Form INC-20A (Declaration for Commencement of Business):
Hello friends, here we are going to discuss the new e-form INC-20A (Declaration for Commencement of Business). First of all we will discuss the legal background of the new provision. What is the reason for insertion of new provision. What are the consequences, if a company does not comply with the new provision and penalty involved for violation of provision. Can Company go for strike off without complying with the new provision?
Introduction:
As per the MCA Notification dated 18th December, 2018, every company who is incorporated on or after 2nd November, 2018, is required to file e-form INC-20A within 180 days from the date of incorporation and such form should be verified by Company Secretary, Cost Accountant and Chartered Account.
Background:
Declaration for Commencement of Business is not a new concept, earlier it was already included in Companies Act, 1956. Only public companies were required to file declaration for commencement of business in e-form INC-21 (Declaration prior to the commencement of business) and private companies can start their business activity without compliance of them.
Reason/logic for re-introduction of new e-form INC-20A:
There are so many reasons or logic behind the insertion of new section 10A of the Companies Act, 2013 read with rule 23A (Declaration at the time of commencement of business) Companies (Incorporation) Rules, 2014. Example: Allot shares without receiving subscription money or To protect lenders or banks or financial institutions and many more.
Applicability and Time Limit:
e-Form INC-20A is required to be filed pursuant to section 10A(1)(a) of the Companies Act, 2013 and Rule 23A of the Companies (Incorporation) Rules, 2014. As per section 10A(1)(a) every company incorporated after the commencement of Companies (Amendment) Ordinance, 2018 and having a share capital shall not commence any business or exercise any borrowing power until and unless a declaration is filed by a director within a period of 180 days of the date of Incorporation of the Company.
Consequences if not filed within prescribed period:
If any default is made in complying with the requirements of this section, the company shall be liable to a penalty of Rs. 50,000/- (Fifty Thousand Rupees) and every officer who is in default shall be liable to a penalty of Rs. 1,000/- (One Thousand Rupees) for each day during which such default continues but not exceeding an amount of one lakh rupees.
What are the consequences ?, if e-form INC-20A filed beyond 180 days:
In case of a form filed beyond 180 days, then the company will have to pay additional fees and ROC has power to impose a penalty which is not less than 50,000.
Can Company go for strike off without filing of e-form INC-20A ?:
There is a lot of confusion in respect of the strike off of companies without filing e-form INC-20A, because e-form INC-20A talks about commencement of business. But if a company has already failed to start its business activity then there is no question should arise for filing of e-form INC-20A, but before filing of this form, MCA does not allow other forms for filing, however due to technical issue on MCA portal, we will have to file e-form INC-20A before strike-off of company. In case the company does not want to do any business activity then we can attach a simple affidavit on Rs. 100/- stamp paper that company does not have any intention to commence any business activity in future and company will go for strike off.
Can companies receive subscription money in cash ?:
In the Company Act, 2013, there is no restriction to receive subscription money in cash mode. However, for good practice, always insist clients to receive subscription money through banking mode because in cash mode, the company does not have any proof for receiving payment and there are a lot of chances to violate companies rules.
Author CS Navneet Rathal is a Practicing Company Secretary from Pune, Maharashtra and can be contacted at csnavneetrathal9567@gmail.com.
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