Monthly Archives: January, 2019

WHAT IS “COMMENCEMENT OF BUSINESS”?

 

WHAT IS “COMMENCEMENT OF BUSINESS”?

 

It is a Declaration to be issued by the directors within 180 days of incorporation of company stating that the subscribers to the Memorandum of the company has paid the value of shares so agreed by them, along with a verification of registered office address of the company.  This declaration need to be filed along with proof of subscription money received by the company in form 20A with the Registrar of Companies.

WHO NEED TO FILE DECLARATION FOR COMMENCEMENT OF BUSINESS?

 

Every company having share capital incorporated after 2nd November 2018

Even the Section 8 Companies having share capital need to file form 20A

WHO ARE NOT REQUIRED TO FILE?

 

Companies not having share capital and

Companies incorporated before 2nd November 2018, with or without share capital.

PENALTY FOR NOT FILING

 

  • 50,000/- for Company
  • 1000/- per day for defaulting directors (maximum Rs. 1,00,000/-)
  • Registrar can remove the name of the company

 

TIME LIMIT TO FILE

 

A company have to file form 20A within 180 days after its incorporation.

 

 

WILL COMPANY GET THE “CERTIFICATE OF COMMENCEMENT OF BUSINESS ?”

 

No, the form 20A is in STP mode  i.e. The eForm will be auto approved (STP) and no certificate will be issued by the Ministry for corporate affairs.

 

WHAT IS THE PRESCRIBED FORM ?

Form 20A

 

ATTACHMENT TO FORM 20A

  • Subscribers proof of payment for value of shares

 

  • Certificate of Registration issued by the RBI (Only in case of Non-Banking Financial Companies) /from other regulators. It is mandatory to attach this document if ‘Yes’ is selected in field 3(a).

 

WHO WILL CERTIFY THE FORM 20A?

This e-form 20A needs to be verified by a practicing professional i,e, CS /CA/CWA. For any negligence or default in certification practicing professional shall be liable for face the consequences as per  the poisons of section 448 and 449 of the companies Act, 2013.

 

For any query on companies Act, 2013. Please feel free to contact the author i.e. Mr. Kashif Ali. He  has been into practice  since 2010 and can be reached at 011-415-800-90 or 9718483209 & mail CS. kashifali@gmail.com

COMMENCEMENT OF BUSINESS

 

Concept of Certificate of ‘Commencement of Business’ was  there in the erstwhile Companies Act, 1956 and it was also introduced by the Companies Act, 2013 under the  Section 11 of the Companies Act, 2013. However, section 11 was omitted (deleted) by the companies (Amendment) Act, 2015 w.e.f. 29th May 2015.

Recently companies Act, 2013 has further amended by way of passing of ordinance by the President of India i.e. Sh. Ram Nath Kovind Ji on 2nd Day of November, 2018. Declaration for Commencement of business is re-introduced by way of inserting a new Section 10A after section 10 of the Companies Act, 2013. The text of Section 10A are as follow;

 

  1. A company incorporated after the commencement of the Companies (Amendment) Ordinance, 2018 and having a share capital shall not commence any business or exercise any borrowing powers unless—
    1. a declaration is filed by a director within a period of one hundred and eighty days of the date of incorporation of the company in such form and verified in such manner as may be prescribed, with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and

 

  1. the company has filed with the Registrar a verification of its registered office as provided in subsection (2) of section 12. 

 

  1. If any default is made in complying with the requirements of this section, the company shall be liable to a penalty of fifty thousand rupees and every officer who is in default shall be liable to a penalty of one thousand rupees for each day during which such default continues but not exceeding an amount of one lakh rupees.

 

  1. Where no declaration has been filed with the Registrar under clause (a) of sub-section (1) within a period of one hundred and eighty days of the date of incorporation of the company and the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he may, without prejudice to the provisions of sub-section (2), initiate action for the removal of the name of the company from the register of companies under Chapter XVIII.

 

After the above amendment the Ministry of Corporate affairs has further amended the Companies (Incorporation) Rules, 2014 vides Companies (Incorporation) Fourth Amendment Rules, 2018 dated 18.12.2018.

According to Companies (Incorporation) Fourth Amendment Rules, 2018, a new Rule 23A shall be introduced by the Ministry which is also reproduced below:

“23A’ Declaration at the time of commencement of business –

The declaration under section 10A by a director shall be in Form No. lNC-20A and shall be filed as provided in the Companies [Registration Offices and Fees) Rules, 2014 and the contents of the said form shall be verified by a company Secretary or a chartered Accountant or a cost Accountant in practice: 

Provided that in the case of a company pursuing objects requiring registration or approval from any sectoral regulators such as the Reserve Bank of India, Securities and Exchange Board of lndia, etc., the registration or approval, as the case may be from such regulator shall also be obtained and attached with the declaration.”.

 

The ordinance was came into force on 2nd Nov 2018 therefore all the provisions of this section become applicable from 2nd November 2018. Therefore every company having share capital incorporated after 2nd November 2018 has to file form 20A with 180 days i.e. before 1st May 2019. The Ministry of Corporate affairs  has launched the form 20A and its available on it portal.

For any query on companies Act, 2013. Please feel free to contact the author i.e. Mr. Kashif Ali. He  has been into practice  since 2010 and can be reached at 011-415-800-90 or 9718483209 & mail CS. kashifali@gmail.com

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