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Business Commencement Certification Mandate
In accordance with the Companies (Amendment) Ordinance of 2018, there is now a stipulation that applies to all companies registered on or after November 2, 2018, regarding the submission of a Certificate of Commencement of Business. This declaration, known as Form 20A, is to be filed by the company’s directors within 180 days of the company’s incorporation date. Complying with this requirement is crucial, given the substantial penalties associated with non-compliance.
Prior to the Companies Act of 2013, the requirement to obtain a Certificate of Commencement of Business did not extend to private or public companies without share capital. This obligation was reserved exclusively for public limited companies with share capital. However, in 2013, the Ministry of Corporate Affairs (MCA) introduced a significant amendment by adding Section 10A to the Companies Act of 2013. This amendment mandates that companies incorporated on or after November 2, 2018, must submit a declaration and verification to align with this new regulation.
Section 10A explicitly states that a company, incorporated after the enactment of the Companies (Amendment) Ordinance of 2019 and having a share capital, cannot initiate any business activities or exercise borrowing powers unless it fulfills the following conditions:
A declaration must be submitted by one of the company’s directors within 180 days from the date of incorporation. This declaration should confirm that every subscriber to the memorandum has paid the agreed-upon value for the shares, as of the date of making such declaration, to the Registrar.
Provisions of Rule 23A in The Companies (Incorporation) Rules, 2014
Rule 23A of The Companies (Incorporation) Rules, 2014 outlines the following requirements:
- The declaration must be submitted using Form No. INC-20A and should follow the filing procedures specified in the Companies (Registration Fees) Rules, 2014.
- The verification of the declaration’s contents must be carried out by a Company Secretary, Chartered Accountant, or Cost Accountant actively engaged in practice.
- If a company’s objectives necessitate registration or approval from sectoral regulators, such as the Reserve Bank of India or the Securities and Exchange Board of India, the company must obtain the required registration or approval and attach it to the declaration.
Companies Exempt from Filing Form INC-20A
Certain companies are exempt from the obligation to file Form INC-20A. These include:
- Companies incorporated before November 2, 2018, which is the date of commencement of the Companies (Amendment) Ordinance, 2018.
- Companies incorporated after November 2, 2018, provided they do not have share capital.
Requirements and Procedures:
To obtain a Certificate of Business Commencement, companies must adhere to the following procedures:
- Within 180 days from the date of incorporation, file eForm INC-20A with the relevant Registrar of Companies (ROC). This eForm should include a declaration under Section 10A from the directors, in the form of a Board Resolution, within eForm INC-20A itself.
- Attach proof of the deposit of the paid-up share capital by the subscribers, along with the registered office address, to eForm INC-20A.
- If the company’s operations require registration or approval from sectoral regulators such as the Reserve Bank of India or the Securities and Exchange Board of India, ensure that the necessary registration or approval is obtained and attached to the declaration.
- Prior to submission with the ROC, eForm INC-20A must be verified and certified by a practicing professional.
Penalties for Non-Compliance:
Non-compliance with these requirements incurs significant penalties, primarily designed to deter the formation of shell companies. The penalties are as follows:
- Company Penalty: A fine of Rs 50,000 will be imposed on the company in the event of non-compliance with the specified requirements.
- Officer Penalties: Officers in default will face a daily penalty of Rs 1,000 for each day of non-compliance, with a maximum limit of Rs 1,00,000.
- Removal from Register: If the Registrar has reasonable grounds to believe that the company is not engaged in any business or operations even after 180 days from incorporation, the Registrar may remove the company’s name from the Register of Companies.
ROC FEE FOR FILING E-FORM 20A:
| IN CASE OF COMPANY HAVE SHARE CAPITAL: | |
| Less than 1,00,000 | Rupees 200 |
| 1,00,000 to 4,99,999 | Rupees 300 |
| 5,00,000 to 24,99,999 | Rupees 400 |
| 25,00,000 to 99,99,999 | Rupees 400 |
| 1,00,00,000 or more | Rupees 600 |
ADDITIONAL FEE (IN CASE THE FORM IS NOT FILED WITHIN THE TIME)
| NOMINAL SHARE CAPITAL APPLICABLE FEES IN (RS) | |
| Up to 30 days | 2 times of normal fees |
| Above 30 but not exceeding 60 days | 4 times of normal fees |
| Above 60 days but not exceeding 90 days | 6 times of normal fees |
| Above 90 days but not exceeding 180 days | 10 times of normal fees |
| Above 180 days | 12 times of normal fees |