Declaration of Commencement of Business - Series 487
A.
Declaration
of Commencement of Business
MCA has inserted New Section 10A after Section 10 by Companies (Amendment)
Ordinance, 2018 Dated 02.11.2018and same has been inserted in
Companies (Amendment) Act, 2019.
As per 10A, a company having SHARE CAPITAL incorporated after ordinance
i.e. 02.11.2018 shall not commence its business or exercise any borrowing
powers unless,
§ A declaration is filed by the directors in
e-form Form No. INC-20A within 180 days from date of incorporation of company with
ROC that ‘every subscriber to the MOA
has paid the value of the shares agreed to be taken by him”.
Quick Bite:
a. Whether company incorporated without share capital
need to file declaration in form INC- 20A?
As
per Section 10A this declaration of commencement of business is required to
file only by Companies having Share Capital. Therefore, Company not having
share capital need not to file 20A.
b. A Company incorporates on or before 02.11.2018
whether needs to file e-form INC-20A with ROC?
Section 10A came into effect 02nd
November, 2019 with prospective applicability.
Therefore, Companies incorporate before 02.11.2019 no need to file Declaration of Commencement of Business.
Therefore, Companies incorporate before 02.11.2019 no need to file Declaration of Commencement of Business.
c. After filing of e-form INC-22A, whether ROC shall
issue Certificate of Commencement of Business?
Let’s
have some look on Background:
§ There
was section 149 in Companies Act, 1956 which required public Company to obtain
certificate of commencement of business from ROC.
§ In
Companies Act, 2013 there was Section 11 which required every company to obtain
certificate of Commencement of Business from ROC.
However, such section has
been omitted w.e.f. 29th May, 2015 by Companies (Amendment) Act,
2015
§ On
02.11.2018 Govt. has introduced Companies (Ordinance), 2018 and inserted
section 10A “Declaration of Commencement of Business”.
Before 02.11.2018 there
was sections for obtaining ‘Certificate of Commencement of Business” from ROC
but section 10A states about “Declaration of Commencement of Business”.
Therefore, after filing of
INC-20A Roc shall not issue any certificate of commencement of business. It is
just an declaration from the Directors of Company.
d. Restriction before filing of e-form INC-20A?
§ Company
can’t Commence Business.
§ Company
Can’t exercise Borrowing Powers.
§ Practically
MCA system not allows filing any e-form with ROC.
e. What are the consequences if company fails to file
form within 180 days?
Company can file such form
INC-20A with Roc even after 180 days by paying additional fees as per fees
rules. However, until unless form is not filed above mentioned restrictions
shall be applicable on Company.
f.
What are the consequences
if company commences business without filing of INC-20A?
§ Penalty on Company: the
company shall be liable to a penalty of fifty thousand rupees.
§ Penalty on Officer in Default: 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
g. Whether subscription money can be received in cash
from the subscribers of memorandum?
As per Companies Act, 2013
that subscription money must be received in Bank account of Company. Therefore,
one can opine that Company can receive subscription money in cash also and book
the same in books of accounts of Company.
Even as per section 269ST of
Income Tax Act, a Company can accept maximum Rs. 200,000/- per day per person
in cash.
h. What are the attachments of e-form INC-20A?
§
In case of subscription money received in
Bank Account, attachment shall be copy of Bank Statement.
§
In case of subscription money received in
cash, attachment shall be a declaration along with copy of books of account of
Company.
i.
What is the time
period of issue of share certificate by the Company?
As per section 56, every
company shall deliver the certificates of all securities allotted, transferred
or transmitted within a period of two
months from the date of incorporation, in the case of subscribers to the
memorandum.
j.
Section 10A allows
company to receive subscription money within 180 days then how to comply with
the provision of Section 56?
As per section 56: Company
need to issue share certificate within 2 month of Incorporation of Company.
As per section 10A:
Company can receive money within 180 days of incorporation of Company.
Note: In such case one can opine that whether
subscription money received or not it is duty of Company to issue share
certificates to subscribers of Memorandum of Association.
Maintenance of Registered office of Company
Addition of Sub - Section (9) after Section 12 Sub Section 8:
As per Section 12(1) A company shall, within thirty days of its
incorporation and at all times thereafter, have a registered office
capable of receiving and acknowledging all communications and notices as may
be addressed to it.
By ordinance, 2018/
Amendment Act, 2019:
Registrar may do physical verification of the
registered office of Company and if any default is found to be made in complying
with provision of Section 12(1) (extract mentioned above). ROC may, initiate
action for removal of name of Company (Strike off)
Compliance as per Section 12:
Every company shall—
(a) paint or
affix its name, and the address of its registered office, in a conspicuous
position, in legible letters, and
(b) if the characters employed therefore are not
those of the language or of one of the languages in general use in that
locality, also in the characters of that language or of one of those languages;
Author – CS Divesh Goyal, GOYAL DIVESH &
ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com).
Disclaimer: The entire
contents of this document have been prepared on the basis of relevant
provisions and as per the information existing at the time of the preparation.
Although care has been taken to ensure the accuracy, completeness and
reliability of the information provided, I assume no responsibility therefore.
Users of this information are expected to refer to the relevant existing
provisions of applicable Laws. The user of the information agrees that the
information is not a professional advice and is subject to change without
notice. I assume no responsibility for the consequences of use of such
information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT,
SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION
WITH THE USE OF THE INFORMATION
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