The Companies (Amendment) Ordinance 2018 has reintroduced the concept of Certificate of Commencement of Business. Under the new Ordinance, no company will be entitled to commence its operations except by filing a declaration within 180 days of its incorporation stating that the subscribers to the Memorandum of the company has paid the value of shares so agreed by them, and files a verification of its registered office address with the Registrar of Companies (ROC) within 30 days of its incorporation. Non-compliance with this provision will result in the removal of the company’s name from the Registrar of Companies.

Form 20A is a declaration that needs to be filed by the directors of the company at the time of the commencement of the business. It should be verified by a Chartered Accountant (CA) or Company Secretary (CS) or a Cost Accountant in practice.

The following companies are not required to file form 20A:

•  Companies incorporated before 2 November 2018 ( i.e. before the commencement of the Companies ( Amendment) Ordinance, 2018).

•  Companies incorporated after 2nd November 2018 without share capital.

•  A certificate of business commencement has to be obtained within 180 days from the date of incorporation and an eForm has to be filed with the concerned ROC (Registrar Of Companies) regarding the same.

•  A declaration under section 10A from the directors has to be provided in the form of a Board Resolution in the eForm itself.

•  In addition to this, a proof of deposit of the paid-up share capital by the subscribers also needs to be attached in the eForm.

•  If a company pursues objects requiring registration or approval from any sectoral regulators such as The Reserve Bank of India and Securities and Exchange Board of India etc, then it shall obtain such registration or approval along with the attached declaration.

•  The eForm has to be verified and certified by a practising professional before filing with the ROC (Registrar Of Companies).

The penalty for non-compliance is very high as under:

Penalty Levied on Company:
Any company that does not obtain commencement of business certificate within 180 days of incorporation will be liable for payment of a penalty of Rs.50,000.

Penalty Levied on Directors:
Each of the Directors who have defaulted would be liable for payment of a penalty of Rs.1000 per day of default upto a maximum of Rs.1 lakh.

Company Strike-Off:
Also, after 180 days of incorporation, if the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he/she may initiate action for the removal of the name of the company from the register of companies (i.e., Company Strike-off).