The Legality of Corporate Amnesty: Assessing the Efficacy of the Company Fresh Start Scheme (CFSS) 2020 in Regularizing Past Filing Defaults

Compliance is a key part of good governance, and is crucial to ensuring transparency, accountability and investor confidence. According to Companies Act, 2013, the companies have to submit the following statutory return, financial statements, annual returns and others documents with the Registrar of Companies (ROC) within the stipulated timelines. If these obligations are not met, extra filing fees, penalties and, in some instances, prosecution of the company and the company officers, may be imposed. Many companies had been in default for many years with the financial strain, business problems, administrative failure, or simply because they had not been operational for long. These problems were exacerbated by the COVID-19 pandemic, which caused significant disruptions to business and hindered businesses from meeting their legal obligations. In this unprecedented scenario, MCA has launched the Company Fresh Start Scheme (CFSS), 2020 to offer a one-time chance to defaulting companies to regularize pending filings without having to pay a significant extra fee or be prosecuted. It was a corporate amnesty, where regulation and economic rehabilitation were found a balance. The Government did not want to punish companies during an economic downturn, nor did it want companies to be put back on track with the law. It manifested a progressive regulatory concept which is based on compliance instead of punishment and improves corporate governance in the long run.