Background

INC-20A was introduced under the Companies Act, 2013 through an amendment to ensure that newly incorporated companies actually bring in their subscribed share capital before starting operations or borrowing funds. Earlier, companies could be incorporated and remain inactive or be misused without verification of capital infusion. To address this, the government made it mandatory for certain companies (especially those having share capital and incorporated after the amendment) to file a declaration confirming that subscribers have paid for the shares they agreed to take. This requirement promotes transparency, prevents the creation of shell companies, and ensures that businesses begin operations with genuine financial backing.

Applicability

Form INC-20A is mandatory for:

• • Companies incorporated after the commencement of the Companies (Amendment) Ordinance, 2019
  • Companies having share capital

Companies Exempted

• Companies incorporated before the amendment ordinance
• Companies without share capital (e.g., Section 8 companies without share capital)

Compliance Requirements for Commencement of Business

A company cannot commence business or exercise borrowing powers unless:

1. Filing of Declaration [Section 10A(1)(a)]

• • Form: INC-20A
  • Filed by: A Director of the company
  • Timeline: Within 180 days from the date of incorporation
  • Filed with: Registrar of Companies (ROC)
  • Declaration Content: Every subscriber to the memorandum has paid the value of shares agreed to be taken by him on the date of making the declaration

2. Verification of Registered Office [Section 10A(1)(b)]

• • Compliance with Section 12(2) – verification of registered office
  • Form INC-22 (Active Company Tagging Identities and Verification) must be filed

Form INC-20A – Key Requirements

Who Can File

• Declarant: Any Director of the company
• Digital Signature: Director’s DSC required

Verification/Certification

As per Rule 23A, the contents of Form INC-20A shall be verified by:

• Company Secretary in practice, OR
• Chartered Accountant in practice, OR
• Cost Accountant in practice

Contents of Declaration

The director must declare that:

1. Every subscriber to the Memorandum of Association has paid the value of shares agreed to be taken
2. Payment has been made as on the date of making the declaration
3. The company has verified its registered office as per Section 12(2)

Special Provision for Regulated Entities

Proviso to Rule 23A mandates:

• Companies pursuing objects requiring sectoral regulatory approval must:
  • Obtain registration/approval from relevant regulators such as:
    • Reserve Bank of India (RBI)
    • Securities and Exchange Board of India (SEBI)
    • Insurance Regulatory and Development Authority of India (IRDAI)
    • Other sectoral regulators
  • Attach such registration/approval with Form INC-20A

Suo Moto Strike-Off [Section 10A(3)]

If no declaration is filed within 180 days:

• ROC may initiate removal of company name from Register of Companies
• Action taken under Chapter XVIII (Removal of Names of Companies from Register)
• Prerequisite: ROC must have reasonable cause to believe company is not carrying on business

Penalty & Punishment

Default in complying with any requirement of the Section will leas to a penalty of Rs. 50,000/- 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.

Company liable to penalty of Rs. 50,000/- and every officer in default liable to penalty of Rs. 1000/- per day of default not exceeding Rs. 1 lakh. Registrar if he has reasons to believe the company is not carrying any operations, he may initiate action for removal of name of company from the Register of members