Acceptance of Loan before filing of 20A Allowed or not? - Series 518
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”.
Common questions amongst many professionals are:
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?
i) Whether a company can accept loan directors, shareholders etc before filing of 20A for any purpose like opening of bank account?
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.
ii) Whether Subscription money can be received in cash
iii) Whether company can commence any business or file for any tender before filing of 20A.
iv) What are the attachments of e-form INC-20A?
Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at firstname.lastname@example.org).
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