MCA notifies relaxation for filings relating to creation or modification of charges

Introduction:

The financial effect of the 2020 coronavirus pandemic in India has been to a great extent problematic. The lockdown however fundamental has prompted a shocking effect on the economy. The Government of India reported an assortment of measures to handle the circumstance, from food security and additional assets for medicinal services and for the states, to area related impetuses and duty cutoff time expansions.

Representations were additionally gotten by the MCA, mentioning that the timetables identified with recording of certain charge related structures to be reasonably loose in order to give a window of consistence to the enlistment of charges. The Central Government in exercise of its forces under area 460 read with segment 403 of the Act and the Companies (Registration Offices and Fees) Rules, 2014 chose to present the "Plan for unwinding of time for recording structures identified with creation or alteration of charges under the Companies Act, 2013" to support the deferral in documenting certain structures identified with creation/change of charges.

A similar scheme namely the Companies Fresh Start Scheme, 2020 (CFSS-2020) was also introduced earlier:-

1. 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.
2. 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.
3. This Scheme provided immunity to stakeholders who were unable to file specified documents including annual filing to ROCs.
4. CFSS 2020 also granted immunity for any prosecution or proceeding against the company on account of delay in filing documents.
5. The CFSS 2020 scheme is applicable from 1st April 2020 to 30th September 2020.

What documents are present with the MCA?

1. 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).
2. 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.
3. Thus, a large volume of information gets generated and stored as a by-product of administration and regulatory compliance of the Companies Act.
4. 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.
5. 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.
6. 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’’?

To overlook the postponement in recording certain structures identified with the creation/adjustment of charges, the Central Government chose to present a Scheme for unwinding of time for documenting structures identified with creation or change 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:

1. 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

or,

2. Falls on any date between 1st March, 2020 and 30th September, 2020 (both dates inclusive).

What benefit is provided under this scheme?

1. If the charge is made before the first March, 2020 and date of enlistment of charge is fall between first March, 2020 to 30th September 2020, at that point the main day after 29th February, 2020 will be figured as first October, 2020 to check the quantity of days inside which the structure is required to be recorded under sector 77 or sector 78 of the Act.
2. If the charge is made between first March, 2020 and 30 March 2020, at that point the period starting from the date of creation/change of charge to 30th September 2020 will not be figured to check of days under segment 77 or segment 78 of the Act. In the event that, the structure isn't recorded inside such period, the principal day after the date of creation/alteration of charge will be figured as first October, 2020 to tally the quantity of days inside which the structure is required to be documented under area 77 or sector 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:-

1. CHG-1 and CHG-9 Forms, which has already been filed before the date of issue of this Circular
2. The timeline for filing the form has already expired under section 77 or section 78 of the Act prior to March 1, 2020
3. If the timeline for filing the form expires at a future date, despite the exclusion of the time provided
4. Filing of Form CHG-4 for the satisfaction of charges.