New Section 10A was inserted through “The Companies (Amendment) Ordinance, 2019” to Declaration for commencement of business in Form INC-20A.
As per Section 10A(1), A company incorporated after the commencement of the Companies (Amendment) Ordinance, 2 and having a share capital shall not commence any business or exercise any borrowing powers unless—
(a) a declaration is filed by a director within a period of 180 days from 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 has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and
(b) The company has filed with the Registrar a verification of its registered office as provided in section 12(2) .
As per Section 10A(2), If any default is made in complying with the requirements of this section, the company shall be liable to a penalty of 50,000 rupees and every officer who is in default shall be liable to a penalty of 1,000 rupees for each day during which such default continues but not exceeding an amount of 1 lakh rupees.
As per Section 10A(3), Where no declaration has been filed with the Registrar under clause (a) of sub-section (1) within a period of 180 days from 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 the provisions of sub-section (2), initiate action for the removal of the name of the company from the register of companies under Chapter XVIII.
As Per Rule 23A, The declaration under section 10A by a director shall be in Form No, lNC-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 the 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.
Attachment with Form INC-20A
- Subscribers proof of payment for value of shares. (i.e Bank Statement or any other proof like Copy of Cheque , DD etc)
- Board resolution authorizing the signatory to sign, give declaration and submit the eForm.
- Certificate of Registration issued by the RBI (Only in case of Non-Banking Financial Companies) /from other regulators.
In Simple Words, It is mandatory to file declaration in form INC-20A within 180 Days from the date of Incorporation before Commence any business or exercise any borrowing powers.
Otherwise penal Provision will attract on the company ( penalty of 50,000 rupees) as well as on every Officer who is in default ( penalty of 1,000 rupees for each day during which such default continues but not exceeding an amount of 1 lakh rupees).
Even Registrar initiates action for the removal of the name of the company from the register of companies.