New Delhi, December 19, 2017

The Ministry of Corporate Affairs has announced a one-time settlement scheme for companies that saw over three lakh directors disqualified from their boards following a government order earlier this year.

The directors had been penalised after it was found that their companies had not filed annual returns and financial statements with the Registrar of Companies (RoC) for three consecutive years. Over two lakh companies had defaulted in filing their statutory reports.

The scheme, called ‘Condonation of Delay Scheme 2018’, will open on January 1, 2018 for a period of three months. A circular put out by the ministry says the scheme intends to give an opportunity for non-compliant, defaulting companies to rectify the default. All defaulting companies other than those that have been struck off or removed from the register of companies are eligible to apply for rectification of records.

The scheme will allow defaulting companies to submit all documents that were due for filing till June 30, 2017. A fee of Rs.30,000 will be charged for condoning the delayed filing of the documents, it added.

The government will also withdraw any pending prosecution for defaults in filing of annual reports and financial statements, the circular said.

The RoC, which comes under the Ministry of Corporate Affairs, had disqualified directors of companies that had defaulted in filing annual returns, balance sheets and profit and loss statements in a sudden move in September. These individuals were barred from sitting on boards for five years. Several high-profile independent directors were among those adversely affected by the move. The disqualification involved suspension of the Director Identification Number (DIN) of these individuals. Some have obtained orders from high courts staying their disqualification.

Under the Companies Act, 2013, only those individuals who have an active DIN can be appointed to company boards. Once a DIN is suspended, a director cannot file returns or any documents with the RoC. This had created an acute problem for SMEs, many of which found all their directors disqualified.

The ministry also stated that those not availing the scheme will find their DIN deactivated after the offer expires.

[The Hindu Business Line]