INC-20A: Declaration for Commencement of Business

The Declaration for Commencement of Business (INC-20A)is a mandatory filing for companies to be done within 180 days of the company incorporation, signifying their readiness to begin operations. It is an important step for ensuring transparency and compliance with corporate regulations. The declaration establishes a company’s intent to operate legally and fulfills its obligations under the Companies Act.

This declaration also ensures that the company is adequately prepared, financially and operationally, to begin its activities, which reduces the risk of fraudulent or non-operational entities. 

In this article, CA Manish Mishra talks about Declaration for Commencement of business (INC-20A).

Historical Context of the Declaration Requirement

Historically, governments introduced the declaration requirement to combat illegal or shell companies. By mandating this filing, regulators aimed to confirm that businesses were genuinely operational and not merely vehicles for tax evasion or money laundering.

For example, in India, the Companies Act, 2013, emphasized stricter compliance measures, including the introduction of the declaration for newly incorporated companies. Similar regulations have been adopted globally to uphold the integrity of business operations.

Importance of Filing the Declaration for Businesses

Filing the declaration is more than a regulatory formality. It provides a range of benefits:

1. Legal Compliance: Demonstrates adherence to corporate laws.
2. Business Credibility: Enhances trust among stakeholders, including investors and customers.
3. Operational Verification: Confirms that a company has the required capital and infrastructure to commence activities.

- Applicability of the Declaration

The declaration requirement applies primarily to companies incorporated under specific acts, such as private limited, public limited, or one-person companies. However, certain exemptions exist, including businesses not intending to start operations immediately.

For example:

• Mandatory Filing: Companies with share capital.
• Exemptions: Non-profit organizations in specific jurisdictions.

Legal Provisions Governing the Declaration

The Companies Act, 2013, specifically under Section 10A, governs the Declaration for Commencement of Business. The act outlines who must file, the timeline, and the penalties for non-compliance. It is essential for companies to familiarize themselves with these provisions to avoid legal complications.

Non-filing of INC-20A can cause the company to be strike off the the Registrar of the company.

Step 1: Prepare essential documents, such as the company’s incorporation certificate and bank statements.
Step 2: Fill out the required forms, such as eForm INC-20A in India.
Step 3: Submit the declaration to the Registrar of Companies (ROC).
Step 4: Pay the applicable fees online.
Step 5: Obtain acknowledgment from the ROC.

Documents Required for Filing the Declaration

A typical checklist includes:

• Certificate of Incorporation
• Bank statement showing deposit of paid-up share capital
• Digital signatures of directors
• Board resolution authorizing the filing

Timeline for Filing the Declaration

The declaration must be filed within a specific timeframe, generally within 180 days of incorporation. Missing this deadline can result in penalties or the company being deemed inactive.

Common Challenges in Filing the Declaration

Businesses may face issues such as lack of clarity on requirements, technical glitches during e-filing, or delays in bank account opening. Seeking professional help can mitigate these challenges.

Penalties for Non-Compliance

Non-compliance can lead to hefty fines, such as:

• A penalty of ₹50,000 for the company.
• An additional fine of ₹1,000 per day for directors.

Role of Professionals in the Filing Process

Chartered accountants and company secretaries play a vital role in ensuring accurate and timely filing. They assist with document preparation, legal advice, and compliance checks.

Declaration Filing in the Digital Age

The introduction of e-filing platforms has revolutionized the process, making it faster and more efficient. Features like online payment, automated checks, and instant acknowledgments have simplified compliance.

Global Perspective on Business Declarations

Countries like the UK and Australia have adopted similar declarations under their corporate laws. A comparison reveals best practices that can be incorporated globally to enhance compliance.

Future of Business Declarations

The future lies in further digitization and streamlining of processes. Governments are exploring blockchain technology to create immutable records of compliance filings.

Frequently Asked Questions (FAQs)

What is the Declaration for Commencement of Business?
It is a legal filing confirming a company's readiness to commence operations.

Who needs to file the declaration?
Newly incorporated companies with share capital.

What are the penalties for not filing?
Fines of up to ₹50,000 for the company and ₹1,000 per day for directors.

How can one file the declaration?
By submitting the required form to the ROC via e-filing platforms.

Can the deadline be extended?
Extensions are rare and typically require valid justification.

What happens after filing the declaration?
The company receives acknowledgment, confirming its legal compliance.