Under the erstwhile Companies Act, 1956, a Private Limited Company could start its business immediately upon receipt of a Certificate of Incorporation from the concerned Registrar of Companies. However Public Companies were required to obtain a Business Commencement Certificate before commencement of business pursuant to Section 149 of the erstwhile Companies Act, 1956.  The said process of obtaining business Commencement Certificate was discontinued for some time. Now, Form INC-20A was introduced by the Ministry of Corporate Affairs with respect to Declaration for commencement of Business Pursuant to Section 10A(1) (a) of the Companies Act, 2013 and Pursuant to Rule 23A of the Companies (Incorporation ) Rules, 2014 with effect from 26th January, 2019.

The purpose of re introduction of Form and process of Business Commencement Certificate both for Private and Public Limited Company seems to be better compliant by newly registered companies with respect to proper deposit of subscription money by First Subscribers to Memorandum of Association as a Promoters of the company in letter and spirit.

To begin with, Let us understand who can be First Subscriber to the Memorandum and Articles of Association at the time of Registration of a company. The Definition of Member is inclusive.

According to Section 2(55) of the Companies Act, 2013, member, in relation to a company, means,

(1) The subscribers to the memorandum of a company, who shall be deemed to have agreed to become members of the company, and on its registration, shall be entered as members in its register of members;

(2) Every other person who agrees in writing to become a member of a company and whose name is entered in its register of members shall, be a member of the company;

(3) Every person holding shares of a company and whose name is entered as a beneficial owner in the records of a depository shall be deemed to be a member of the concerned company.

Following persons can be a First Subscriber to Memorandum of Association:

1) An Individual

2) A Hindu Undivided Family

2) A Company (Public, Private, Section 8 Company)

3) A limited Liability Partnership (LLP)

4) A Foreigner (Non Resident Indian) Subject to FEMA and RBI Compliances.

Form INC 20A requires one attachment with respect to Subscribers Proof for Value of shares. Payment towards Initial Subscription Money can be paid through following mode of Payment:

1)  To Deposit a Cheque in a give n bank account of company by the Subscriber to Memorandum of Association in Individual Capacity. It is suggested to attach to the Form Individual Subscriber Cheque photocopy self attested, Individual Subscriber bank statement reflecting payment of subscription money paid and Bank Statement of Company reflecting receipt of subscription money duly self attested by Directors .

2) Deposit cash in a give n bank account of company by the Subscriber to Memorandum of Association in Individual Capacity subject to proof of deposit of cash.

The Form INC 20A Certifying Professionals can obtain a Board Resolution and a declaration from Subscribers to Memorandum of Association in the following format:

On letterhead of Company  CIN :

Date :


The Registrar of Companies,

Maharashtra, Mumbai

Sub : Declaration relating to Commencement of Business Pursuant to Section 10A (1) (a) of the Companies Act, 2013 (Form 20A)  and rules made there under :

This is to inform that the Promoters/First Subscribers to Memorandum and Articles of Association of the company do hereby declare and confirm that both First Subscribers have deposited their respective Share Application money towards Paid up Share Capital of the company has been deposited, the particulars of which are as follows:

 Sr. No. Name of First Subscriber Amount (Rs.) Particulars of Bank & Cheque No. No. of Equity Shares subscribed
1 Rs. 75,000/- State Bank of India,  Cheque No. : 7,500 Equity Shares of Rs. 10/- each
2 Rs. 25,000/-, Central Bank of India, Cheque . No : 2,500 Equity Shares of Rs. 10/- each
Total Rs. 1,00,000/-

ABC & CO, A Firm of Practising company Secretaries, i be and is hereby authorized on behalf of company to File Form 20A (Declaration relating to Commencement of Business Pursuant to Section 10A (1) (a)  of the Companies Act, 2013) and to do all such acts, deeds, things to give effect to above.





Place :

 If the company is regulated by any Sectoral Regulator like RBI (Reserve Bank of India) for NBFC Companies SEBI (Securities Exchange Board of India), TRAI (Telecom Regulatory Authority of India), it is necessary to attach such approval or certificate from Sectoral regulator to Form. The intention seems to be compliant by company with respect to Regulatory approvals on time before commencement of business.  It will help protect general interest of all stakeholders and public at large.

Further requirement of form INC 20A is with respect to verification of Registered Office pursuant to Section 12(2) of the Companies Act, 2013. This will confirm existence of Registered Office at a proper place so that future correspondence by Public at large and regulatory correspondence will reach at a proper place of business of the company.

Section 10A(1) relating to Business Commencement is reproduced below for reference :

Section 10A(1): A company incorporated after the commencement of the Companies(Amendment) Act, 2019 and having a share capital shall not commence any business or exercise any borrowing powers unless:

> A declaration is filed by a director within a period of one hundred and eighty days 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.

The new Section 10A of the Companies Act has been introduced through the Companies (Amendment) Bill, 2019 and prescribes that every company is now required to file e-Form INC 20A with the Registrar of Companies. The section states that any company incorporated after the commencement of the Companies (Amendment) Bill, 2019 will be required to file the e-Form INC-20A with the Registrar of Companies within 180 days from the date of incorporation or commencement of its business. The form will comprise of the declaration by the director of the Company that all the subscribers to the memorandum have paid up the value of the shares agreed to be taken by the Director. It also declares that the company has filed and verified its registered office with the Registrar through Form INC-22 according to Section 12(2) of the Companies Act of 2013.

The analysis of Above Section 10A can be summarized as follows:

Every Company is covered and is required to file Form INC 20A.

Form INC 20A is required to be filed within 180 days of Incorporation of a Company. If due to inadvertence, Form is not filed within 180 days of Incorporation of a company; additional fees as may be prescribed may be levied.

Form INC20A need to be filed by Companies Registered on or after 2nd November, 2018. Companies Registered before 2nd November, 2018 need not file Form INC20A.

Companies which fail to file Form INC20A , the Registrar may remove the name of the company from the records of the Registrar of Companies pursuant to Chapter XVII.

In case the Company fails to file the declaration within the prescribed time, the Company shall be liable to penalty of Rs. 50,000/- and every officer in default shall be liable to a penalty of Rs. 1000/- for each defaulting day subject to maximum amount of Rs. 1 lakh

To conclude, the purpose of reintroduction of Form for Business Commencement seems to bring back on track compliance level by companies with respect to business commencement and avoid misuse of provisions allowing companies to commence business without actual deposit of initial subscription money. There seems to be a mixed bag from Government allowing ease of doing business on one hand and compliance on the other hand.

Disclaimer : The Views expressed in this Article are based upon prevailing facts and Law and information available on MCA Site and views expressed are purely personal in nature. Readers are advised to seek expert opinion before arriving at a decision. You may reach me at csdeepakamrutkar@gmail.com

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January 2021