CS S Kavitha
Section 10A of Companies Act, 2013 read with Rule 23A of Companies (Incorporation) Rules, 2014
Just incorporation of the Company does not imply that the Directors/Promoters can commence the business. A lot of promoters are unaware that there is one more step involved before commencing the business i.e., the director needs to file a declaration to commence the business and exercise borrowing powers as stipulated under Section 10A of the Companies Act, 2013 within 180 days of the incorporation of the Company. It is to declare that a company incorporated after the commencement of the Companies (Amendment) Ordinance, 2018 and having a share capital shall not commence any business or exercise any borrowing powers unless
i) Every subscriber to the Memorandum of Association has paid the value of the shares agreed to be taken by him on the date of making of such declaration.
ii) The Company has filed Form INC-22 with Registrar of Companies for Verification of the registered office address in compliance of Section 12(2) of the Act, where it has submitted only Correspondence address at the time of the incorporation.
RELEVANT FORM:
Form 20A.
The eForm has to be signed by the director and verified and certified by a practicing professional before filing with the Registrar Of Companies.
ATTACHMENTS:
- A proof of deposit of the paid-up share capital by the subscribers.
- Certificate of Registration from Sectoral regular- If a company pursues objects requiring registration or approval from any Sectoral regulators such as The Reserve Bank of India and Securities and Exchange Board of India etc., then it shall obtain such registration or approval along with the attached
IMPLICATIONS OF NON- FILING:
The Ministry in order to avoid and curb the shell companies from being incorporated and has kept high penalty. Following are the penalties for non-compliance of this section:
- Penalty to be levied on the company: A penalty of Rs 50,000 will be levied on the company if it fails to comply with the mentioned requirement.
- Penalty to be levied on the officers: Every such officer in default shall be liable to a penalty of Rs 1,000 per day for each day during which the default continues subject to a maximum of Rs 1,00,000.
Further, if the Registrar has reasonable grounds to believe that the company is not carrying on any business or operations even after 180 days of incorporation, the Registrar may remove the name of the company from the Register of companies.
CONCLUSION:
Keeping in mind the implications of non- filing and complying the law in true spirit it is important that the promoters/ directors incorporating new companies be aware to file the declaration for commencement of business and have in records the certificate of commencement of business.
Further, the promoters/ directors are advised to take note of this procedure after receiving Certificate of Incorporation to avoid penalties and the name of the Company being struck off.
