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Section 460 of Companies Act deals with condonation of delay which means that the if there is delay in filing cases under companies act within specified time limit which is 270 days then the applicant has to take permission from Central Government by stating valid reasons of inability of filing the case within the given time frame. As the businesses are affected due to the current situation of pandemic whether it is companies or LLPs or sole proprietorship the government has provided certain relaxations to LLPs under LLP Settlement Scheme, 2020 and one of them is that Section 460 of Companies Act, 2013 will apply to LLPs also and because of its LLPs will have less burden for filing the case proceedings at this time.
Section 460 of Companies Act, 2013
Condonation of delay in certain cases
“Notwithstanding anything contained in this Act,—
(a) Where any application required to be made to the Central Government under any provision of this Act in respect of any matter is not made within the time specified therein, that Government may, for reasons to be recorded in writing, condone the delay; and
(b) Where any document required to be filed with the Registrar under any provision of this Act is not filed within the time specified therein, the Central Government may, for reasons to be recorded in writing, condone the delay.”
Ministry of Corporate Affairs Notification (30th January 2020, New Delhi)
G.S.R. 59(E).—In exercise of the powers conferred by sub-section (1) of section 67 of the Limited Liability Partnership Act, 2008 (6 of 2009), the Central Government directs the provisions of section 460 of the Companies Act, 2013 to apply to a limited liability partnership from the date of publication of this notification in the official Gazette.
This notification means that the above LLP Settlement Scheme 2020, will be applicable to any defaulting LLP which is registered under Limited Liability Partnership, 2008 and those LLPs has made a default in filing any application or documents which can be of any form specified under LLP act 2008 with the mentioned due dates. The rules given under the settlement is to ease the working of LLP and the applications and documents can be filed with condonation of delay which were due to filed till 31st October 2019.
Problems which were faced at the time of Covid-19
In general LLPs have easier compliance norms to be followed and as a result LLP has a norm of limitation to file documents but in the times of pandemic many LLPs have reported non-compliance of the norms issued to them as a result, they were unable to file annual documents with ROC. There were many reasons for non-compliance of the norms such as disqualification of any designated partner, need to affix digital signature, de-activation of DIN. Partners of many LLPs have held to be criminally prosecuted because of which they were unable to close until all the requirements are fulfilled. There is no remedy to such situation.
Solution given for above mentioned problems
To ease for doing business as LLP in the times of pandemic and to provide solution to the current situation Central Government has decided to give a onetime relaxation in additional fees to any defaulting LLPs and condonation of delay in default of filing documents at the correct time.
Firstly, through the circular additional fees has to be paid by the defaulting LLP of Rs. 10/- per day in the prescribed form, if any. Also, the circular state that additional fee shall not exceed Rs. 5000/- per document.
But the above fees structure has been completely waived off through the circular given on 30 March 2020 when the option of condonation of delay has been provided to LLP.
LLP Settlement Scheme
This scheme is given by Central Government to deal with pandemic situation where any LLP is at default for not filing the documents /forms with Roc then LLP’s have chance to condone the delay. The documents which have to be filed by LLPs to MCA includes:
- At the end of very half year i.e., after every 6 months of the financial year LLPs have to submit Statement of Account and Solvency in the prescribed form given as Form 8 with the Registrar, within 30 days from the end of each half- yearly.
- After that annual return report must also be filed within 60 days of the time of closure of the financial in prescribed form which is Form-11
- If any change is made in the agreement of LLP it must be informed by filing required document within 30 days of any such change.
- If any change is made related to the appointment, termination, change in designated partner. All such changes must be filed to ROC in the prescribed format which is Form- 4 within 30 days of any such change.
- In the case of change in the name of LLP after taking consent of every designated partner the notice of such change is to be filed to ROC within 30 days of obtaining consent from all the partners in the manner prescribed as Form-5.
- If there is any change related to the place of business such notice must be filed with ROC within 30 days after taking consent from all the designated partners in the prescribed manner which Form-15 and such change must be done under section 13 read with rule 17.
- The first implication is very clear and evident that it is really a positive step towards the protection of justice which now cannot be taken away by the ministry on the basis of delay of filing documents if such delay is happened because of the reasons which are not controllable by the designated partners. But this has another side also where lawbreakers deliberately would take the shield of this relaxation. Therefore, the Central Government has given this relaxation for limited period of time to protect any negative implication of pandemic on business sector. The compliance of LLPs is easier than of the companies because of which this relaxation is not given to LLPs permanently. Also, the condonation of delay is to be decided judicially and not arbitrarily in the current times so that lawbreakers would not take advantage of this relaxation.
- Now that the LLPS have to condone the delay in filing the forms as per the procedure mentioned in section 460 of the Act read with Rule given. It is, therefore, said that in respect of delay in filings under any section of LLP Act, the LLPs have to obtain condonation of delay under Section 460 and if they do not get the approval by the Central Government then they are not eligible for immunity from any penal/prosecution action against designated partners for any delay.
- In filling e-forms or manually form procrastination will surely be a disadvantage for both time and money of the designated partners. Therefore, the LLPs have now a challenge to take responsibility for filing timely otherwise the same would result in not only invitation of additional fees but also to ask for condonation of delay.
- It will now be evident to track doubtful companies because LLPs now have to file document even after their incompetence to file such documents on time, they cannot take the shield of incompetence to not file such important documents with ROC because of the stricter environment it will be easy to track down such doubtful companies.
Companies Fresh Start Scheme (CFSS)
There are two schemes which were introduced by Central Government in the time of Covid-19. One is LLP Settlement scheme, and another is Companies fresh start scheme. Under CFSS only normal fees has to be paid and no additional fees is required to be paid to MCA-21 registry. It has to be paid in the prescribed form which is as per the Section 403 read with Companies (Registration offices and fee) Rules, 2014 (“Fee Rules”) and Section 460 of the Companies Act.
Section 455 of the Companies Act define dormant company which basically means any company incorporated for future project and CFSS provides an opportunity to inactive companies to declare them as dormant company by filing a simple form with a normal fee. This will help companies to stay on the registry with the minimum compliance fulfillment.
Under these schemes defaulting company has to pay only normal fees which is prescribed under the Fee rules, no additional fees are to be paid for filing delayed documents. Also, immunity is provided from prosecution for imposing penalty associated with filing of belated documents. It is also stated that if there is any related matter which involves the interest of any shareholder, directors, or any related person of the company then it will cover those members also in such immunity.
Modification under LLP Settlement Scheme
In continuation to the general circular of LLP Settlement Scheme further relaxations was also introduced which was based on additional fees as a one-time relaxation was provided for the additional fees to the defaulting Limited Liability Partnerships so that they can file their pending documents with ROC. This reduces the compliance burden of LLPs in the time of pandemic. There are some modifications made in the circular which includes:
The LLP scheme which was given by the Central Government was to be in force till 13 June 2020 at the first instance but in paragraph 8 it was replaced to March 30, 2020.
- On April 1, 2020, a new paragraph was inserted which was paragraph 8A and it modifies the LLP Scheme and also it will come in force on April 1, 2020 and will remain applicable till September 30, 2020. This circular has also provided that any defaulting LLP can file belated documents till 30th September 2020. The defaulting LLPs can take advantage of the opportunity by filing the belated delayed documents without paying any additional fees or any prosecution charge, only a simple fee is to be paid to file such documents. In addition to it, the working off LLP is ease in also another way as they will not be prosecuted if the default is done because of the uncontrollable events. In the end LLP Scheme would not apply to those LLPs which have made applications to the registrar for striking off their name from the register under Rule 37(1) of the Limited Liability Partnership Rules, 2009.
- The LLP Scheme has also clarified that the registrar will take necessary actions against those LLPs which have not availed the LLP Scheme in the given period till September 30, 2020 and are still at default regarding filing of documents on timely manner.
Matters under CFSS Related to LLP Settlement Scheme
In the continuance of circular relating to the schemes given during the time of pandemic, it is given that after giving the immunity by the designated authority, if there is any pending prosecution then it must be withdraw and if there are any penalties given as per the Section 454 of Companies Act 2013 other than those where court has given conviction in a matter where no appeal has been preferred against such order need to be withdraw. In matter of those defaults against which immunity has been granted will be deemed to be taken as completed without giving any further action on the part of the designated authority.
There are cases in which special measure will be applied, those are cases where penalty has been charged due to the delay associated in filing any documents with registrar under MCA-21, but no appeal has been made by the opposite parties under section 454(6) of Companies Act, 2013 on the date of commencement of CFSS. For those cases, the procedure is given under:
- The last date to file an appeal by the concerned party against the order of the adjudicating authority under section 454(6) of the companies act, 2013 is March 1, 2020 to May 31, 2020, including both of the days.
- After that, a period of 120 days was granted from such date to all the companies and its members for filling the appeal.
- The Prosecution which is filed against the company under 454(8) of the Companies Act, 2013 for non-compliance of the order given by the adjudicating authority, and the matter relates to delay in filling of any such document with registry then in that case it will not be initiated against such company or officers.
The relief is provided to the companies under Company Fresh Settlement Scheme but there are some companies to which they are not applicable, and they are:
- A company who has filed an application for striking off the name of the company by the register companies.
- Those companies which has been amalgamated with an arrangement under Companies Act.
- Where companies whether those who are inactive companies or other companies have filed to convert themselves into Dormant company.
- Vanishing Companies
At the conclusion Central Government has provide with a golden opportunity to both Companies and LLP to remove there incompetency with a minimum requirement of compliance. But still if the Companies or LLPs does not take such opportunity then Central Government after expiry of given time will take necessary actions against them.