Commencement of Business — Form INC-20A and Section 10A Compliance

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A certificate of incorporation is not permission to trade. Since 2018, a company registered in India with share capital must file a declaration confirming that its subscribers have actually paid for their shares before it may lawfully commence business or exercise any borrowing power. That declaration is Form INC-20A, and it is due within 180 days of incorporation.

The requirement exists because of a specific problem. Companies were being incorporated in large numbers with subscribers who never paid a rupee, leaving an entity on the register with a paid-up capital figure that was pure fiction. Section 10A closes that gap by making a company’s ability to operate conditional on the money having genuinely arrived.

N D Savla & Associates handles commencement of business filing for newly incorporated companies across Mumbai, Navi Mumbai, Thane and Goa. We confirm the subscription money has been received in the correct amount from the correct persons, verify the registered office position, certify and file INC-20A within the window, and complete the rest of the post-incorporation set — including the first auditor appointment, which runs on a much shorter clock.

What Is the Commencement of Business Declaration?

The commencement of business declaration is a filing under Section 10A of the Companies Act, 2013, made in Form INC-20A, in which a director declares that every subscriber to the memorandum has paid the value of the shares agreed to be taken by them. It must be filed within 180 days of incorporation by every company with share capital incorporated on or after 2 November 2018.

Section 10A(1) states the consequence plainly: a company falling within the requirement shall not commence any business or exercise any borrowing powers unless the declaration has been filed, and unless the company has filed with the Registrar a verification of its registered office as provided in Section 12(2).

Two conditions therefore run together. The subscription money must have been received and declared, and the registered office must have been verified. A company that has filed INC-20A but not INC-22 has not satisfied Section 10A, and the reverse is equally true.

The declaration is verified by a Chartered Accountant, Company Secretary or Cost Accountant in practice. The professional is certifying a matter of fact evidenced by the bank statement — that the money came in, in the right amount, from the right people.

What Do You Need to File INC-20A?

The documentation is short, and the whole filing turns on one attachment.

• Proof of payment of the subscription money — the bank statement or account statement showing credits from each subscriber, matching the amount each agreed to take in the memorandum
• A board resolution authorising a director to make and file the declaration
• The certificate of incorporation and the memorandum recording the subscription
• Verification of the registered office in Form INC-22, where this was not filed at incorporation
• Where the company pursues an activity requiring sectoral approval, the registration or approval of the relevant regulator
• The digital signature of the declaring director and of the certifying professional

The most common defect is a bank statement showing a single consolidated credit from one director covering everyone’s subscription. Section 10A requires every subscriber to have paid the value of the shares agreed to be taken by them — individually. Each subscriber should transfer their own amount from their own account.

Who Must File and Who Is Exempt?

Why Was Section 10A Introduced — and Reintroduced?

The commencement of business requirement has been imposed, abolished and imposed again within a decade. That unusual history explains the shape of the present provision.

Under the Companies Act, 1956, Section 149 required a public company to obtain a certificate of commencement of business before starting operations or exercising borrowing powers. The rationale was investor protection: a public company inviting subscription from the public should demonstrate that the minimum subscription had been received before it began trading. Private companies were outside the requirement entirely, since they raised money from a known and limited group.

The Companies Act, 2013 as originally enacted extended the concept to all companies with share capital through Section 11, which required a declaration in Form INC-21 before commencement of business. This was a significant widening — for the first time, every private company incorporated in India had a post-incorporation gate to pass.

It did not last. The provision attracted immediate criticism as an additional compliance step for small companies with no corresponding benefit, at a time when the government was actively pursuing improvements in the ease of doing business. Section 11 was omitted altogether by the Companies (Amendment) Act, 2015, and for the following three years an Indian company could commence business immediately upon incorporation.

The pendulum swung back after 2016. The demonetisation exercise focused attention on shell companies, and the scale of the problem became visible when the Ministry of Corporate Affairs struck off more than two lakh companies for prolonged non-filing during 2017 and 2018, disqualifying large numbers of directors under Section 164(2). A recurring feature of those entities was that subscription money had never been received — companies existed on the register with a stated paid-up capital that had never been paid.

The response was Section 10A, inserted by the Companies (Amendment) Ordinance, 2018 with effect from 2 November 2018 and subsequently enacted through the Companies (Amendment) Act, 2019. It reinstated the commencement of business gate, but with a different design from either predecessor. It applies to all companies with share capital rather than only public companies. It focuses on a single verifiable fact — whether the subscribers paid — rather than on a broader certification. It requires professional verification. And it links the declaration to registered office verification, targeting the second characteristic of shell entities, which is an address that does not exist.

Understanding the history makes the professional certification requirement easier to accept. Section 10A is not a formality restored for its own sake; it is a targeted response to a specific abuse, and the certifying professional is the control that makes it work.

How Do You File INC-20A — Step by Step?

1. Open the bank account immediately after incorporation. This is the practical bottleneck. Account opening requires the certificate of incorporation, the memorandum and articles, board resolution, PAN, and know-your-customer documentation for the directors and beneficial owners. Where a subscriber is non-resident, allow considerably longer. Companies that treat this as a task for the second month routinely find the 180-day window uncomfortably short.
2. Collect the subscription money from each subscriber individually. Each subscriber transfers the value of the shares they agreed to take, from their own bank account, in a single identifiable credit. Avoid cash, avoid one person paying for others, and avoid round-figure transfers that do not match the memorandum. The bank statement is the evidence, and it should tell the story without explanation.
3. Verify the registered office. Where INC-22 was not filed with the incorporation application, file it with the ownership or tenancy proof, a utility bill not older than two months, and the owner’s no-objection certificate. Section 10A requires this alongside the declaration, and a registered office change between incorporation and this filing must be reflected before INC-20A is submitted.
4. Hold a board meeting and pass the authorising resolution. The board notes receipt of the subscription money and authorises a director to make the declaration and file INC-20A. This meeting is commonly combined with the first board meeting at which the first auditor is appointed, which is efficient and also sensible — both matters arise from the same event.
5. Have the declaration certified. A Chartered Accountant, Company Secretary or Cost Accountant in practice verifies the form against the bank statement and the memorandum. Expect the professional to reconcile each credit to each subscriber’s commitment. Where the amounts do not match, they need to be corrected before filing rather than explained afterwards.
6. File Form INC-20A on the MCA portal. The form is filed at mca.gov.in with the proof of payment attached, signed with the digital signature certificate of the declaring director and the certifying professional. Record the SRN on submission.
7. Complete the rest of the post-incorporation set. INC-20A is one item on a list that becomes due in the first months. The first auditor must be appointed within 30 days of incorporation and reported on ADT-1 within 15 days of that board meeting. Directors must complete DIR-3 KYC. Depending on the business, GST registration, professional tax registration, Shop and Establishment registration and Udyam registration follow.
8. Only then commence business. Trading, invoicing, drawing on a facility or exercising any borrowing power before the declaration is filed contravenes Section 10A(1). Where a company has already commenced, file the declaration immediately and take advice on the exposure — delay compounds the daily penalty on the officers in default.

The 180-day period runs from the date of incorporation and cannot be extended. There is no condonation route for a routine INC-20A delay, and the penalty structure — fifty thousand rupees on the company and one thousand rupees per day on each officer in default — accumulates against individuals, not only against the entity.

How Does This Apply Across Different Sectors?

Startups and first-time founders

This is the filing most often missed, because founders reasonably assume incorporation is the finish line. It is not — it is the start of a sequence with three different deadlines running at once. Companies pursuing Startup India recognition or applying for early grants find that a pending INC-20A blocks the application, since the entity is not yet permitted to commence business.

Indian subsidiaries of foreign companies

The bottleneck is remittance. Subscription money from an overseas parent must travel through the banking channel with the correct purpose code and supporting documentation, and the transfer routinely takes longer than founders expect. The Indian subsidiary setup timetable should therefore start the remittance in the first weeks, and the FCGPR reporting on allotment runs alongside the INC-20A window.

Companies in regulated sectors

Where the intended business requires a licence — an NBFC certificate of registration, an insurance intermediary licence, a food or drug licence — the company faces a sequencing problem. It cannot commence business until INC-20A is filed, and the regulator may require the company to be operational or capitalised before granting the licence. The declaration should be filed early so that it is not the item holding up the approval.

Real estate and project companies

Special purpose vehicles are incorporated well before a project reaches financial close, and their subscription capital is often nominal. INC-20A is still required, and filing it does not oblige the company to trade. Where the vehicle will remain idle for years, filing INC-20A and then applying for dormant status is a coherent path; leaving the declaration unfiled is not.

Why Choose N D Savla & Associates for Commencement of Business Filing?

We check the bank statement properly

The certification is only as good as the reconciliation behind it. We match each credit to each subscriber’s commitment in the memorandum and raise discrepancies while they can still be corrected — which, in a meaningful number of cases, means asking a subscriber to redo a transfer they made from the wrong account.

The whole post-incorporation sequence, not one form

INC-20A, first auditor appointment, ADT-1, registered office verification, DIR-3 KYC and the applicable registrations all fall due in the first six months on different clocks. We run them as one checklist from the date of incorporation. Recurring dates thereafter are on our compliance calendar.

Certification by the firm that will audit you

The professional certifying INC-20A is taking responsibility for a statement of fact. Having that done by the same firm that will handle your statutory accounts means the person signing understands the company rather than certifying a form for a client they have never met.

We flag the sequencing problem before it becomes one

Regulated businesses, foreign-funded companies and project vehicles each have a sequencing conflict between the 180-day window and something else. We identify which one applies to you at the start and order the steps accordingly.

Six offices across Maharashtra and Goa

Andheri, Charni Road, Vashi, Thane, New Panvel and Panaji. New companies need documents signed, banks visited and offices verified, and proximity genuinely shortens all three.

Frequently Asked Questions on Commencement of Business

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• ADT-1 Filing for Auditor Appointment
• ADT-3 Filing on Auditor Resignation
• AOA Amendment under Section 14
• Auditor Appointment Services
• Authorised Capital Increase and Form SH-7
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