Introduction: Form INC-20A, titled the “Declaration for Commencement of Business,” plays a pivotal role in the Companies Act, 2013. This concise overview aims to demystify its purpose and shed light on the critical Section 10(A) of the Companies Act. Here’s a detailed overview:
1. Purpose: INC-20A aims to prevent the creation of dummy or bogus companies. According to the Companies Act, 2013, every company with share capital incorporated must file INC-20A within 180 days of incorporation.
2. Filing Requirements: Directors of the company are responsible for filing INC-20A at the commencement of business. The form serves as a declaration that the company has initiated its business activities.
3. Applicability: All companies with share capital, incorporated after the specified date, fall under the purview of INC-20A. It helps regulatory authorities verify the authenticity of business commencement.
4. Preventing Dummy Companies: The filing of INC-20A is a preventive measure to curb the formation of fake companies. It ensures that entities registered under the Companies Act genuinely engage in business activities.
5. Timeframe for Filing: The Companies Act prescribes a strict timeline of 180 days from the date of incorporation for filing INC-20A. Failure to adhere to this deadline may result in penalties and regulatory actions.
6. Penalties for Non-Compliance: Non-filing or delayed filing of INC-20A can lead to penalties. The penalty amount may vary, and the Registrar of Companies (RoC) has the authority to impose financial consequences on the company and its officers.
7. Adjudication Order and Penalties by ROCs It is observed from the ROC adjudication orders passed by the respective ROCs, that ROC started issuing show-cause notices and passing an adjudication order for the below non-c0mpliances under Section 10(A) of the Companies Act, 2013
- Non-Filing of Form INC-20A within 180 Days of Incorporation
- Filing of Form INC-20A after 180 Days
- Commencing the business activity before filing INC-20A with the ROC
- Exercised any borrowing powers before filing INC-20A
Accordingly, the ROC has imposed the penalties on the Company and Officer in Default (Directors of the Company). The maximum penalty that has been imposed is Rs. 50,000 on the Company and Rs. 1,00,000 on officer on default individually.
Further, the ROC has the power to struck off the Company from the register of companies after giving reasonable opportunity of being heard to the Company and Officer in Default.
The Directors will be held liable personally for non-filing of INC-20A within the due timelines. Hence, it is advisable to file the Declaration for Commencement of Business within 180 Days and before commencing any business activity or exercising any borrowing powers.
8. Appeal against ROC adjudication order.
- Section 454 dealt with the appeal against the ROCs adjudication orders imposing penalties.
- The appeal can be filed with the Hon’ble Regional Director of the region within a period of sixty days (60 Days) from the receipt of the above adjudication orders in Form ADJ.
9. What if the penalty is not paid or appeal is not filed?
- In case the Company or the officer in default failed to remit or pay the adjudicated penalty fees withing the 90 days of receipt of order, the ROC has power under Section 454 of the Companies Act, 2013 to impose the additional fine which shall not be less than Rs. 25,000 but which may extend to Rs. 5,00,000 on the Company and Officer in default shall be liable to imprisonment which may extend to 6 Months or with Fine which shall not be less than Rs. 25,000 but which may extend to Rs. 1,00,000 or with Both.
Conclusion: Navigating Form INC-20A and Section 10(A) compliance is crucial to avoid penalties and legal consequences. The article highlights the importance of timely filings, understanding ROC adjudication, and the appeal process. For professional advice, consult before taking any action based on the information provided. Compliance is key in ensuring a seamless journey under the Companies Act, 2013.
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Disclaimer:- The above information is purely and solely for informative purposes. This in no way should be construed to be any professional advice, as these are merely general information and our interpretations of the laws and the Act. Viewers are requested to consult us before taking any action based on our interpretations. Circulation of any information in our name without our permission is not allowed.
The author is a Practicing Company Secretary and GST practitioner and may be reached at: csmalkitsingh@gmail.com or +91-9711975109
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