file various forms, returns & documents with the Registrar of Companies (RoC) under the Ministry of Corporate Affairs (MCA).
- Requirements are laid down in various sections of the Act and in the rules/ regulations made there-under, which prescribe the forms, returns and other documents to be filed with the RoC.
- Thus, a large volume of information gets generated and stored as a by-product of administration and regulatory compliance of the Companies Act.
- The forms, returns and documents to be filed include various applications, returns, balance-sheet, prospectus, memorandum of agreement, article of association, particulars of charges, etc. As per the Act these documents are required to be maintained by the RoC.
- These documents contain thorough information about the companies, their net worth, shareholding and ownership pattern and detailed financial statements i.e. Balance Sheet and Profit & Loss Accounts.
- The information available with the RoC is relied upon by various courts, financial institutions etc.
What is the new ‘’Scheme for relaxation of time for filing forms related to creation or modification of charges under the Companies Act, 2013’’?
For the purpose of condoning the delay in filing certain forms related to the creation/ modification of charges, the Central Government decided to introduce a Scheme for relaxation of time for filing forms related to creation or modification of charges under the Companies Act, 2013.
The scheme shall be applicable in respect of Filing of Form No. CHG-1 and Form No. CHG-9 by a company or a charge holder, where the date of creation/modification of charge:
- Is before 1st March, 2020, but the timeline for filing such form had not expired under section 77 of the Act as on 1st March, 2020
2. Falls on any date between 1st March, 2020 and 30th September, 2020 (both dates inclusive).
What benefit is provided under this scheme?
- If the charge is created before the 1st March, 2020 and date of registration of charge is fall between 1st March, 2020 to 30th September 2020, then the first day after 29th February, 2020 shall be reckoned as 1st October, 2020 for the purpose of counting the number of days within which the form is required to be filed under section 77 or section 78 of the Act.
- If the charge is created between 1st March, 2020 and 30 March 2020, then the period beginning from the date of creation/modification of charge to 30th September 2020 shall not be reckoned for the purpose of counting of days under section 77 or section 78 of the Act. In case, the form is not filed within such period, the first day after the date of creation/modification of charge shall be reckoned as 1st October, 2020 for the purpose of counting the number of days within which the form is required to be filed under section 77 or section 78 of the Act.
What is Section 77 and 78?
As per section 77 of the Companies Act, the charge must be registered with the RoC within 30 days from its creation or modification. This period can be extended up to 120 days, which would attract late fees.
The scheme is also applicable for the timeline under section 78 which relates to the charge-holder filing the charges with the RoC in case the company fails to do it.
According to Section 78, where a company fails to register the charge within the period of 30 days referred in section 77, without prejudice to its liability in respect of any offence under this Chapter, the person in whose favor the charge is created may apply to the Registrar for registration of the charge along with the instrument created for the charge, within such time and in such form and manner as may be prescribed and the Registrar may, on such application, within a period of 14 days after giving notice to the company, unless the company itself registers the charge or shows sufficient cause why such charge should not be registered, allow such registration on payment of such fees, as may be prescribed.
When will this Scheme not be applicable?
The MCA barred the applicability of this circular on:-
- CHG-1 and CHG-9 Forms, which has already been filed before the date of issue of this Circular
- The timeline for filing the form has already expired under section 77 or section 78 of the Act prior to March 1, 2020
- If the timeline for filing the form expires at a future date, despite the exclusion of the time provided
- Filing of Form CHG-4 for the satisfaction of charges.