Summary: Form INC-20A is a declaration of commencement of business filed by a director under Section 10A of the Companies Act, 2013, confirming that every subscriber to the memorandum has paid the value of shares agreed to be taken. The declaration must generally be filed within 180 days of incorporation. Where subscription money is received through banking channels, the company’s bank statement ordinarily serves as evidence of payment. However, when subscribers pay in cash, questions arise regarding the appropriate supporting documents. The author discusses two approaches: depositing the cash into the company’s bank account and attaching the bank statement, or submitting a signed declaration of cash receipt supported by subscriber-wise receipts and cash book entries. The author considers both approaches acceptable evidence of receipt, while preferring the bank deposit route because Form INC-20A requires banking particulars. The article examines Rule 23A of the Companies (Incorporation) Rules, 2014, restrictions on cash receipts under Section 269ST of the Income-tax Act, consequences of false declarations under Sections 448 and 449, and penalties for non-compliance under Section 10A. It also provides practical documentation requirements and an illustration involving two subscribers contributing ₹40,000 each. The acceptability of a declaration without bank evidence remains the author’s interpretation and should not be treated as confirmed MCA acceptance.
Applicable Legal Provisions
| Provision | What it does |
|---|---|
| Section 10A(1)(a) | Director’s declaration that every subscriber has paid the value of shares agreed to be taken, filed within 180 days of incorporation. |
| Rule 23A, Companies (Incorporation) Rules, 2014; Form INC-20A | Prescribes the form, the bank details and the attachments. |
| Sections 448 and 449 | Punishment for a false statement or false evidence. The form itself draws attention to them. |
| Section 10A(2) and (3) | Penalty for default, and possible strike-off if no declaration is filed in 180 days. |
| Section 269ST, Income-tax Act, 1961 | Cash of ₹2 lakh or more from one person cannot be received. |
Relevant Extracts (Simplified)
- Form INC-20A asks for the name of the bank, with its IFSC code, in which the subscription money was received, and for proof of the subscribers’ payment. A bank statement showing the credits is the usual proof.
- The director’s declaration states that everything in the form and its attachments is true, correct and complete, and that nothing has been hidden.
Legal Position
What the law needs. Section 10A needs proof that the subscribers have paid. It does not say that only a bank statement will do. The bank statement became the common proof because most subscribers pay by bank transfer. When payment is in cash, any reliable record showing who paid, how much and when can serve as proof. The author opines that a signed declaration, supported by the company’s cash records, is a valid attachment where the money is received in cash.
The caution. The online form has a field for the bank in which the money was received. If the cash was never banked, this field cannot be answered truthfully, and the form may not let it be left blank. This should be checked on the portal before relying on Option 2. Never enter a bank in which the money was not actually received, because a false statement invites action under Sections 448 and 449. Option 1 removes this difficulty. The question whether cash itself is allowed is dealt with in the previous article.
Practical Interpretation
Option 1 (preferred): deposit the cash. Deposit the cash in the company’s bank account soon after receipt. Attach the bank statement showing the credits. Keep the receipts and cash book entries on file in case the Registrar asks for them.
Option 2: attach a declaration. Prepare a declaration on the company’s letterhead, signed by a director and by each subscriber, with the following details:
- company name, CIN and date of incorporation;
- name of each subscriber, number of shares, amount paid, date of receipt and receipt number;
- a statement that the amount was received in cash and recorded in the cash book;
- a statement that no subscriber paid ₹2 lakh or more in cash in a day.
Along with it, attach the extract of the cash book and copies of the receipts. The form is signed by a director and certified by a practising professional, so the professional should see these records before certifying.
Whichever option is used, file within 180 days of incorporation. A default attracts the Section 10A(2) penalty (₹50,000 on the company, and ₹1,000 a day on each officer in default up to ₹1 lakh). Please verify these figures against the current Act.
Example
Ms. C and Mr. D are the two subscribers to a new company, each paying ₹40,000 in cash. The company records the cash and issues receipts. It can deposit ₹80,000 in its bank account and attach the bank statement. If it keeps the cash, it attaches a declaration signed by both subscribers and a director, with the cash book extract and receipts.
Conclusion
The author opines that where subscription money is received in cash, the company can either deposit it in the bank and attach the bank statement, or attach a signed declaration of cash receipt with the supporting cash records to Form INC-20A. The author further opines that depositing the cash in the bank is the safer route, as it fits the bank field of the form and avoids any query from the Registrar.
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Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at [email protected]).
