Declaration for Commencement of Business (Form INC-20A)

Introduction:

The Ministry of corporate affairs has issued the new provisions and guidelines for the commencement of business in 2018. The newly created provision includes section 10A (1)(a) of the companies act 2013 and 23A of the companies (incorporation) rules, 2014. A company that registered itself on or after 2^nd November 2018 shall contact the registrar of companies regarding the commencement of its business. Directors of the company have to file a declaration form for the commencement of business to the registrar within 180 days of incorporation of the company. Companies must stick to following the compliances or they will face strict penalties for non-filing of form.

What is the declaration for commencement of business?

Companies need to file a declaration under form 20A of the companies act, 2013. A company that has been incorporated on or after 2^nd November 2018 and which has share capital, is prevented from commencing its business or exercising its borrowing powers unless its directors file a declaration within 180 days from the date of incorporation of the company in Form 20A with the registrar of company. The declaration state that every subscriber to the MOA has paid the value of the shares agreed to be taken by him on the date of making such a declaration. The content of the form needs to be verified by a Company Secretary, Chartered accountant, or practicing Cost accountant. If the directors fail to fill the form, the registrar of the company has the authority to remove the company name.

Provisions related to declaration for Commencement of Business

Section 10A of The Companies Act, 2013

Section 10A of the companies act, 2013 is recently included section by the Companies (Amendment) Second Ordinance, 2019. According to section 10A of the Companies act, those companies who are incorporated after the companies (amendment) ordinance, 2018 and possess a share capital shall not start any business or use any borrowing powers unless it follows some conditions.

First, Director has filed a declaration within 180 days of the date of incorporation of the company. The form is filed in the prescribed manner and verified with the registrar. The form contains that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making such declaration. The company has filed with the Registrar a verification of its registered office as given in Section 12(2) of the act.

Rule 23A of the Companies (Incorporation) Rules, 2014

The declaration made by the director shall be in Form No. INC 20A and will be filed as per the company rule, 2014. Details of the form are verified either by a chartered accountant, company secretary, or a cost accountant. Companies pursuing those objects which need approval from any sectoral regulators such as RBI, SEBI, etc. then the registration or approval from the regulator is to be obtained and attached with the declaration.

What is form INC 20A?

It is a form mandatory to be filled by companies incorporated on or after 2^nd November 2018 with the Ministry of corporate affairs. The form must be filed by the directors within 180 days from the date of incorporation of a company. The form contains the declaration for commencement of business.

Instruction for Filling The e-Form

• A valid corporate identity number (CIN) of the company will be entered. One can find the CIN by filling in the already existing number on the MCA portal.
• After that click on the pre-fill button and the name, address and email-id will be displayed on the system itself.
• The name, address, designation of the person who is giving the declaration should be mentioned.
• The resolution that was passed should be mentioned- special resolution or ordinary resolution. In the case of an ordinary resolution, the company needs the approval from central government. The reference number and the date of the approval letter from the central government should be mentioned.
• The essential details of stamp duty and the total amount of stamp duty are to be entered in the respective option.
• A copy of the ordinary resolution (approval letter) or special resolution is to be attached whichever is applicable in the form. All the additional information can be given under the optional attachment.
• For the verification enter the serial number and date of board resolution which authorize the signatory to sign and finally submit the form.
• The director or secretary of the company should digitally sign the e-form which is duly authorized by the board of directors or in case the company has not appointed a secretary then by the company secretary in whole-time practice.
• If the director is digitally signing the e-form then enter the DIN. Or else mention membership number or income tax PAN if the secretary has digitally signed the form. If the company secretary is signing the form then he/ she enters the certificate of practice number.

Documents required

1. Corporate Identification Number( CIN) of the Company
2. Name of the Company
3. Email of the company
4.  Registered office address of the company
5. Attachments with the form-
   • Subscribers Proof of payment for the value of shares (bank statement)
   • Certificate of Registration issued by RBI or other Regulators (in case the company is regulated by a sectoral regulator)
   • Further Attachments, if any

Companies Barred from filling the form 20A

• Those companies who are incorporated before 2^nd November 2018 will not fill the form.
• Companies who are incorporated after 2^nd November and without share capital are also prevented from filling the form.

Penalties for not filing the Declaration Form

Companies with Nominal Share Capital	Fees Payable
Less than 1 Lakh	200 rupees
1 Lakh – 4,99,999	300 rupees
5 Lakh – 24,99,999	400 rupees
25 Lakh – 99,99,999	500 rupees
1 Cr. or More than that	600 rupees

The strict penalties are imposed for non-compliance on the companies to prevent the shell companies from incorporation.  Penalties for non-compliance are as follows-

• The company will face a penalty of 50000 rupees if it didn’t meet the prescribed requirement.
• The officer in default will bear the penalty of 1000 rupees per day in accordance with the default of 1 lakh rupees.
• Registrar has the authority to remove the company name from the Register of companies if the Registrar has reasonable grounds to believe that the company is not carrying on any business or operations even after 180 days of incorporation.

Conclusion

The declaration is a very essential means for the commencement of business. Every company has to comply with the guidelines after the MCA reintroduced the companies (amendment) ordinance, 2018. The process of declaration is smooth and efficient so one can easily go ahead while filling the form. After declaration, the company will get a business certificate from the registrar and can run the business. The penalty related to non-compliance is very high because many shell companies are engaged in the incorporation process without following the guidelines. So the strict penalties will prevent the companies from opting for those measures and allow the active companies to do the business.

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