Condonation of Delay Scheme, CODS-2018: Relief to an extent By CS Shweta Dubey



MCA on 29.12.2017 came out with a notification introducing CODS i.e. Condonation of Delay Scheme, 2018 (the Scheme) for defaulting companies, giving them an opportunity to file their overdue documents as specified in the scheme and thereafter applying for condonation of Delay under this Scheme along with a payment of Rs. 30,000 filing fee, within the time frame as mentioned in the Scheme. This whole exercise shall go a long way in creating an atmosphere of confidence and faith in the system paving the way for better Corporate Governance across the country.

Now the question arises, what was the need of this Scheme?

In September, 2017, to curb the activities of the Black Sheep Companies and to increase the ease of doing business activities, MCA declared around 2.09 lakh companies as non-operational treating them as shell companies and even the Banking transactions of all these companies were restricted only for settling liabilities, and subsequently, these companies were deregistered by the ROC pursuant to Section to 248 of the Companies Act, 2013 (the Act) and around 3 lakhs directors were disqualified.

But with all these debarments too, a recourse to safeguard the interests of the shareholders and creditors of the Companies which were struck off from the Registrars was missing and so, the MCA after getting the appeals of the bonafide directors who were disqualified due to their negligence and considering the stakeholders' protection, introduced this CODS.

CODS at a glance:

# The Scheme is enforceable from 01.01.2018 to 31.03.2018 on all defaulting companies except the ones that have been struck off by the Registrars u/s 248 of the Act and the revival application has not been filed by the Companies to NCLT. It means that a Struck-Off Company can only avail this Scheme benefits if it has applied for revival process to NCLT.

# A defaulting Company which did not file its Financial Statements or Annual Returns for a continuous term of 3 years and the documents having the due date till 30.06.2017 can file under this Scheme. Defaulting Company as defined in the scheme "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.”

# The procedure of availing this CODS goes in an under-mentioned manner:

  • DINs of disqualified directors will be activated temporarily.
  • After this, the defaulting companies shall file the overdue documents (due up to 30.06.2017)
  • After filing documents under this scheme, the Defaulting Company shall seek for condonation by filing e-form e-CODS, fees of the same is Rs. 30,000/-
  • The DINs of the disqualified directors of the defaulting companies, that have not filed their overdue documents and e-form CODS will be deactivated once the expiry of the scheme. It means that the DINs associated with the defaulting companies who applied for filed the documents and filed e-form CODS can be reactivated once the scrutiny of the documents gets over.
  • The Struck-off Companies by ROCs, which already applied for the revival of to NCLT can apply in this scheme only if the NCLT has passed a revival order and then only the DINs of the directors shall be reactivated also.
  • This scheme is only limited to the documents of annual filings like MGT-7, AOC-4, AOC-4 XBRL, FORM 66 etc.
  • The ROCs shall withdraw the prosecutions filed with the concerned courts for all documents filed under this Scheme except the ones filed under but section 167(2) of the Act or civil and criminal liabilities if any, of such disqualified directors during the period they remained disqualified.
  • The ROC will take necessary actions against the defaulting companies eligible for availing but who do not file the overdue documents and e-CODS. Further, the e-CODS shall be available after 20.02.2018 approx.

Lastly, it can be said that this scheme is a call for relief for the Companies and not the Disqualified Directors on a whole, as the DINs of the disqualified directors may/may not be de-activated after the procedural activities end and so, it can be said that this scheme is a boon for the Disqualified Companies but remains a snag for the Directors of such Companies.

Advertise With Us

Click here to read the disclaimer


Write a Comment