Form INC-20A Filing Online in India

Form INC-20A is a mandatory declaration that must be filed by companies in India, incorporated on or after November 2, 2018, with the Registrar of Companies (RoC). It is a declaration by the directors confirming that all subscribers to the memorandum have paid for their shares.

This form is also known as the Declaration for Commencement of Business. The form must be filed within 180 days of the company's incorporation date.

Its primary objectives are to:

• Declare Commencement of Business: It acts as a formal declaration by the company's directors that the company is ready to begin its business operations. Without filing this form, a company cannot legally commence business activities.
• Confirm Subscription Money Paid: A key purpose is to confirm that every subscriber to the company's memorandum has paid the full value of the shares they agreed to take. This ensures that the company has received its initial share capital as committed.
• Prevent Shell Companies and Fraud: By mandating this declaration and requiring proof of paid-up capital (usually through bank statements), Form INC-20A helps prevent the formation and operation of "shell companies" or fraudulent entities that might be incorporated without genuine business intent or financial backing.
• Enable Borrowing Powers: A company is prohibited from exercising any borrowing powers (e.g., taking loans, issuing debentures) until Form INC-20A is filed and approved by the Registrar of Companies. This ensures financial stability and compliance before a company engages in significant financial transactions.
• Ensure Legal Compliance: Filing Form INC-20A is a mandatory legal requirement under the Companies Act, 2013. Timely submission ensures that the company adheres to statutory obligations and avoids penalties, which can be substantial (e.g., Rs. 50,000 for the company and Rs. 1,000 per day for defaulting officers, up to Rs. 1 lakh).
• Enhance Transparency and Credibility: By fulfilling this compliance, a company demonstrates its legitimate existence and financial preparedness to stakeholders, including investors, creditors, and regulatory bodies. This fosters trust and transparency in the corporate ecosystem.
• Avoid Company Striking Off: If Form INC-20A is not filed within the stipulated 180-day period, and the Registrar has reason to believe the company is not carrying on any business, the RoC may initiate action to strike off the company's name from the Register of Companies, effectively dissolving it.

How INC-20A Prevents the Creation of Shell Companies?

Form INC-20A, which requires a declaration of commencement of business, helps prevent the creation of shell companies by ensuring that newly incorporated companies with share capital actually begin operating and don't just exist on paper.

• Demonstrates Intent to Operate: The form requires a declaration that the company is ready to commence business, supported by evidence like bank statements or invoices showing actual business activity.
• Verifies Capital Contribution: It confirms the company has received the minimum share capital from its subscribers, a key indicator of a legitimate business.
• Prevents Delayed/Fake Operations: By requiring this declaration within 180 days of incorporation, it discourages companies from remaining inactive or using the incorporation for fraudulent activities like money laundering.
• Legal Safeguard: The form acts as a legal requirement, and its absence can lead to penalties, including a potential strike-off of the company from the register.
• Increased Transparency: Filing INC-20A enhances transparency and accountability in the corporate sector, making it more difficult to operate shell companies without consequences.

Filing for newly incorporated companies in India offers several advantages, including limited liability, enhanced credibility, easier access to funding, and potential tax benefits. These benefits contribute to the long-term success and sustainability of the business by providing legal protection, attracting investors, and facilitating growth.

1. Limited Liability

• Incorporation shields personal assets from business debts and liabilities. This means owners are generally not personally responsible for the company's obligations beyond their investment.
• This protection is crucial for entrepreneurs who want to minimize personal financial risk, separating their finances from the company's financial health.

2. Enhanced Credibility and Trust

• A registered company is viewed as more credible and trustworthy by clients, suppliers, partners, and financial institutions.
• Incorporation demonstrates a commitment to legal compliance and professional business practices, fostering confidence among stakeholders.

3. Easier Access to Funding

• Investors and lenders are more likely to invest in or provide loans to registered companies due to their clear legal structure and reduced perceived risk.
• Incorporation facilitates raising capital through various avenues, such as issuing shares, seeking venture capital, or obtaining loans, as it provides a more formal and accountable entity.

4. Potential Tax Benefits

• Registered companies may be eligible for various tax deductions, exemptions, and incentives offered by the government to promote specific industries or activities.
• For instance, the Startup India initiative offers significant tax exemptions to eligible startups for a certain period, alongside other benefits like capital gains exemptions and "angel tax" relief.

5. Business Continuity and Perpetual Succession

• Incorporation creates a separate legal entity that has perpetual succession, meaning it can continue to exist even if the original owners or founders leave the business, retire, or pass away.
• This allows for smoother transitions and succession planning, ensuring the business's long-term survival and stability.

6. Brand Protection

• Incorporation allows for the registration of company names, logos, and trademarks, legally protecting the brand identity and preventing unauthorized use by others.
• This is crucial for building a strong brand, gaining a competitive edge, and safeguarding intellectual property.

7. Legal Compliance and Governance

• Incorporation ensures adherence to legal and regulatory requirements under the Companies Act, 2013, and other relevant laws, minimizing the risk of penalties and legal issues.
• It provides a framework for sound corporate governance, promoting transparency, accountability, and ethical conduct within the organization.

8. Access to Government Schemes and Support

• Registered companies, especially startups recognized under the Startup India program, may be eligible for various government schemes, subsidies, and support programs designed to encourage entrepreneurship and innovation.
• These schemes can provide financial assistance (e.g., Startup India Seed Fund Scheme, Credit Guarantee Scheme for Startups), mentorship, and other resources to help businesses grow.

9. Employee Benefits

• Incorporation can make it easier to attract and retain talent by enabling the company to offer structured employee benefits, such as stock options, provident fund (PF), and other incentives.
• A formal, structured company framework can enhance employee morale, provide job security, and boost productivity.

10. Intellectual Property Protection

• Incorporation provides a robust legal framework for protecting intellectual property (IP), including patents, trademarks, copyrights, and trade secrets, registered in the company's name.
• This is crucial for safeguarding valuable innovations, creative works, and preventing infringement by competitors.

All companies incorporated in India on or after November 2, 2018, with share capital, are required to file Form INC-20A.

Applicability for Private and Public Limited Companies

Form INC-20A is mandatory for both Private Limited Companies and Public Limited Companies incorporated in India on or after November 2, 2018, provided they have share capital. This includes:

• One-Person Companies (OPCs) with share capital: While often seen as a simplified structure, OPCs that meet the criteria of having share capital and being incorporated after the specified date are also required to file INC-20A.
• Section 8 Companies (Non-profit companies) with share capital: Even companies established for charitable or non-profit purposes, if they are incorporated with share capital after November 2, 2018, must file this form.
• Producer Companies with share capital: These specialized companies also fall under the ambit of INC-20A if they meet the incorporation date and share capital criteria.

Companies Exempt from Filing INC-20A

While broadly applicable, there are a few key exemptions:

• Companies incorporated before November 2, 2018: The requirement for INC-20A was introduced by an amendment ordinance, so companies formed before this date are not subject to this specific filing.
• Companies incorporated without share capital: This typically refers to companies limited by guarantee, which do not have a share capital structure. Since the form's primary purpose includes confirming the payment of share value, it does not apply to such entities.
• Government companies exempted by special provisions: In some cases, specific government companies might be exempted from certain compliance requirements, including INC-20A, through special provisions or notifications.

Understanding the "Date of Incorporation"

The Date of Incorporation marks the official birth of a company. It's the specific day the Registrar of Companies (ROC), under the Ministry of Corporate Affairs (MCA), approves the incorporation application and issues the Certificate of Incorporation.

• Establishes Legal Existence: From this date, the company becomes a distinct legal entity, separate from its founders. It gains the legal capacity to own assets, enter into contracts, and engage in legal proceedings in its name.
• Triggers Legal Obligations: It's the precise starting point for all statutory compliance timelines, including tax obligations, annual filings, and other regulatory requirements.
• Is Official Record: This pivotal date is prominently displayed on the Certificate of Incorporation, serving as the company's official birth record.

Significance for Form INC-20A Filing

The Date of Incorporation is paramount for Form INC-20A, the "Declaration for Commencement of Business," for the following critical reasons:

• Determines Applicability: Form INC-20A is mandatory only for companies incorporated on or after November 2, 2018. The Date of Incorporation dictates whether a company falls under this specific requirement.
• Calculates Filing Deadline: The 180-day deadline for filing Form INC-20A is strictly calculated from the Date of Incorporation. Missing this deadline triggers significant penalties.
• Unlocks Business Operations: Crucially, a company cannot legally commence business operations or exercise borrowing powers until Form INC-20A is filed and approved. This restriction is effective from the Date of Incorporation, making timely submission essential for active businesses.
• Prevents Penalties & Dissolution: Failure to file INC-20A within the 180-day window from the Date of Incorporation results in substantial penalties for both the company and its directors. Prolonged non-compliance can even lead to the ROC striking off the company's name, effectively dissolving the entity.

Filing Form INC-20A requires a specific set of documents and information to be accurately prepared and attached.

These documents serve as proof that the company has fulfilled the necessary conditions to commence business operations, particularly concerning its share capital.

1. Bank Statement of the Company

• Purpose: This is the most crucial document. It must clearly show that the entire amount of the subscribed share capital (as stated in the Memorandum of Association) has been deposited into the company's bank account by the subscribers.
• Details: The statement should cover the period from the date of incorporation up to the date of declaration, explicitly showing the credit entries from all subscribers for their respective share contributions. It's often recommended to show transactions for at least the initial 30-60 days.

2. Board Resolution

• Purpose: A copy of the Board Resolution passed by the company's directors is required. This resolution formally authorizes a director to sign and file Form INC-20A and confirms that the company has received the subscription money from its shareholders.
• Details: The resolution should explicitly state the decision to commence business, the confirmation of share capital receipt, and the authorization for the specific director to file the form.

3. Digital Signature Certificate (DSC) of the Authorized Director

• Purpose: The form must be digitally signed by a director of the company who is authorized to do so by the Board Resolution.
• Details: The DSC must be active and registered on the MCA portal for the concerned director's DIN.

4. Director Identification Number (DIN) of the Authorized Director

• Purpose: The DIN of the director signing the form is a mandatory field in Form INC-20A.

5. Digital Signature Certificate (DSC) of the Practicing Professional

• Purpose: Form INC-20A must be certified by a practicing professional—either a Chartered Accountant (CA), Company Secretary (CS), or Cost Accountant (CMA). Their DSC is required for this certification.
• Details: The professional's membership number and whether they are an Associate or Fellow member must also be provided.

6. Certificate of Incorporation (for reference)

While not always a direct attachment to the e-form, the details from the Certificate of Incorporation (like CIN and Date of Incorporation) are essential for filling out the form accurately.

7. Proof of Registered Office Address (if not already filed or updated)

• Purpose: The form requires a declaration that the company has filed the verification of its registered office as per Section 12(2) of the Companies Act, 2013 (typically through Form INC-22). While often completed during incorporation, ensure this compliance is met.
• Details: If there were any changes or this was not fully compliant during incorporation, relevant proofs like a utility bill (not older than 2 months) or a rent agreement might be implicitly required to support the declaration.

8. Approvals from Sectoral Regulators (if applicable)

• Purpose: For companies whose objects require registration or approval from specific sectoral regulators (e.g., Reserve Bank of India for NBFCs, SEBI, IRDAI), such approvals must be obtained and attached.
• Details: This would include a copy of the registration certificate, approval letter, or any other relevant document issued by the respective regulatory body.

9. Photographs of the Registered Office

• While not explicitly listed as a mandatory attachment in the official MCA instruction kit for INC-20A, many professionals advise attaching geo-tagged photographs of the company's registered office.
• Details: These usually include an external view of the building with the company signboard and an internal view of the office, ideally showing at least one director/Key Managerial Personnel (KMP) to substantiate genuine operations.

Filing Form INC-20A, the "Declaration for Commencement of Business," is a crucial step for newly incorporated companies with share capital in India.

1. Log in to the MCA Portal

• Visit the official MCA website: mca.gov.in
• Log in using your registered user ID and password. If you don't have one, you'll need to register as a "Registered User."

2. Download e-Form INC-20A

• Navigate to "MCA Services" -> "e-Filing" -> "Company Forms Download" or "Company e-Filing".
• Search for and download "e-Form INC-20A – Declaration for Commencement of Business." Ensure you download the latest version.

3. Fill in the Form Details

• Open the downloaded e-Form using a compatible PDF reader (like Adobe Acrobat Reader).
• Enter the Corporate Identification Number (CIN) of your company. Once entered, the system will auto-populate certain details like the company name and registered office address.
• Enter the Date of Incorporation.
• Declare that every subscriber to the memorandum has paid the value of shares agreed to be taken by them on the date of making the declaration.
• Confirm that the company has filed the verification of its registered office as per Section 12(2) of the Companies Act, 2013 (usually done via Form INC-22 during incorporation).
• Provide details of any approval or registration obtained from sectoral regulators, if applicable.
• Enter the Digital Signature Certificate (DSC) details of the director signing the form (DIN, Designation, Date of signing).

4. Attach Required Documents

Click the "Attach" button within the form to upload the necessary documents:

• Bank statement showing the receipt of subscription money.
• Board Resolution (if required as a separate attachment).
• Approvals from sectoral regulators (if applicable).
• Any other optional attachments like geo-tagged photos of the registered office.

Ensure all attachments are in PDF or JPG format and within the prescribed size limits (usually up to 2MB per attachment).

5. Pre-fill and Check Form

• After filling in all details and attaching documents, click the "Pre-fill" button to verify the data against MCA records.
• Click the "Check Form" button to validate if all mandatory fields are correctly filled and there are no errors. Rectify any errors indicated.

6. Affix Digital Signatures

• Affix the DSC of the director authorized to sign the form.
• Affix the DSC of the practicing professional (CA/CS/CMA) certifying the form, along with their membership number.

7. Upload the Form

• Save the completed e-Form.
• Go back to the MCA portal.
• Navigate to "MCA Services" -> "Upload e-Forms."
• Browse and select your saved INC-20A PDF form.
• Click "Upload."

8. Make Payment

• Upon successful upload, the system will generate a Service Request Number (SRN).
• You will be redirected to the payment gateway.
• Pay the applicable fees based on your company's nominal share capital. Be aware of additional fees for delayed filing.
• You can pay online using Net Banking, Credit/Debit Card, or UPI.

9. Acknowledgement

• Once the payment is successful, a payment challan will be generated. You should save this for your records.
• An acknowledgment email with the SRN will be sent to your registered email ID.
• The form will go into "processing" mode. For INC-20A, it is often processed under the Straight Through Process (STP) mode, which means it is often approved automatically without manual checks if all data is correct.
• You can track the status of your form using the SRN on the MCA portal.

The due date for filing Form INC-20A, the declaration for commencement of business, is within 180 days of the company's incorporation. Late filing attracts penalties, with the fee increasing based on the delay.

Fee for Filing Form INC-20A

Fee for filing eForm for companies having share capital:

Failing to file Form INC-20A, the declaration for commencement of business, within the 180-day deadline after a company's incorporation can lead to significant penalties and potential removal of the company from the Registrar of Companies (RoC) register.

Penalty for Non-Filing of Form INC-20A on the Company

The penalty for not filing Form INC-20A, which is a declaration for commencement of business, is a ₹50,000 penalty for the company and a ₹1,000 per day penalty for each officer in default, with a maximum penalty of ₹1,00,000 for officers.

Failure to file this form within 180 days of incorporation can lead to these penalties and potentially other consequences like operational limitations and even company de-registration.

• Company Penalty: ₹50,000; for the company itself.
• Officer Penalty:₹1,000 per day; for each officer in default.
  Maximum penalty of ₹1,00,000; for each defaulting officer.

The Risk of Company Strike-Off by the Registrar of Companies

The risk of company strike-off by the Registrar of Companies (RoC) for not filing Form INC-20A is that if a company fails to file this form within 180 days of incorporation, the RoC may presume it's inactive and initiate proceedings to remove its name from the Register of Companies. This results in:

• Loss of Legal Entity: The company ceases to exist.
• Asset Vesting: Remaining assets may go to the government.
• Director Disqualification: Directors could be barred from other directorships.

Restrictions on Commencing Business and Exercising Borrowing Powers

In India, for companies incorporated on or after November 2, 2018, there are significant restrictions on commencing business operations and exercising borrowing powers until certain statutory requirements are met. This is primarily governed by Section 10A of the Companies Act, 2013.

A company with share capital incorporated on or after November 2, 2018, cannot exercise any borrowing powers unless the same conditions for commencing business are met:

1. The Declaration of Commencement of Business (Form INC-20A) is filed: This is a prerequisite for exercising borrowing powers. The declaration in Form INC-20A confirms the receipt of initial share capital, which is crucial for a company's financial standing and ability to borrow.
2. Verification of Registered Office Filed: As above, the registered office verification must be completed.

Purpose of these Restrictions:

These restrictions are a cornerstone of the Companies Act, 2013, aimed at:

• Promoting Genuine Businesses: Ensuring that companies are not merely "paper companies" but have genuinely received their initial capital and are ready to conduct legitimate business.
• Protecting Stakeholders: Safeguarding the interests of investors, creditors, and the public by ensuring financial transparency and legal adherence from the outset.
• Enhancing Ease of Doing Business (with Safeguards): While promoting ease of incorporation, the law also builds in checks like INC-20A to ensure subsequent compliance and prevent misuse of the corporate structure.

Consequences of Non-Compliance:

• Invalid Debts (Potentially): While lenders acting in good faith might be protected in some cases (as per Section 180(5) regarding borrowings exceeding limits), any debt incurred by a company before filing INC-20A could be legally challenged or deemed ineffectual.
• Difficulty in Raising Funds: Lenders and financial institutions are highly unlikely to provide loans or credit facilities to a company that has not complied with Section 10A, as it indicates a fundamental lack of legal compliance and financial preparedness.
• Penalties and Strike-Off: The same penalties and risk of strike-off for non-compliance with Section 10A apply.

A Board Resolution is a mandatory and critical document for the filing of Form INC-20A, the Declaration for Commencement of Business.

Importance

1. Legal Requirement: While the Companies Act, 2013, doesn't explicitly state that a Board Resolution must be attached, it's an inherent part of corporate governance and a best practice to ensure formal approval for such a significant declaration. Practicing professionals (CA/CS/CMA) certifying the form often require it.
2. Authorization: It formally authorizes a specific director (or directors) to sign and file Form INC-20A on behalf of the company.
3. Confirmation of Compliance: The resolution serves as official proof that the Board has reviewed and confirmed that:

• The company has received the full value of shares from all subscribers to the Memorandum.

• The company is ready to commence its business operations.
• All other preconditions for commencement (like having a registered office) are met.

4. Evidence for Regulators: In case of any future scrutiny or query from the Registrar of Companies (RoC), the Board Resolution provides documented evidence of the Board's due diligence and compliance.
5. Internal Record: It creates an essential internal record of the company's decision-making process.

Content of the Board Resolution

A well-drafted Board Resolution for filing INC-20A should typically include the following key elements:

1. Meeting Details: Date, time, and venue of the Board Meeting.
2. Quorum Confirmation: Confirmation that the meeting was duly convened and a proper quorum was present.
3. Purpose of Resolution: Clearly state the agenda item related to the commencement of business and filing of Form INC-20A.
4. Confirmation of Share Subscription: Explicitly state that all subscribers to the Memorandum of Association have paid the value of the shares agreed to be taken by them. This is the core declaration for INC-20A.
5. Confirmation of Registered Office: Acknowledge that the company has a verified registered office as per Section 12(2) of the Companies Act, 2013.
6. Confirmation of Regulatory Approvals (if applicable): If the company's business requires specific approvals from sectoral regulators (e.g., RBI, SEBI), the resolution should confirm that such approvals have been obtained.
7. Declaration of Commencement: A clear declaration that the company is ready to commence its business operations.
8. Authorization for Filing: Authorize a specific director (or any director) to sign and submit Form INC-20A to the RoC.
9. Ancillary Powers: Grant authority to the authorized director to do all such acts, deeds, and things as may be necessary to give effect to the resolution, including signing other related documents.