New 2-month scheme exempts defaulting cos from prosecution:MCA

With stricter legal regime in place for corporates, the government has said the ongoing company law settlement scheme provides an opportunity for defaulting entities to "make good of their default" by granting them immunity from prosecution.
The Ministry of Corporate Affairs (MCA), which is implementing the Companies Act, has launched the scheme which offers immunity for thousands of entities that have defaulted on making statutory filings.
Under this 'Company Law Settlement Scheme 2014', the defaulter entities can make statutory filings for a period of two months without attracting any prosecution. The scheme, which started on August 15, would end on October 15.

Corporate Affairs Secretary Naved Masood has said the scheme provides an opportunity to defaulting companies to "make good their default".
According to him, the Companies Act, 2013 lays down stricter regime for companies defaulting in filing statutory returns, with higher additional fees and penalties.
"The scheme condones delays in late filing, by granting immunity from prosecution and reduced additional fee," Masood has written in the Ministry's latest monthly newsletter.

The new Companies Act, whose many provisions came into force from April 1, has stringent norms to deal with defaulting entities and even directors can be disqualified for failing to make necessary annual filings.

At the end of July, there were 14.09 lakh registered companies in the country and out of them, only 9.81 lakh entities were active.
Around 1.42 lakh companies were classified as "dormant" as they have not filed their annual returns/balance sheets for more than three consecutive years.
As per the scheme, while defaulting companies would be exempt from prosecution, inactive ones would have an opportunity get themselves declared as "dormant" by filing a simple application at reduced fee.
The Companies Act, 2013, lays down a "stricter regime" for defaulting companies along with higher additional fees and increased quantum of punishment for non-compliance, the Ministry had said in a circular last month.

"A specific provision for enhanced fine in case of repeated default has also been included in the form or section 451 of the Act.
"... The provisions of section 164(2) of the Act, inter alia, providing for disqualification of directors in case a company has not filed financial statements or annual returns for any continuous period of three financial years has been extended to all companies," it had said.