Certificate of Commencement of Business – Amendment Ordinance, 2019

Every company incorporated on and after 2nd November 2018 must apply for the issuance of another certificate known as The Certificate of Commencement of Business by filing a declaration in Form INC-20A before starting any business or operation or even entering into any kind of agreement of commercial nature. The MCA has notified the new provision on 26th January 2019 which shall have retrospective effect to all companies incorporated on or after 2nd November 2018. This article is an attempt to put the new requirement in easy-to-understand language.

The central government has issued an ordinance on 12th January 2019 and the same is published in the Gazette of India, Number 6, extraordinary, part II, among many amendments made to the Companies Act, 2013. One of the significant amendments made through the ordinance is the new requirement of filing a declaration in Form INC-20A before commencing the business operation of the company after incorporation. This new requirement is applicable to all companies incorporated on and after 2nd November 2018. The Ministry of Corporate Affairs has recently notified the eform INC-20A on 26th January 2019, and the same need to be filed within six months from the incorporation of the company.

The most important impact of this amendment to the companies’ act is on the understanding of the share subscription money resulting from the subscription to the MOA and AOA. To understand the impact, let’s understand how a company is incorporated in brief. To incorporate a company you are required to provide a specific amount as Authorised capital of the company, in the MOA and each shareholder of the company has to subscribe to the share capital of the company. The last page of the MOA is known as share subscription and every subscriber of the MOA is required to pay his share of capital to the company when it is called for by the board of directors.

However, after this very amendment, the treatment of the share subscription has changed substantially, now entire subscribed share capital of the company is required to be deposited into the bank account of the newly incorporated company, and thereafter a declaration in form INC-20A with the proof of the payment of share capital by the shareholder to the company bank account. After approval of Form INC-20A, a Certificate of Commencement of Business is issued, and only after issuance of this certificate, the company can do any business activity. Though the time prescribed for filing the form INC-20A is 180 days, a company incorporated after 2nd November 2018 must file it ASAP and must not enter into any transaction or business activity. In other words, any agreement, sale, or purchase without obtaining the certificate of commencement of business shall be an illegal activity.

This requirement is a very stringent provision with a severe punishment in case of any non-compliance. for non-filing the form INC-20A or for commencing of any business activity without obtaining the certificate of commencement of business, the company is punishable with a fine of Rs. 50,000 and every officer in default shall be punishable with a fine of Rs. 1000/- per day for each day of default, however, the maximum punishment cannot be more than Rs. 1,00,000/-

It has been further provided that in case the company which has been incorporated after the 2nd November 2018 does not file the required declaration with the proof of collecting and depositing the share subscription money to the credit of the Company shall be closed by the ROC and prosecution may be started against all key managerial personnel including all directors and the promoters of the company.

The ministry of corporate affairs has issued a notification on 26th January 2019 having the retrospective operation on all companies incorporated on and after 2nd November 2018 and released the Form INC-20A on the mca portal for filing the same with the ROC. After coming to the effect of this amendment a company can not commence its business operation without obtaining the certificate of commencement of business, which can be obtained only after the company has done the following activity in form number INC-20A

Open Current Bank Account
Collect Share Subscription Money from the shareholders
The share subscription should be deposited in the company through banking channel
The eform shall be filed with the digital signature of any of the director
The eform shall be attested by a practising CA, CS or CMA

FAQs

1.What is e-form INC-20A?

2.What is the time limit for filing the eform INC-20A?

3. Can I file the Form INC-20A even when I miss the deadline of 180 Days?

As per MCA, If a company does not file the declaration in form INC-20A within 180 days of its incorporation then the status of the company shall be changed to “Struck Off(Defunct)”. However, the company may be revived after making an application to the National Company Law Tribunal (NCLT). If the company is ordered to be revived or in case the default has taken place but the ROC has not struck down the company yet the Form INC-20A can still be filed with an additional government fee for delayed filing to the MCA.

Table of the additional fee as per rule:

S.No	Delay	Additional Fee as times of Normal filing fee
1.	Delay up to 30 Days	2 Times
2.	More than 30 days and up to 60 days	4 Times
3.	More than 60 days and up to 90 days	6 Times
4.	More than 90 days and up to 180 days	10 Times
5.	More than 180 days	12 Times

4.What is the penalty of non-filing?

5.Why company need to file eform -INC-20A?

6.What are the documents required for filing the eform INC-20A?