DECLARATION OF COMMENCEMENT OF BUSINESS

DECLARATION OF COMMENCEMENT OF BUSINESS

Under the Companies Act, 2013, a Declaration of Commencement of Business is a mandatory e-form filed by a company's directors to the Registrar of Companies (ROC). This declaration, filed in Form INC-20A, confirms that a company incorporated with a share capital has received the full value of the shares from its subscribers and is ready to begin its business operations or exercise its borrowing powers. 

Applicability and exemptions

The requirement to file Form INC-20A applies to:

• All companies with share capital that were incorporated on or after November 2, 2018. 

The following companies are exempt from this requirement:

• Companies without share capital, which can begin business operations immediately after incorporation.
• Companies incorporated before November 2, 2018. 

Key requirements and deadlines

• Time limit: Form INC-20A must be filed within 180 days of the company's date of incorporation.
• Subscription money: The company must receive the paid-up capital from its subscribers, and this must be confirmed by attaching a bank statement showing the transaction.
• Professional certification: The form must be digitally signed by a director and certified by a practicing professional, such as a Chartered Accountant, Company Secretary, or Cost Accountant.
• Regulatory approval (if applicable): If the company's business activities require approval from a sectoral regulator (e.g., RBI or SEBI), a copy of that registration or approval must also be attached. 

Consequences of non-compliance

Failing to file the Declaration of Commencement of Business can lead to significant penalties and restrictions: 

• Monetary penalty: A penalty of ₹50,000 is imposed on the company, and every defaulting director is liable for a penalty of ₹1,000 for each day the default continues, up to a maximum of ₹1 lakh.
• Business prohibition: The company is prohibited from commencing business operations or exercising its borrowing powers until the form is filed.
• Company strike-off: If the ROC believes the company is not carrying on business after 180 days, it may initiate proceedings to remove the company's name from the register. 

Filing procedure

The filing of Form INC-20A is completed electronically through the Ministry of Corporate Affairs (MCA) portal: 

1. Log in to the MCA portal with a registered user ID and password.
2. Navigate to the e-filing section and download Form INC-20A.
3. Fill in the company details and attach the required documents.
4. Attach the Digital Signature Certificate (DSC) of a director and have it certified by a professional.
5. Upload the form and pay the prescribed fee, which depends on the company's authorized share capital.
6. Upon successful submission, a Service Request Number (SRN) will be generated for tracking purposes.