The term ‘business’ usually refers to the regular occupation, profession or trade. For regulating the business or corporate industry, various rules and legislations as well as their amendments have been introduced in India from time to time. One such legislation is the Companies Act 2013, which mentions the definition, requirements, procedures, conditions and penalties for almost every aspect related to the incorporation, registration and functioning of a business/company in the country.
‘Commencement of Business’ is a term which anyone owning a business is familiar with. This article mentions all that you need to know about the various procedures, requirements, forms which must be complied with for commencing a business.
According to the Companies Act, 2023’s Section 11, the directors of a company having share capital must submit a declaration to the Registrar of Companies. This declaration must assert that the signatories or subscribers to the MoA of the company have fully paid up their share. This declaration must be filed within a period of 180 days from the company’s date of incorporation. This declaration is known as Commencement of Business.
The provision of the commencement of business was adopted in the Companies Act 2013 under Section 11 from the erstwhile Companies Act of 1956. However, the same was left out in the Companies (Amendment) Act of 2015. However, Section 10A of the Companies (Amendment Ordinance), 2018 reinserted this provision to the Companies Act 2013 once again. The provision is very clear regarding its applicability with respect to the share capital. A company has to make a declaration within 180 days of its incorporation to be able to begin with its operations or exercise any other power.
What is Certificate of Commencement of Business
The certificate of commencement of business is the declaration filed by the company’s directors with the registrars. After the company is incorporated, it is provided with a sufficient one hundred and eighty days to file the proclamation in Form INC-20A. The Ministry of Corporate affairs launches Form 20 A
Which companies are not required to file form 20A?
The Companies Act does not require certain companies to file form 20A. These companies are mentioned below:
- Companies which have been incorporated before 2nd November, 2018 (before the start of the Companies (Amendment) Ordinance, 2018)
- Companies incorporated after 2nd November, 2018 which do not have share capital.
Regulatory Framework for Commencement of Business Certificate.
- Section 10A of the Companies Act 2013.
- Rule 23A, The Companies (Incorporation) Rules, 2014
What is Form INC-20A?
It is a declaration under section 10A by a director. Further as per rule 23A, The declaration under section 10A by a director shall be in Form No, INC-20A and shall be filed as provided in the Companies (Registration Offices and Fees) Rules, 2014 and the contents of the said form shall be verified by a company Secretary or a chartered Accountant or a cost Accountant in practice.
Eligibility Criteria for Filing INC-20A:-
👉The company must be incorporated under the Companies Act, 2013.
👉The company must have a valid Certificate of Incorporation (COI).
👉The company must have a registered office address. (The same could be updated via a Form No. INC-22 or Form No. SPICe+ Part B )
👉 The company must have a bank account,
👉DSC and Board resolution.
Timelines for Filing INC-20A:-
Companies are required to file INC-20A within 180 days from the date of incorporation.
Documents Required for Filing INC-20A
a. Mandatory:
✔Photo:- Director whose DSC is affixed on the form,it should be his photo outside the office and it should show the company corporate board showing CIN,GST rgistered address like letter head.(outside the buidling) and a photo inside the office showing director or kmp).Then merge the both photos and create a pdf.
b. Optional: –
✔ Copy of the company’s bank statement, reflecting the paid-up share capital (optional attachment however highly recommendatory)
✔ A declaration by subscribers to Board -(optional)
✔ Sectoral Regulator approval letter if taken.
Application Process for Commencement of Business Certificate
To apply for the certificate of commencement of business, you must fill Form 20A using the steps mentioned below:
- Visit the homepage of the official website of the Ministry of Corporate Affairs (MCA). Login in to the website using a valid ID and password.
- In the next step, opt for “MCA services” then choose the “E-filing” option available on the screen. Select “Company Forms Download”
- Now in the forms list, you must find a form titled Form No. INC-20A which is the declaration form for commencement of business
- Enter the information of your company asked in the form and optionally, search for CIN using the search option available. Select CIN from the drop down menu and then complete the form.
- You can save the webform as draft in case you want to make changes or add more details in it later.
- Now, submit the web form. After the submission, SRN or a serial request number will be generated. SRN can be used for correspondence with MCA in future.
- Attach the Digital Signature Certificate’s pdf form on MCA’s website.
- Now pay the required fees mentioned on the portal. Once the verification is finished and there are no errors, you will receive an acknowledgement email.
Penalties and Consequences for non-compliance during Form Filing
In case of non-compliance while filing Form 20A, the consequences can be severe. The penalties have been made harsh in order to reduce the number of shell companies. These penalties are mentioned below:
- Penalty of Rs 50,000: This penalty will be imposed on the firm if it fails to comply with the conditions for filing the form.
- Penalty of 1,000 per day: Each such officer who is in default will be liable to pay a penalty of Rs 1,000 per day for each day that the default persists. This penalty can be imposed to a maximum of Rs 100,000.
- Striking off of the Company: The registrar can remove the company’s name from the Register of Companies if he has reasonable grounds to believe that the firm is not carrying on any business or activities even after a period of 180 days calculated from the date of incorporation.
FAQs
What is Form 20A meant for?
It is the prescribed form required to make a declaration which is mandatory as per the Companies Act 2013’s Section 10A. The Ministry of Corporate Affairs has directed that all companies registered after the Companies (Amendment) Ordinance, 2018 after 2nd November, 2018 holding a share capital must file Form 20A for issuance of Commencement of Business Certificate. This form must be filed by all the specified companies (mentioned in this article) in order to begin their business operations and exercise their powers.
What is the time limit for obtaining the Commencement of Business Certificate by the Registrar of Companies (ROC)?
Form 20A must be submitted for obtaining the Commencement of Business Certificate within 180 days from the date of the newly formed company’s incorporation.
What is the penalty for not filing the Form 20A for Commencement of Business Certificate?
For not filing Form A, penalties will be imposed. A penalty of Rs 50,000 will be imposed on the firm if it fails to comply with the conditions for filing the form. Any officer who is in default will be liable to pay a penalty of Rs 1,000 per day for each day that the default persists. This penalty can be imposed to a maximum of Rs 100,000.
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