Ministry of Law and Justice amended the companies act,2013 by way of Companies(Amendment) Ordinance,2018 by inserting a new section 10A prescribing to obtain commencement of business certificate. This article discusses all compliance regarding the Certificate of Commencement of Business.
The concept of obtaining commencement of business certificate was first introduced in the companies act,1956 and the same has been deleted via a notification dated 26.05.2015 for the promotion of “Ease of Doing Business in India”. The same concept has now re-introduced via Companies(Amendment)Ordinance,2018.
The requirement of Section 10A
Section 10A requires that all the companies which are incorporated in India on or after the date of commencement of Ordinance,2018 i.e.., on or after 2nd November 2018 having a share capital, has to obtain commencement of business certificate before commencing the business or exercising any borrowing powers.
The due date for obtaining commencement of business certificate
As per the provisions of section 10A of the companies act,2013, the companies within the period of 180 days from the date of incorporation, would have to file a declaration by a director with the registrar in Form.No.INC.20A, declaring that every subscriber to the memorandum of the company has paid the share value which was agreed to be taken by him on the date of making the declaration.
Persons not required to file Form.No.INC-20A
Following Persons are not required to file Form.No.INC-20A
- The companies which are incorporated before the commencement of Ordinance,2018 i.e.., before 2nd November 2018.
- The companies having no share capital
Persons required to Obtain commencement of business certificate
Following Persons are mandatorily required to file Form.No.INC-20A
- Both the private and Public limited companies having share capital registered or incorporated on or after the date of commencement of Ordinance,2018 i.e.., on or after 2nd November 2018.
The Ministry of Corporate Affairs (MCA) inserted a rule 23A via notification dated 18th December 2018 stating that the declaration for commencement of business under section.10A of the companies act,2013, by a director shall be made in Form.No.INC.20A and the information contained in Form.No.INC.20A has to be verified by the Chartered Accountant or by the Cost Accountant or by the Company Secretary in Practise.
Documents Required for the commencement of business
Following are the documents required to obtain the commencement of business certificate
- Certificate of Incorporation (COI)
- A proof showing that all subscribers to the memorandum have deposited the value of shares which was agreed to be taken by them. (It can be a bank statement along with the Board Resolution)
In the case of a Non-Banking Financial Company (NBFC), a Registration certificate issued by the Reserve Bank of India (RBI) is also required.
Fees for Form.No.INC.20A filing
In case of companies having share capital
|Nominal Share Capital||Fees Applicable|
|Share Capital less than 1,00,000||200 Rupees|
|Share Capital 1,00,000 or more but not exceeding 4,99,999||300 Rupees|
|Share Capital 5,00,000 or more but not exceeding 24,99,999||400 Rupees|
|Share Capital 25,00,000 or above but not exceeding 99,99,999||500 Rupees|
|Share Capital more than 1,00,00,000||600 Rupees|
In the case of companies not having a share capital, Rs.200/- fees shall be applicable.
If the Form.No.INC.20A has not filed within 180 days from the date of Incorporation and filed after the period of above said 180 days, following late fees shall be applicable
|Delay period||Applicable Fees|
|Not exceeding 30 days||2 times of normal fees|
|Exceeding 30 days but not exceeding 60 days||4 times of normal fees|
|Exceeding 60 days but not exceeding 90 days||6 times of normal fees|
|Exceeding 90 days but not exceeding 180 days||10 times of normal fees|
|exceeding 180 days||12 times of normal fees|
Consequences on Defaults made in Complying with Section 10A
As per the provisions of section 10(A)(2), following penalties shall be levied for the defaults made in complying
- Penalty Levied on the Company:
The company shall be liable to the penalty of Rs.50,000/-
- Penalty Levied on the Directors:
Every officer in default shall be liable to the penalty of Rs.1,000 for each day during which such default continues but not exceeding Rs.1,00,000/-
Removal of Company Name from Register of Companies
Where no Declaration has been filed within the period of 180 days from the date of incorporation with the registrar and the registrar has the reason to believe that the company is not carrying any business or operations, the registrar may take the action for removal of the name of the company from the register of companies.