Brief Note on Condonation of Delay Scheme (CODS), 2018
Defaulting company means a company which has not filed its financial statements or Annual returns as required under the Companies Act, 1956 or Companies Act, 2013, as the case may be, and the Rules made thereunder for a continuous period of three years.
About the Scheme
Condonation of Delay Scheme, 2018 has been notified vide General Circular No. 16/2017 dated 29th December, 2017 and purpose of the scheme to give the relief to the Defaulting Companies and disqualified Directors. This scheme shall be effective from 1st January, 2018 and shall remain in force up to 31st March, 2018.
Means only three months period has been given to the Defaulting companies and disqualified directors to file their overdue documents/report/returns.
This Scheme is Applicable to all defaulting Companies (Other than the Companies which have been stuck off/whose name have been removed from the register of Companies under section 248(5) of the Act). A defaulting company can file its overdue documents which were due for filing till 30th June, 2017 means up to the financial year ending on 31st March, 2016.
Why this scheme has been introduced/launched?
Every company registered under Companies Act, 1956 or 2013 are required to file their Annual Financial statements and Annual Return with the concerned Registrar of Companies within 30 days and 60 days from the Date of Annual General meeting or due date of Annual General Meeting whichever is earlier respectively and with such additional period and fees prescribed under section 403 of the Companies Act, 2013. Non filing of the said reports is an offence under the said Act.
Section 164 (2) read with section 167 of the Companies Act, 2013 provide for disqualification of a director on account of non-filing of financial statements or Annual Return for a continuous period of three years. And every Director disqualified shall inform to the concerned Company about his disqualification in form DIR-8.
Now, earlier before this scheme, Ministry of Corporate Affairs (MCA) had launched Company Law Settlement Scheme, 2014. The purpose of the scheme was the same, to provide immunity to the defaulting companies and relief to the disqualified Directors in the same manner.
But in current scenario, the Government was strict and has taken major steps. MCA in September, 2017, identified approx. 3 lakh Directors associated with the defaulting Companies and they were barred from accessing the online registry and their DIN has de-activated for 5 years from the date of default.
After this step, ministry received so many representation from industry, defaulting Companies and their directors seeking an opportunity and giving them some relief to normalize their business operations. Some disqualified Directors also filed writ petition before High Courts seeking relief from disqualification. So, this scheme has been launched by the Ministry.
Under this scheme, DIN of disqualified directors shall be temporarily activated during the validity of the scheme to enable them to file overdue documents.
Which e-form can be filed under the Scheme?
Under this scheme only below mentioned e-forms can be filed:
- Form 20B/MGT-7 – Annual Return by a company having share capital
- Form 21A/MGT-7 – Annual Return by a company not having share capital
- Form 23AC, 23ACA, 23AC-XBRL, 23ACA- XBRL, AOC-4, AOC-4 (CFS) and AOC-4 (XBRL) – Financial Statements
- Form 66 – Compliance Certificate
- Form 23B/ ADT-1 – Intimation for Appointment of Statutory Auditors
The defaulting companies shall file its overdue documents and after filing the overdue documents, the defaulting company shall seek Condonation of delay by filing form e-CODS to the Registrar of Companies. The fee for filing e-form CODS is Rs. 30,000/- (Rupees Thirty Thousand only).
Effect of the Scheme
The DIN of the disqualified directors shall be permanent activated and defaulting company’s status shall be active and they can continue their business with the same directors.
And Registrar concerned shall withdraw the prosecution(s) pending if any before the concerned court(s) for all documents filed under the scheme. However, this scheme is without prejudice to action under the section 167(2) of the Companies Act, 2013 or civil and criminal liabilities, if any, of such disqualified directors during the period they remain disqualified.
Punishment if not avail this scheme
In case Defaulting Companies did not file their overdue documents under this scheme then the DIN of disqualified directors of the concerned Companies shall be de-activated after expiry of the said scheme and Registrar shall take all necessary actions under the Companies Act, 1956/2013 against the Companies who have not availed themselves of this scheme and continue to be in default in filing the overdue documents.
- The DINs in respect of disqualified Directors have been activated w.e.f. 12th January, 2018 and the status of the relevant DINs can be checked on the portal. Further note that the scheme is not applicable for those Directors who may have been associated with a company which was struck off under Section 248(1) of the Companies Act-2013 and DINs for such individuals shall be re-activated only upon receipt of orders for revival of the said company, as per due process laid down under Section 252 of the Companies Act-2013.
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