REMEDY – DISQUALIFIED DIRECTORS -Whether Company Active or Struck off

REMEDY –

DISQUALIFIED DIRECTORS

Short Summary:

In this Flash editorial, the author begins by referring the provisions of Condonation of Delay Scheme 2018 in relation to allow the Defaulting Companies (other than the companies which have been struck off/ whose name has been removed from the register of Companies u/s 248(5)) and Remedy for Disqualified Directors of Struck Off Company”. To file its overdue documents which were due for filing till 30.06.2017 in accordance with provisions of the scheme”

This is way out prescribed for Removal of Disqualification of Directors due to non Filing of Financial Statement and Annual Return u/s 164(2).

This is article no. 308 of the series of editorials written by the author on corporate laws {Including Companies Act, 2013, SEBI, RBI Regulations, IBC, LLP Act, 2008 etc.}.

Introduction:

As MCA issued the list of approx 309,614 Director who has been disqualified under section 164(2) and whose DIN has been blocked by the MCA. Due to this action many representations made from industry, defaulting companies and their directors seeking an opportunity for the defaulting companies to become compliant and normalize operations.

With a view to give them opportunity the CG has decided to introduce a scheme namely “Condonation of delay scheme 2018” [CODS-2018].”

However, this scheme is applicable only on active Companies; Struck off Companies can’t take benefit of this scheme. Therefore, Writ petition is filed in Hon’ble High Court, Delhi in the case of Raman Nanda V/s Union of India and ors. In this petition High Court provide way out for removal of disqualification of directors of struck off Companies.

In this editorial first will discuss about the scheme then about the Hon’ble High Court Order.

Time Period: The scheme shall be into from w.e.f. 01^st January, 2018 and shall remain in force upto 31^st March, 2018 (Companies have to comply with the scheme within this period of 3 months).

First: CODS Scheme

SOME DEFINITIONS TO BE USED FOR THE COMPLIANCES:

Over Due Documents	§  Financial Statements or §  The Annual Returns or §  Or documents as mentioned in below List §  Other associated documents, as applicable, In the case of a defaulting Company or
Defaulting Company	Company which has not filed its - Financial Statements, or - Annual Return As required under the Companies Act, 1956 or Companies Act, 2013, as the case may be, and the rules made there under for a continuous period 3 years.

Forms Allowed filing under the Scheme –

Over Due Documents

S. No.	Form No.	Purpose of File
1.	20B / MGT – 7	Annual Return by Company having Share Capital
2.	21A / MGT -7	Annual Return for Company not having Share Capital
3.	23AC, ACA, AOC-4- XBRL, non-XBRL, CFS	Form for filing of Balance Sheet/ Financial Statement and Profit and Loss Account
4.	66	Compliance Certificate with Roc
5.	23B/ ADT-1	Intimation for appointment of Auditor

PROCEDURE TO BE FOLLOWED FOR THE PURPOSE OF THE SCHEME

This Scheme is for the Defaulting Companies “Whose name have not been removed from the record of the Registrar” means the Companies which are defaulting but whose status in the record of the ROC is Active.

STEP – I- DIN Activate

The DIN of the disqualified directors shall be activate during the validity of the scheme i.e. 01.01.2018 to 31.03.2018 to enable them to file the documents.

STEP – II- Filing of Pending ROC Forms

The defaulting Company shall file the overdue documents (list mentioned above in table form) in respective form with addition fees i.e. as per section 403 (maximum additional fees 12 time of actual fees).

STEP – III- Seeking of Scheme

After filing documents in STEP II Company shall seek condonation of delay by filing of e-form e-CODS 2018 with Fees Rs. 30,000/-.

EFFECT OF NON- AVAILING OF SCHEME

The DIN of Directors associated with defaulting Company that have not done the below mentioned shall be liable to deactivated on expiry of the scheme period.

§  Have not filed over due documents and

§  The eform CODS 2018 and

§  These are not taken on record in the MCA21 and

§  Are still found to be disqualified on the conclusion of scheme

EFFECT ON DEFAULTING COMPANIES – WHICH HAS STRUCK OFF

In case of defaulting – struck off Company have filed applications for revival under section 252 of the Act upto the date of this scheme (i.e. 31.03.2018). The DIN of such directors shall be re-activated only NCLT order of revival subject to the Company having filing of all overdue documents.

WARNING:

At the conclusion of scheme i.e. 31.03.2018, the Registrar shall take all necessary actiosn 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.

Few Questions:

I.            Whether Struck Off Companies can take benefit of this Scheme CODS – 2018?

Solution: This scheme can be avail by the Defaulting Company – which has not struck off in the record of the Registrar of Companies. Therefore, Struck Off Companies can’t take benefit of this scheme.

II.            Applicability of Scheme CODS – 2018?

Solution: This scheme can be avail by the Defaulting Company – (other than the companies which have been struck off/ whose names have been removed from the Register of Companies under Section 248(5) of the Act)

III.            Time period for avaibility of benefits of Scheme CODS – 2018?

Solution: This scheme shall be available for the period:

Start from 1^st January, 2018                      TO                   End on 31^st March, 2018

IV.            Fees to be paid under Scheme CODS – 2018?

Solution: Following fees required to pay under the Scheme:

§  Late Filing Fees of all the Pending form i.e. ( Actual + 12 times additional Fees)

§  Fee of e-CODS 2018 i.e. Rs. 30,000/-fsdf

V.            E-form for which this scheme can be avail?

S. No.	Form No.	Purpose of File
1.	20B / MGT – 7	Annual Return by Company having Share Capital
2.	21A / MGT -7	Annual Return for Company not having Share Capital
3.	23AC, ACA, AOC-4- XBRL, non-XBRL, CFS	Form for filing of Balance Sheet/ Financial Statement and Profit and Loss Account
4.	66	Compliance Certificate with Roc
5.	23B/ ADT-1	Intimation for appointment of Auditor

Second: Writ Petition

Writ Petition “Raman Nanda V/s Union of India and ORS.

Order by Hon’ble High Court of Delhi

Dated: 21^st December, 2017

FACATURAL BACKGROUND:

i.            The Learned counsel appearing for the petitioner unequivocally states that the Company has not carried out any business for the past 3 years. 

ii.            Its Bank Account is also not in operation for the past 3 years. 

iii.            The Petitioner also did not file the requisite returns as required under the CA, 2013. 

A.  The petitioner is desirous of availing of the CODS, 2018. However, since the Company ahs been struck off from the Registrar of Companies, it has disabled from availing the benefits of CODS,2018. 

B. The petitioner also not in position to seek revival of Company u/s 252 since admittedly the Company has not carried out any business. 

C. The petitioner states that, it would voluntarily seek dissolution of the Company u/s 248(2) of the Act, if it has the opportunity to do so.

Decision of Hon’ble High Court:

The Court Directs that the below mentioned documents and application will not be submitted online but in hard copies to the Registrar of Companies.

a)     The petitioner may file all the requisite returns in relation to the company to avail the CODS-2018. 

b)     The petitioner may also file the necessary resolutions for voluntarily striking off the name of the Company as required under Section 248(2) of the Act. 

c)      The petitioner would also make a necessary application under CODS-2018 alongwith the requisite charges.

According to the order above mentioned documents shall be file in Hard Copies with Registrar of Companies.                     

After filing ROC shall scrutinize the documents and if the same are found to be in order for strike off u/s 248(5) or availing benefit of CODS-2018.

The removal of Company from the Register u/s 248(1) would be deemed as striking off the Company /s 248(2), and application under CODS-2018 would be sympathetically considered by the Registrar.

One can opine that if any director of struck off Company want to avail the benefit of CODS-2018 or want to remove its disqualification can file a writ petition in Hon’ble High Court for the same.

Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.