The Companies Act, 2013 was effective for all the companies with effect from 1st April, 2014 but of its certain sections or provisions was applicable from different dates depending upon the notification of by Ministry from time to time.

The Government of India has always put a thrust to start a business by incorporating a legal entity i.e. Partnership Firms, Limited Liability Partnerships (LLPs), One Person Company (OPC), trust to name few. The Companies Act, 2013 governs company and to promote them MCA has even simplified the process to incorporate a company, by removing the limit of minimum Share capital investment as well as filing of form for “Commencement of Business” by a company under The Companies Act, 2013.

Sticking to our topic, after the incorporation of a company, company can start its business right after getting its Certificate of Incorporation. However, by the applicability of “The Companies (Amendment) Ordinance, 2018, the provision for “Commencement of Business” has been brought back effective from 2nd November, 2018 which used to exist in previous Companies Act, 1956. It means any company incorporated on and after this date has to file “Commencement of Business” by filing E-form 20A within one hundred and eighty days (180) from the date of incorporation.

Commencement of Business Certificate

Commencement of Business

There is no definition given under The Companies Act, 2013. However its filing is mandatory, one can opine that, it’s approval from the Registrar of Companies that a company incorporated under this Act can commence its business.

Provision of Commencement of Business

The provision of Commencement of Business is given under section 10A which was inserted  by the The Companies (Amendment) Ordinance, 2018. Let us go through section 10A under the Companies Act, 2013, which states:-

  • A company incorporated after 2nd November, 2018 and having a share capital shall commence any business or exercise any borrowing powers after—
  • a declaration in E-form 20A is filed by a director within a period of one hundred and eighty days (180) of the date of incorporation of the company in such form and verified in such manner as may be prescribed, with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and
  • The company has filed with the Registrar a verification of its registered office as provided in sub-­section (2) of section 12.
  • If any default is made in complying with the requirements of this section, the company shall be liable to a penalty of fifty thousand rupees and every officer who is in default shall be liable to a penalty of one thousand rupees for each day during which such default continues but not exceeding an amount of one lakh rupees.

Process To File E-Form INC-20A

There are two (2) situations, stated below:-

  1. Filing of form within one hundred and eighty (180) days: In this case file the E-form 20A with the fees depending upon the paid up Share capital of the company along with a proof of deposit of the paid-up share capital by the subscribers has been paid to the company.
  2. Filing of form after one hundred and eighty (180) days: In this case, we need to attach an application for condonation of delay for Form INC-20A with brief reasons for delay and other important merits of case. After that Follow up with the concerned Registrar is required until the form is approved by the Registrar.

Penal Provisions for non filing of Commencement of Business declaration

Where no declaration has been filed with the Registrar under clause (a) of sub-section (1) within a period of one hundred and eighty days of the date of incorporation of the company and the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he may, without prejudice to the provisions of sub-section (2), initiate action for the removal of the name of the company from the register of companies under section 248 of the Companies Act, 2013.

The non filing of Form INC-20A shall invalidate all the business activity operated or executed by the company since the incorporation.

Also, there is no clear indication that what action would be initiated by the Registrar of Companies on the non compliant company but it if it takes an action it shall be binding on the company as well as its officer.

Disclaimer:– The above article is interpretation of Section 10A under the Companies Act, 2013. While making an application to be attached with the Form INC-20A, there are other important aspects also which are considered and are kept in mind while preparing them, as cases varies and depend upon merits of the company’s profile. Hence, the professional/(s) who are involved should consider the whole case. The author shall not liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the information.

(The Author is Corporate Consultant and provides varied array of services including Start-ups, Secretarial, Legal, Trademark, taxation, Audit, GST, Book keeping and other ancillary advisory service in Delhi, Chandigarh as well as The National Capital Region (NCR) and can be contacted through email id:- triptishakyacs2017@gmail.com)

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Qualification: CS
Company: Proventure Startup (Aiding your Business)
Location: NEW DELHI, New Delhi, IN
Member Since: 06 Jul 2019 | Total Posts: 21
I am Company Secretary and engaged with this profession from last nine (9) years. Throughout this journey, my moto is to help people start their startups and business. View Full Profile

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