Form INC-20A: Commencement of Business, Proof of Capital and the 180-day Deadline

Incorporation isn't the last step before a new company can do business. A company with share capital also has to declare, in Form INC-20A, that its subscribers have paid for the shares they agreed to take, and back it up with proof from the company's bank account. It's a short form, but missing it is expensive, and it's one of the most common compliance gaps in a company's first year. This guide explains what's involved.

Who Has to File

Companies incorporated with share capital have to file INC-20A, which covers almost every new private limited company and One Person Company. Companies without share capital aren't required to file it.

The Deadline

INC-20A is due within 180 days of the date of incorporation. Until it's filed, the company shouldn't commence business or exercise borrowing powers. Diary the date as soon as the certificate of incorporation is issued.

Why the Bank Account Comes First

The form declares that every subscriber to the memorandum has paid the value of the shares they agreed to take. The evidence is the company's bank statement, showing the subscription money received into the company's own current account. That's why opening the bank account quickly after incorporation matters: without it, the subscribers have nowhere to pay, and the form can't be filed.

A few points to get right:

• Each subscriber should pay their share money into the company's account, ideally from their own bank account, so the payment is easy to trace.
• The amounts should match the shares each subscriber took in the memorandum.
• Keep the bank statement showing the credits, as it's attached to the form.

What the Form Needs

• The company's details, from its incorporation records.
• The declaration that subscribers have paid for their shares.
• A copy of the bank statement showing the subscription money received.
• The DSC of a director to sign the form.

The company must also have its registered office in place, and the ROC may verify it.

The Cost of Missing It

If INC-20A isn't filed within 180 days:

• The company is liable to a penalty of ₹50,000.
• Each officer in default is liable to a penalty of ₹1,000 for each day the default continues, up to ₹1 lakh.
• If the ROC has reason to believe the company isn't carrying on business, it can start the process to strike off the company's name.

Late filing is possible, but it doesn't remove the penalty, which is adjudicated separately. It's far cheaper to file on time.

A Checklist for New Companies

1. Open the company's current account soon after incorporation.
2. Have each subscriber pay their subscription money into it.
3. Download the bank statement showing the credits.
4. Confirm the registered office is set up and verifiable.
5. File INC-20A, signed with a director's DSC, well within 180 days.
6. Only then commence business and borrow.

Common Mistakes

• Waiting months to open the bank account.
• Founders paying business expenses personally instead of paying their share money into the company.
• Subscription amounts that don't match the memorandum.
• Forgetting INC-20A entirely and only discovering it at the first annual filing.

Getting Help

Think Filing opens new companies' bank accounts, tracks subscription payments, and files INC-20A on time.

Sources

• Companies Act, 2013, section 10A.
• Companies (Incorporation) Rules, 2014.