An Overview of Filing Form IC-20A

The Ministry of Corporate Affairs governs and regulates the companies that have been incorporated in India. Every company is required to adhere to specific procedures and compliances mandated by the ministry of corporate affairs or the MCA to be duly incorporated. There are certain mandatory post-incorporation compliances that companies must comply with for the smooth functioning of their business and operations and also to avoid fines and other penalties.

What is Form INC-20?

Form INC-20 is one of the many compliance companies must comply with after receiving the certificate of incorporation. This form is filed as a declaration to the Registrar of Companies before the commencement of the company's business and to file additional details regarding bank statements and facts of the company's registered office. This form is to be filed by registered companies before commencing the operations of the business and to allow them to borrow money from other entities.

Section 10A of the Companies Act of 2013 states that every company which has been incorporated on or after 2nd November 2018 and has share capital cannot commence business operations or exercise its borrowing powers unless a declaration is filed by its directors stating that on the date of the declaration being made, every subscriber who has subscribed to the memorandum of association of the company has duly paid the face value of the shares which she had agreed to be taken by her.

The declaration must also include a statement of the fact that the company has filed a proof of verification of the registered office of the company to the registrar of companies as is provided for in Section 12(2) of the Companies Act of 2013. The declaration must be made within 180 days from the date of incorporation of the company.

Section 10A places the onus on the directors of companies to file for declaration before commencing business within the stipulated time. There are two essential requirements that a company must fulfil before starting the business and activating its borrowing powers, and they are as follows:

• Every necessary return pertaining to the registered office of the company must be duly filed with the registrar of companies for verification.
• The bank statements showing proof of deposit by subscribers of the amount of the number of shares agreed upon by them.

Rule 23A of the Companies (Incorporation) Rules of 2014 mandates that the declaration under Section 10A must be filed in Form INC-20A and in accordance with the provisions of Companies (Registered Office and Fees) Rules, 2014. A practising company secretary or a cost accountant, or a chartered accountant must verify the contents of the form.

Who Should File Form INC-20A?

Form INC-20A shall be filed by companies that have been incorporated on or after 2^nd November 2018 and have a share capital, within 180 days from the company's date of incorporation. Companies incorporated before 2nd November 2018 or incorporated after 2nd November 2018 but without any shares or capital are not required to file Form INC-20A and declare the commencement of business.

Pre-requisites to File Form INC-20A

There are specific pre-requisites which are required to be fulfilled before filing Form INC-20A:

• The company must have been duly incorporated under the Companies Act.
• Directors of the corporate body must provide a declaration as is mandated under Section 10A.
• Any proof of deposit of the paid-up share capital by the subscribers of the memorandum must also be filed.
• Bank statements of the company, with all the credit entries along with the receipts, show the subscription money which has been received from the shareholders.
• The form must be verified and certified by a practising company secretary, a cost accountant, or a chartered accountant.
• The form shall be filed before the expiry of 180 days on the company's date of incorporation, and the E-form shall be filed with the registrar of companies.

Documents Required to File Form INC-20A

There are certain documents which are required to be present with the company and its officials while filing Form INC-20:

• Digital Signature Certificate or DSC of the directors.
• Verification of the registered address of the company.
• Declaration by the directors of the board resolution
• Proof of no other transaction in the bank account of the company other than the deposit of capital by the shareholders.
• Payment of the prescribed for filing Form INC-20.
• Certificate issued by a practising company secretary or a cost accountant, or a chartered accountant verifying the contents of the form.
• Bank statements that show the all-over capital of the company.
• Proof of non-operation of the business.
• If the company is involved in the furtherance of objects and requires prior permission or registration from regulators like the Securities and Exchange Board of India or the Reserve Bank of India, then proof of such approval or registration is needed.

Procedure to File Form INC-20A

The following procedures are required to be followed to file Form INC-20A:

• Open a bank account for the company

One needs to open a bank account for the company or a current account for transactions pertaining to it. To open a company bank account, the following documents are a must: certificate of incorporation of the company, Articles of Association, Memorandum of Association, Permanent Account Number and KYC details of the directors of the company.

• Collection of capital from shareholders

The companies are required to collect from the company shareholders the capital invested, as mentioned on the last page of the company's memorandum of association, which also includes a list of shareholders and the amount invested by them.

• Deposit of share capital in the bank account of the company

Once the money invested by the shareholders is collected by the company, it shall be deposited into the bank account of the company. The company shall procure proof of such deposit by acquiring a true certified copy of the bank statement.

• Online filing of Form INC-20A

Once all the above submissions have been made and the required documents have been collected, declaration of the commencement of business shall be made by the directors of the company by filling out this form. Suppose the company is involved in the furtherance of objects which requires prior permission or registration from regulators like the Securities and Exchange Board of India or the Reserve Bank of India, in that case, such approval or registration shall be obtained before filing the form.

The form must be attached with all the required attachments as mentioned above and must be signed digitally by attaching the DSCs of the directors of the company. The form shall then be certified by a practising company secretary or a cost accountant, or a chartered accountant verifying the contents of the form.

Penalties for Non-Compliance to File Form INC-20A

The filing of Form INC-20A is mandatory a non-compliance can lead to hefty penalties. The penalties have been put in place to cause a reduction in the number of fake companies being incorporated. Companies can only commence business activities or borrow money if they file Form INC-20A. Non-compliance with this mandate can lead to fines as follows:

• Companies that do not comply with the requirement of filing Form INC-20A shall be required to file a penalty of ₹50,000.
• A company official who is in charge of filing the form shall be fined ₹1000 per day for each defaulting day fill the form is filed. The maximum amount of fine they shall be liable to pay is ₹1,00,000.
• Moreover, if the company has conducted no business operations or transactions after 180 days of incorporation of the company, the registrar of companies has the power to remove the name of the company from the register of companies.

Prescribed Fees to File Form INC-20A

The prescribed fee for filing Form INC-20A is based on the share capital of the company. The fee structure pertaining to filling the form is mentioned below:

• If the share capital does not exceed ₹1,00,000, the applicable fees ₹200
• If the share capital exceeds ₹1,00,000 but does not exceed ₹4,99,999, then the applicable fees is ₹300
• if the share capital exceeds 5,00,000 but does not exceed ₹24,99,999, then the applicable fees ₹
• if the share capital exceeds ₹25,00,000 but does not exceed ₹99,99,999, then the applicable fees shall be ₹
• if the share capital exceeds ₹1,00,00,000, then the applicable fees shall be ₹

If the form is not filed within the stipulated time, the form can still be filed by submitting applicable late fees as follows:

• If the period of delay is up to 30 days, then the late fees shall be two times of the normal fees.
• If the period of delay exceeds 30 days but is less than 60 days, then the late fees shall be four times the normal fee.
• If the period of delay exceeds 60 days but is less than 90 days, the late fees shall be six times the normal fee.
• The period of delay exceeds 90 days but is less than 180 days, then the late fees shall be ten times the normal fees.
• If the period of delay exceeds 180 days, then the late fees applicable shall be 12 times the normal fee.

Corpbiz Support

The team of experts at Corpbiz have a proven record of successfully helping companies meet MCA compliances, prepare documents, and submit requisite forms for filing within the stipulated time. Companies looking to file Form INC-20A and other MCA forms with minimal hassles can approach Corpbiz for assistance.