Acceptance of Loan before filing of 20A Allowed or not? - Series 518
Acceptance
of Loan before filing of 20A Allowed or not?
MCA
has come with New Section 10A inserted after Section 10 by Companies (Amendment)
Ordinance, 2018 dated 02.11.2018 and same has been inserted in Companies
(Amendment) Act, 2019
Extract of law:
As per 10A,
a company having SHARE CAPITAL incorporated after ordinance i.e. after 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”.
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Common questions amongst many professionals are:
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Q. “Whether a company can accept loan from directors, shareholders etc
before filing of 20A?”
Q.“Whether company can accept loan from directors for opening of bank
account before filing of 20A?”
Therefore, in this editorial, author will strive to answer the following
questions including above mentioned:
v Whether Subscription money can be received in cash?
v Whether company can commence any business or file
for any tender before filing of 20A?
i)
Whether a company can accept loan directors, shareholders etc before filing
of 20A for any purpose like opening of bank account?
If a company
incorporated with share capital of Rs. 10K and minimum required for opening of
bank account in specific company is Rs. 25K. At this situation company face
difficulty to open bank account. Then question arise whether loan from director
can be taken to open bank account of the Company.
Language of Law: As per 10A, a company having SHARE CAPITAL incorporated after the ‘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.
As mentioned in 10A to exercise borrowing power
company is required to file 20A (declaration of commencement of business). The
term Borrowing power includes acceptance of loan from any one i.e. whether
Directors, Shareholders etc.
Therefore, one can opine that as it is
specifically restricted under Section 10A that company can’t exercise borrowing
power before filing of declaration in e-form 20A. Therefore,
it is very clear that no company can accept loan from any one before filing of
20A, even for the purpose of opening of bank account also.
However, if any company accepts loan before
filing of 20A then company is liable for following Penalty:
§ 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
ii)
Whether Subscription money can be received in cash
As per Companies Act, 2013,
it is nowhere mentioned that subscription money should 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.
iii) Whether company can
commence any business or file for any tender before filing of 20A.
As per section 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.
One can opine that section 10A specifically restricts commencement of
business before filing of 20A i.e. declaration of commencement of business. Therefore, is
can be deduced that the companies even can’t apply for any tender or business
proposal before filing of 20A.
iv) 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 accounts of Company.
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, still 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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