The insertion of a new Section 10A to the Companies Act, 2013 and 23A to the Companies (Incorporation) Rules, 2014 requires filing an eForm INC-20A (Declaration for commencement of business). It is mandatory to obtain this certificate of commencement of business and following is everything you need to know about this certificate.
- “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-
- A declaration is files by a director within a period of one hundred and eighty days (180 days) from 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 had paid the value of the shares agreed to be taken by him on the date of making 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 (Registered office of the company).
- 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 (INR 50,000) and every officer who is in default shall be liable to a penalty of one thousand rupees (INR 1,000) for each day during which such default continues but not exceeding an amount of one lakh rupees.
- Where no declaration has been filed with the Registrar under clause (a) of sub-section (1) within a period of 180 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, without prejudice to sub-section (2), initiate action for the removal of the name of the company from the register of companies under Chapter XVIII.”
“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:
Provided that in 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.
Who have to file the form?
- The companies which are incorporated on or after 2nd November 2018;
- The companies having share capital.
Which companies do NOT need to file the form?
- The ones incorporated before 2nd November 2018;
- The ones limited by guarantee not having share capital.
Limitation for filing the form:
The form should be filed within one hundred and eighty (180) days from the date of incorporation.
Purpose of the form:
- Declaration prior to the commencement of business;
- Exercising borrowing powers.
Consequences of not filing:
- The Registrar may initiate an action for removal of the company;
- The company would not be able to borrow money.
DETAILED INSTRUCTIONS TO FILL THE FORM
To get your commencement of business certificate, the filing of the form needs to be correct. Here’s a guide explaining important fields of the form in detail:
- Corporate Identity Number (CIN)
You will have to enter a valid and active CIN of company having share capital and where the flag for filing commencement of business is enabled. The pre-fill button will automatically display the name, address (registered office) and email id of the company.
- If the affairs of the company is regulated by any sectoral regulator like RBI, then:
- Select the Radio button,
- Specify the name of the regulator if it is not mentioned in the drop down menu
- Enter the date of approval/ registration by the sectoral regulator.
- Subscribers proof of payment for value of shares
- Certificate of Registration issued by RBI (in case of Non-Banking Financial Companies) or from other regulators. (It is mandatory to attach this document if the affairs of the company is regulated by any sectoral regulator)
Any other information can be provided as an optional attachment(s).
After attaching all the relevant, the Director, or any other person representing the company needs to sign the declaration, enter the serial number and date of board resolution authorizing the signatory to sign, give declaration and submit the eForm.
SIGNING OF THE FORM
The eForm should be digitally signed by the Director of the company, only he is allowed to sign this form. The person should have registered his/her Digital Signature Certificate (DSC) with Ministry of Corporate Affairs by using the link www.mca,gov.in. Disqualified directors are not eligible to sign and registration of DSC with the ministry is mandatory before signing the form. The approved Director Identification Number (DIN) will also be needed to sign the form.
CERTIFICATE BY PRACTICING PROFESSIONAL
The form needs to be verified by a practicing professional whose details with his digital signature are also entered in the form.
AFTER THE SUBMISSION OF THE FORM
On successful submission:
- Service Request Number (SRN) will be generated and shown to the user which will be used for future correspondence.
- Challan will be generated depicting the details of the fees paid by the user to the Ministry. It works as an acknowledgement.
- When the eForm is completely processed by the authority concerned, an acknowledgement of the same with related documents, if any, is sent to the user in the form of an email to the email id of the company.
- Fee for filing e-Forms or documents in case a company have share capital
|Nominal Share Capital||Fee Applicable|
|Less than 1, 00,000||INR 200|
|1, 00, 000 – 4, 99,999||INR 300|
|5, 00,000 – 24, 99,999||INR 400|
|25, 00,000 – 99, 99,999||INR 500|
|1, 00, 00,000 or more||INR 600|
- Additional fee rules
|Period Of Delays||All Forms|
|Up to 30 days||2 times of nominal fees|
|More than 30 days and up to 60 days||4 times of nominal fees|
|More than 60 days and up to 90 days||6 times of nominal fees|
|More than 90 days and up to 180 days||10 times of nominal fees|
|More than 180 days||12 times of nominal fees|
This whole concept of obtaining commencement of business certificate was introduced in the Companies Act, 1956 and was omitted via a notification dated 26th November 2015 for ease of doing business in India. It is now introduced again by the Companies (Amendment) Ordinance, 2018. When you set up your business, there are certain rules and regulations that need to be followed which is prescribed by the Government. It gives your company the legal identity it requires for proper functioning. Obtaining Certificate of Commencement of Business is one of the steps that a person needs to follow between registering and running a company. It is now a mandatory step and not following through it has serious repercussions.