Commencement of Business

MCA has vide the Companies Ordinance 2019 which has been promulgated on 14th January, 2019 introduced a new section 10A in the Companies Act, 2013 which requires that every company incorporated after the above date and having share capital shall not commence business nor exercise its borrowing powers unless it has filed a declaration within 180 days from the date of incorporation and also filed document pertaining to its registered office.

There is the penalty of Rs.50,000 on the company and Rs.1000 per day on each officer in default subject to a maximum of Rs.100,000/-

Where the aforesaid declaration has not been filed within 180 days of the date of incorporation, then the Registrar may, where he is of the opinion, that the company is not carrying on any business or operations, start proceedings to remove the name of the company from its records. Of course the penalty clause will still be applicable.

Form INC-20A is the form which has been introduced by the MCA and the only mandatory documentation required is the proof that the subscriber has paid in his subscription money for the value of shares which he has agreed to subscribe via the memorandum of association. A copy of the cheque issued by the subscriber and a copy of the bank statement showing the credit in the company’s bank account should suffice for the purpose. Which also means that the bank account can be opened by the company but actual business like invoicing etc. cannot commence until this declaration has been filed.

Originally this provision was introduced vide Companies Amendment Ordinance 2018 w.e.f  2nd November, 2018 but this 2019 Ordinance replaces the old one.

So one more compliance for a company after its incorporation in India.

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