All Companies having share capital registered on or after 02nd November 2018, are required to declare commencement of business to the authorities, before it could start its business. This needs to be declared within 180 days of incorporation to avoid penalties.

This requirement was also present there in erstwhile Companies Act 1956 and Companies Act 2013. However, it was omitted eventually on 29th May 2015 and companies were not required to declare commencement of business. Now, it has again been introduced by Companies (Amendment) Ordinance 2018, w.e.f. 02nd November 2018. Thus, companies registered on or after this date are required to declare the commencement.

How to file declaration

In order to file the declaration, one need to file form INC-20A, which requires to furnish the proof of payment for the value of shares subscribed, which simply means, a company have to get its bank account opened to enable the deposit of share subscription amount.

Further, this form needs to be certified by a practicing professional i.e. a CA, CS or Cost accountant.

What are the consequences if the declaration is not filed?

  • Company would not be allowed to commence the business until the declaration is made
  • Company would not be able to exercise any of its borrowing power.
  • Even small events like appointment of director etc. could not be completed.
  • Delay in filing the declaration will attract the late fees, depending upon the number of days of delay.

What to do?

All companies having share capital registered on or after 02nd November 2018, should open the bank accounts, receive the value for subscription of shares and file the declaration of commencement in form INC-20A.

Disclaimer: The above post is only for the purpose of academic discussion and should not be construed as any legal opinion in any matter whatsoever.

(The author is a CA in practice at Delhi and can be contacted at: Email:abhinandansethia90@gmail.com, Mobile: +91-9811741451))

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