Commencement of Business

The concept of Commencement of Business is not new. It was there in the erstwhile Companies Act, 1956 and it was also introduced by the Companies Act, 2013 under the Section 11 of the Companies Act, 2013. However, Section 11 was deleted by the Companies (Amendment) Act, 2015 w.e.f. 29th May, 2015.

On 02nd Day of November, 2018, the Companies Act, 2013 has been further amended and declaration for Commencement of business was re-introduced by way of inserting a new Section 10A after Section 10 of the Companies Act, 2013. Recently, a change was made in the return i.e., Form INC-20A. The form is asking for photographs of registered office in which atleast one of the Directors should be present as attachment.

Commencement of business is a declaration required to be filed by every Company incorporated after 02nd November, 2018 and having share capital. A Company cannot commence any business or exercise any borrowing powers without filing the declaration with the registrar.

Pursuant to Section 10A of the Companies Act, 2013 and Rule 23A of the Companies (Incorporation) Rules, 2014, A Company incorporated after 02nd November, 2018 and having share capital shall file a declaration within a period of one hundred and eighty days of the date of incorporation of the Company in Form INC-20A 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.

The contents of the said form shall be verified by a company Secretary or a chartered Accountant or a cost Accountant. in practice. In the case of a company pursuing objects requiring registration or approval from any sectoral regulators such as the Reserve Bank of India, Securities and Exchange Board of India, etc., the registration or approval, as the case may be from such regulator shall also be obtained and attached with the declaration.

Process of filing declaration for Commencement of Business: –

1. Convene a Board Meeting and authorise any of the Director of the company to sign and file declaration for Commencement of Business with the concerned Registrar.

2. The Company shall file Form INC-20A with the concerned registrar along with the prescribed fee within 180 days from the date of incorporation of Company.

Attachments with Form INC-20A

1. Subscribers proof of payment for value of shares i.e. Bank Statement of the Company depicting the amount received from the subscribers

2. Certificate of Registration issued by the RBI (Only in case of Non-Banking Financial Companies) /from other regulators if the affairs of the Company are regulated by any sectoral regulator (like RBI in case of NBFI activities).

3. Inside and outside photographs of Registered office in which atleast one of the Directors should be present.

4. The Form shall be verified by a Company Secretary or a Chartered Accountant or a Cost Accountant in practice before submitting.

Penalty Provisions: –

1. If any default is made in complying with the requirements of this section, the Company shall be liable to a penalty of fifty thousand rupees and every officer who is in default shall be liable to a penalty of one thousand rupees for each day during which such default continues but not exceeding an amount of one lakh rupees.

2. Where no declaration has been filed with the Registrar within a period of one hundred and eighty days of the date of incorporation of the Company and the Registrar has reasonable cause to believe that the Company is not carrying on any business or operations, he may initiate action for the removal of the name of the Company from the register of companies.

Note: – A Company will not be allowed to file any return except Form DIR-12 for change in Directors with the registrar without filing declaration for commencement of business.

For any query on the Companies Act, 2013, please feel free to contact us by submitting your query.