The Silent Company Killer: Why Form INC-20A Compliance is Non-Negotiable for New Indian Companies

For many founders and finance heads in hubs like Delhi-NCR or Bangalore, the excitement of receiving a Certificate of Incorporation (COI) is often followed by immediate business activity—hiring, product development, and vendor negotiations. However, a critical compliance barrier introduced under Section 10A of the Companies Act, 2013, is frequently overlooked: The Declaration for Commencement of Business (Form INC-20A).

This is not merely a procedural filing; it is a statutory “gate.” Without it, your company cannot legally borrow money or commence commercial operations. This guide details the legal framework, the critical “subscription money” requirement, and the severe consequences of non-compliance—including the Registrar of Companies (ROC) striking off your entity.

The Companies (Amendment) Ordinance, 2018, reintroduced Section 10A to curb the menace of “shell companies.” The objective was to ensure that companies incorporated on paper actually receive the capital they promised.

The Mandate: Every company incorporated after November 2, 2018, having a share capital, must not commence any business or exercise any borrowing powers unless:

1. A declaration is filed by a Director within 180 days of incorporation (Form INC-20A).
2. Verification is provided that every subscriber to the Memorandum has paid the value of the shares agreed to be taken by them.

2. The 180-Day Deadline: A Hard Stop

Time is of the essence. The statutory timeline is strict.

• Start Date: Date of Incorporation (as mentioned on your COI).
• End Date: 180th day from the Start Date.

Scenario: If a tech startup in Noida is incorporated on January 1, 2026, the deadline to file INC-20A is June 29, 2026. Pro Tip: Do not wait for the 180th day. Banking delays are common.

3. The Pre-Requisite: Subscription Money & Bank Accounts

The core of this compliance is proving that “real money” has entered the company.

The Workflow:

1. Open a Current Account: Immediately post-incorporation.
2. Deposit Share Capital: Shareholders must transfer funds from their personal accounts to the company’s new current account.
3. Match the MoA: The amount deposited must match the amount subscribed in the Memorandum of Association (MoA).

Common Pitfall (Cash Deposits): While the Act doesn’t explicitly ban cash deposits for small amounts, strictly avoid them. In the current regulatory environment, the ROC and Income Tax Department view cash infusion as high-risk. Always use banking channels (NEFT/RTGS/IMPS/Cheque) to create a clean audit trail.

4. Restrictions Until Filing

Until Form INC-20A is approved, your company is in a state of “suspended animation” regarding external liabilities.

• No Commercial Operations: You cannot technically invoice clients or sign major commercial contracts.
• No Borrowing: You cannot take loans, whether from banks, financial institutions, or even directors.

5. Penalties: The High Cost of Non-Compliance

The Ministry of Corporate Affairs (MCA) has moved to an automated adjudication penalty system. If you miss the deadline, the costs are steep.

Adjudication Penalties (Section 10A(2)):

• Company: A fixed penalty of ₹50,000.
• Officer in Default (Directors): ₹1,000 per day for each day the default continues, subject to a maximum of ₹1,00,000.

Impact Analysis: If a company with two directors delays filing by 100 days:

• Company Penalty: ₹50,000
• Director 1 Penalty: ₹1,00,000 (Max capped)
• Director 2 Penalty: ₹1,00,000 (Max capped)
• Total Liability: ₹2,50,000 just for a filing delay.

6. The Ultimate Risk: Strike Off (Section 10A(3))

Beyond monetary fines, the Registrar has the power to initiate action for the removal of the name of the company from the Register of Companies.

If the ROC has reasonable cause to believe that the company is not carrying on any business (indicated by non-filing of INC-20A), they can strike off the company without a hearing. This effectively “kills” the legal entity, rendering its assets frozen and liabilities personal to the directors.

7. What If You Missed the Deadline? (Condonation of Delay)

If the 180-day window has passed, you can still file, but the path is harder.

1. Additional Fees: You will have to pay significantly higher government fees based on the duration of the delay.
2. Adjudication: You may voluntarily approach the ROC for adjudication of penalties to regularize the status before they issue a show-cause notice.

Conclusion

Form INC-20A is the bridge between being a “registered” entity and an “operational” one. For Corporates and Startups, ensuring this filing is done within the first 6 months is as vital as your first customer acquisition.