INC-20A (Commencement of business)

Overview

The Companies Act, 2013 through amendment introduced new section 10A which provide for the declaration by directors before the commencement of business of the company that every subscriber to the MoA has paid the amount of shares agreed to be taken by them within a period of 180 days from the date of Incorporation of the company in form INC-20A.

Key points of filing e-form INC-20A

• Applicability on companies: The provisions of section 10A shall be applicable on every company which is incorporated on or after 2nd November, 2018 and having share capital.. This provision shall have a retrospective effect on all the companies which were incorporated on 2nd November 2018 or after it.
• No activity until approval of INC-20A: Any incorporated company cannot start its business activities before the approval of form 20A. Any agreement, sale, purchase, issue of shares, borrowings, etc. will be considered as illegal before the approval of the INC-20A.
• Deposit of Capital from Promoters: The total share capital share capital amount must be deposited in the bank account of the company by the promoters. These deposits can be made in parts via any of the banking channels but the total sum of money should be exactly equal to the total paid-up capital of the company.

Procedure of Filing INC 20-A

• Download the form INC-20A from the website of MCA.
• Fill in the required particulars.
• Affix required attachments.
• Digitally sign form by the DSC of the director authorised.
• Certification of form by professional.
• Upload the form on MCA portal and pay prescribed fees.

Time limit of filing form INC- 20A

• Filing the form within 180 days (6 months): according to this case, the E-form 20A is filed. It is filed along with the fees according to the paid up share capital of the business/ company. Along with these, the proof of deposit of the total paid-up capital by all the subscribers that has been paid to the company in its bank account should also be provided.
• Filing of form after 180 days (6 months): In this case, the directors of the company need to attach the condonation of delay for Form 20A. This condonation must include the brief description of the reasons of the delay and other important application/merits of the case.
• After any of the above criteria has been fulfilled, follow up with the concerned Registrar. The follow up is required until the form 20A is approved by the Registrar.

Document Required

• Proof of payment of value of shares agreed to be taken by subscriber.
• DSC of the director authorised to sign form.
• If the company is regulated by any sectoral regulator, then the information required are as follows:
  Name of regulator
  Letter number or the registration number provided
  Date of approval/ registration
• Certificate of Registration issued by the RBI: Certificate of Registration issued by Reserve Bank of India is required also. It is required in case of Non-Banking Financial Companies/ from other regulators.

Companies that are exempted from filing form 20A

Individual companies that are exempted from filing form 20A commencement of business declaration are as follows:

• A company incorporated before the Commencement of Companies (Amendment) Ordinance 2018 i.e., 2nd November 2018.
• A company which is formed after 2nd November 2018 but is incorporated without any share capital.

What are the outcomes of not Filing E-Form INC-20A?

• The company cannot commence its business activities.
• The company cannot borrow any kind of funds.
• The company and its business activities can be shut down by the Registrar of the companies.
• The name of the company can be removed from the register of companies by the registrar.

Advantages of filing form 20A

• After filing the E-form 20A within the limit of 180 days (6 months), the company becomes eligible to exercise its borrowing powers. The company can raise funds from the general public as well as banks and other institutions.
• If the company files the form 20A within the given time limit of 180 days (6 months), then it will be safeguarded from having heavy penalties per day for each director.
• After filing the form 20A, all the information relating to business and its activities will be made available on the public database. This database will be easily accessible to the general public, investors, and other stakeholders. This feature will authenticate the existence of the company/ business. This will help the business/ company to build its credibility in the market and among the stakeholders.

Government Fees

The fees for filing Form INC-20A with the registrar of companies is:

Additional fees:

Consequences of non filing of INC-20A

• Penalty to be levied on the defaulting companies: A company which fails to complete the requirements which are mentioned will have to pay a penalty of sum of rupees 50,000.
• Penalty to be levied on the defaulting officers: Every officer who is in default will be liable to a penalty of rupees 1,000 every day. This shall continue for everyday during the period for which the default continues. It can reach up to a maximum of sum of rupees 1,00,000.
• Company strike-off by Registrar: The Registrar can remove the name of the company from the Register of companies. It is done if the Registrar has reasonable grounds to believe that the company is inactive or is not carrying out its business activities even after 180 days of incorporation.