Introduction to INC-20A
The Ministry of Corporate Affairs (MCA) in India imposes stringent compliance rules to guarantee accountability and openness in the corporate sector. Form INC-20A filing is one such crucial compliance. For businesses registered after November 2, 2018, this form acts as a statement of the beginning of operation, as required by Section 10A of the Enterprises Act of 2013. For a business to legally exist and utilize the cash raised during formation, this document must be filed.
What is INC-20A?
Businesses must submit the INC-20A declaration with their incorporation to confirm that they have received their paid-up share capital and are ready to begin operations. This form must be filed to the Registrar of Companies (RoC) within 180 days of the company’s incorporation date. Regardless of whether they are private, public, or share-limited, all companies incorporated after November 2, 2018, must file the INC-20A.
- Opening a Bank Account: The company had to open a bank account in its name and deposit the paid-up share capital as stipulated in its Memorandum of Association (MoA).
- Company photos
- Proof of Subscription: The company must present proof that each shareholder has given money for the subscription. This evidence is typically provided by a bank statement attesting to the share capital deposit.
- No Commencement Without Filing: It’s important to keep in mind that a company cannot use borrowing authority or start operations legally before the INC-20A has been filed and approved by the RoC.
Steps to File INC-20A
Even though filing an INC-20A is a straightforward process, it requires close attention to detail. The following are the steps involved:
Access and sign in the MCA Portal:
The form can be found on the MCA portal; it must be filled out and submitted electronically.
Filling Out the Form:
The company needs to provide details about subscribers, the date of incorporation, and the Corporate Identification Number (CIN).
Submission:
The form is electronically submitted after it has been completed.
Fee Payment:
At the time of submission, you must pay the relevant fees online. The charge is based on the authorized capital of the company’s shares.
Acknowledgment:
Following the submission’s evaluation by the MCA and approval, the business will get an acknowledgment.
Importance of INC-20A
The submission of the INC-20A is necessary for several reasons:
Need for Legal Advice
The Companies Act of 2013’s requirement to file an INC-20A is the main driving force behind it. Failure to abide by this provision could result in severe fines and restrictions on the business’s ability to operate. By completing an INC-20A, a company ensures that it complies with regulatory bodies and keeps a positive relationship with them.
Proof of Authorized Business
The INC-20A provides proof of a business’s legal existence and that it has the money to start up. It gives the government and stakeholders confidence that the business is a legitimate enterprise with the resources to support its activities. This statement is particularly significant in the context of combating shell companies and preventing financial fraud.
Acquiring Funding
Without filing an INC-20A, a firm will not be able to access the funds it raised during its incorporation. Until this document is filed, the corporation is not legally allowed to spend the funds donated by its shareholders. This limitation ensures that companies have all the tools they need and are prepared to go live before they open for business.
Removing Authorities
Without INC-20A’s consent, a corporation cannot lawfully employ its borrowing capacity. Consequently, the company is unable to issue debentures, get any credit facilities, or take in loans. Businesses that rely on outside investment for growth and expansion are required to file an INC-20A to ensure they can raise the funds necessary to scale their operations.
Being Away from Penalties
There could be harsh penalties for failing to file INC-20A within the given deadline. If a corporation violates this guideline within 180 days, it may be fined ₹50,000. Furthermore, for a daily infraction of ₹1,000, any delinquent officer, including directors, may be fined up to ₹1 lakh. Under severe conditions, the RoC may take action to remove the company’s name from the Register of Companies and terminate its operations.
Trust Among Stakeholders
Filing an INC-20A boosts the confidence of all stakeholders, including clients, investors, and creditors. It demonstrates that the company follows the law and maintains an ethical and open business environment. This confidence is necessary to attract funding and establish long-lasting business relationships.
Conclusion
INC-20A is not only legally required, but also a critical step in evaluating a company’s operational readiness and integrity. By submitting this form, an organization shows that it is committed to both legal compliance and financial transparency. It ensures that the company is prepared to conduct business and fulfill its obligations to the state, investors, and creditors. The INC-20A must be filed on time by each newly incorporated company in India because failure to do so may result in penalties and restrictions.
