Section 10A: Commencement of business etc. (Form INC 20A)



Section 10A:  Commencement of business etc. (Form INC 20A)


This Section says that:


(1)   A company incorporated after the commencement of the Companies (Amendment) Ordinance, 2019 (Means thereby on or after the date of 2nd of November 2018) and having a share capital shall not commence any business or exercise any borrowing powers unless—


      (a)  A declaration by a director within a period of 180 days of the date of incorporation of the company in form No. INC 20A and contents of said form shall be verified by a CS/CA/CMA in Practice, is filed with the Registrar(ROC) that every subscriber to the MOA has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and



Central Government has inserted a new Rule 23A, after rule 23 through the Companies (Incorporation) Fourth Amendment Rules, 2018 In the Companies (Incorporation) Rules, 2014, namely:-
Rule 23A: Declaration at the time of commencement of business.-
The declaration under section 10A by a director shall be in Form No. INC-20A and shall be filed as provided in the Companies (Registration Offices and Fees) Rules, 2014 and the contents of the said form shall be verified by a CS/CA/CMA in practice:

Provided that in the case of a company pursuing objects requiring registration or approval from any sectoral regulators such as the RBI, SEBI, etc., the registration or approval, as the case may be from such regulator shall also be obtained and attached with the declaration.

https://www.mca.gov.in/Ministry/pdf/CompaniesFourthAmendmentRules_19122018.pdf



(b)  The company has filed with the Registrar a verification of its registered office as provided in section 12(2). 
        
Section 12(2): The company shall furnish to the Registrar verification of its registered office within a period of 30 days of its incorporation in form No. INC-22 along with the fee.


   (2)      If any default is made in complying with the requirements of this section:

§  The company shall be liable to a penalty of 50,000 rupees and

§  Every officer who is in default shall be liable to a penalty of 1000 rupees for each day during which such default continues but not exceeding 1 lakh rupees.

Section 2(60) of the Companies Act defines officer who is in default and it mentions officers such as whole time director, KMP, directors etc. who shall be liable to any penalty or punishment in case of default committed by the company under the companies act 2013.


(3)      ROC may initiate action for the removal of the name of the company from the register of companies under Chapter XVIII, without prejudice to the provisions of sub-section (2), where no declaration has been filed with the ROC under clause (a) of sub-section (1) within a period of 180 days of the date of incorporation of the Company and the ROC has reasonable cause to believe that the Company is not carrying on any business or operations.


Note: In case the Company fails to file the e-form INC-20A within the 180 days, additional fees will be levied as follows:
Period of delays
Additional fees
Up to 30 days
2 times of normal fees
More than 30 days and up to 60 days
4 times of normal fees
More than 60 days and up to 90 days
6 times of normal fees
More than 90 days and up to 180 days
10 times of normal fees
More than 180 days
12 times of normal fees





Note: MCA has issued a general circular (circular no. 11/2020) dated 24th of March 2020 with respect to Special Measures under Companies Act, 2013 (CA-2013) and Limited Liability Partnership Act, 2008 in view of COVID-19 (coronavirus) outbreak which states that:

No additional fees shall be charged for late filing during a moratorium period from 1st April to 30th September 2020, in respect of any document, return, statement, etc., required to be filed in the MCA-21 Registry, irrespective of its due date, which will not only reduce the compliance burden, including the financial burden of Companies/ LLPs at large, but also enable long-standing, non-compliant companies/ LLPs to make a 'fresh start'. The Circulars specifying detailed requirements in this regard are being issued separately.


Conclusion Note:

In respect of the above provision of the section 10A, it is a mandatory requirement for all the companies to file said form which are incorporated on or after the commencement of the Companies (Amendment) Ordinance, 2019 i.e 2nd November 2018 under any situation within time limit except some relaxation is given by the Government at this time of pandemic COVID-19 but we can conclude that following companies are not required to file Form 20A:
First: Companies which are incorporated before 2nd November 2018 ( i.e before the commencement of the Companies ( Amendment) Ordinance, 2018).
Second: Companies which are incorporated after 2nd November 2018 without share capital.


A fact to Know: Earlier to insert of this new section 10A, there was a section 11 which was omitted by the Companies (Amendment) Act, 2015 dated 25th May 2015, had the same provisions of commencement of business.

Source: www.mca.gov.in

Download: The Companies ( Amendment) Act, 2019

Please watch video on this topic on my Youtube channel: Bhuwan Taragi - The Law Talks


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