Has your company filed Form INC-20A before starting business?

So, you just registered a company and got your certificate of incorporation from the Registrar of Companies. You are now ready to roll with your business. Right? Turns out it is not. There is one more thing to do.

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I incorporated a private company in February, 2019 with paid up capital as Rs. 25 lakhs and the main business of providing investment advisory services.

My client, owner and director of the private company, called up to check if they can start doing business.

“Not yet! There is a new requirement now. We need to file one more declaration with Ministry of Corporate Affairs (MCA) before commencement of business.”

“What is that?”

Read on.

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Compliance before you commence business

As per the Companies (Amendment) Ordinance, 2019, all companies incorporated after November 2, 2018 and having a share capital–

#1 – have to file a declaration with Ministry of Corporate Affairs before:

• commencing the business or
• borrowing any money

#2 – have to file form for verification of registered office with the Registrar of Companies

Since your company is incorporated after November 2, 2018 with a share capital (of Rs. 25 lakhs), you are required to file the declaration before commencement of business.

If the company was limited by guarantee and did not have any share capital, this compliance would not have been applicable to you.

“How and where is this declaration to be filed?” 

Declaration to be filed in Form INC-20A

To file the declaration, MCA has introduced new e-form INC–20A. The form has to be filed to declare that:

#1 – The registered office of the company has been verified –

One has to make sure that the registered office of the company is established, before starting the business, by filing e-form INC-22 with MCA. In your case, we have filed for verification registered office at the time of incorporation. Hence, we need not file any form.

#2 – The subscribers have made payment for value of shares subscribed by them –

You have to ensure that all the subscribers have paid the amount they promised for subscription of shares before filing the form. It is mandatory to attach proofs for receipt of subscription money in e-form INC-20A. I would suggest you give a copy of the bank statement mentioning the receipt of Rs. 25 lakh.

#3 – The company is / is not regulated either by SEBI / RBI / IRDA –

If the company is regulated (by any regulator), one has to make sure that the approvals are in place before filing the form. Since your company is into investment advisory, it will be regulated by SEBI. We need to make sure the company get registered as an Investment Adviser with SEBI before filing the form. The registration certificate received from SEBI needs to be attached in the form.

Note: It is required to file form INC-22, for verification of registered office, before filing form INC-20A. Also, if there are any regulatory approvals required, the same have to be in place before filing form INC-20A. The registration number, along with the date of approval needs to be mentioned in the form.

Signing the form

The form has to be digitally signed by the director of the company who is authorized to sign the form. In the first Board Meeting, we had passed a resolution authorizing you to sign all the forms filed with MCA. So, you can sign the form.

The form has to certified by a CA, CS or ICWA in practice. As a Company Secretary (CS) in Practice, I am eligible to certify the form.

Time limit for filing the form

The form has to be filed within a period of 180 days of the date of incorporation of the company. Your company is incorporated on February 25, 2019. You have time till August 24, 2019.

The form can be filed after the due date with additional fees.

Filing fees

Here is the table of fees.

For authorized capital of Rs. 25 lakhs, filing fees will be Rs. 500.

Penalty on default

If any default is made in complying with the requirements, the company will have to pay a penalty of Rs. 50,000 and every officer who is in default will have to bear a penalty of Rs. 1,000 for each day during which such default continues but not exceeding an amount of Rs. 1 lakh.

Note: If no declaration is filed within due date and the Registrar of Companies has reasons to believe that the company is not carrying any business, it may initiate the process to strike off the company.

As soon as the form is approved by MCA, you can commence the business activity.

So let us file the form on time to avoid any penalties or additional filing fees.

“Surely, let’s do”

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This is yet another move from MCA to identify shell companies. MCA is ensuring that the companies start their business only after:

1. Registered office is established and verified
2. Money from the subscribers is received
3. Approval is taken from the regulator

And, the time limit given to the companies to complete the above is 6 months from the date of incorporation.

So, if you are going for incorporation of a company, plan it accordingly. For any queries, write to me at kruti@cskruti.com.

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Update: In the wake of COVID-19 outbreak, MCA has relaxed the due date for filing Form INC-20A. MCA has granted more 180 days to file the declaration. In other words, all newly incorporated companies can file the declaration within 360 days from incorporation instead of 180 days.

However MCA has not specified the period of validity of this relaxation.