Form 20A is a declaration that must be filed by the directors of the firm at the start of the business. In practise, it should be verified by a Chartered Accountant (CA), a Company Secretary (CS), or a Cost Accountant. The Companies (Amendment) Ordinance 2018 requires all companies registered on or after November 2, 2018, to file a certificate of beginning of business. Form 20A is a declaration filed by the directors within 180 days of the company’s establishment. This is one of the most critical compliances to follow since the consequences for failure to file are severe.
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Companies that are exempt from filing Form 20A
The following companies are not required to file form 20A:
- Companies formed before November 2, 2018 (i.e. before the start of the Companies ( Amendment) Ordinance, 2018).
- Companies formed after November 2nd, 2018 that do not have a share capital.
The time period for filing Form 20A
Every business that is obliged to submit form 20A must do so within 180 days of its establishment.
Requirement and procedure for filing Form 20A – Declaration of Commencement of Business
A certificate of business commencement must be obtained within 180 days after formation, and an eForm must be submitted with the relevant ROC (Registrar Of Companies). A declaration from the directors is required under section 10A and must be provided in the form of a Board Resolution in the eForm itself. Furthermore, a proof of deposit of the subscriber’s paid-up share capital must be added to the eForm. If a firm undertakes activities that need registration or permission from any sectoral regulator, such as The Reserve Bank of India or The Securities and Exchange Board of India, it must seek such registration or approval together with the attached declaration. Before filing with the ROC, the eForm must be reviewed and validated by a practising professional (Registrar Of Companies).
Penalties for Default in filing Form 20A – Declaration of Commencement of Business
The consequences for noncompliance are quite harsh, which was done on purpose to reduce the number of shell companies formed. The consequences for noncompliance are as follows:
- Penalty to be imposed on the firm: A penalty of Rs 50,000 will be levied on the company if it fails to comply with the aforementioned condition.
- Penalty to be imposed on officers: Each such officer who is in default shall be subject to a penalty of Rs 1,000 per day for each day that the default persists, up to a maximum of Rs 100,000.
- Company strike-off: If the Registrar has reasonable grounds to assume that the firm is not carrying on any business or operations, even after 180 days, the Registrar may remove the company’s name from the Register of Companies.
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