TO KILL THE SNAKE AND SHOW THE STICK

From a long time what we were seeing was that, the Companies were generally incorporated to pass an entry in it and not for actual work. Also when the Companies were incorporated, ROC never asked for the proof of actual usage of the Capital, which was declared in Memorandum of association, at the time of incorporation.

 At the same time, ROC or any other government authority had no clue about the CAPITAL:

1.That whether the capital was used for the purpose of setting up the business or not, for which it was meant to be used.

2.That whether any actual bank account was open or not. If opened, then whether the Capital introduced in Memorandum of Association, was deposited in it or not.

To curb upon those newly incorporated companies, whose purpose was only to be on paper or shell companies and to never perform any business activities, MCA on November 02, 2018 had come up with an Ordinance where in Section 10A of Companies Act, 2013 was introduced, which read as follows:

SECTION 10A OF COMPANIES ACT, 2013

COMMENCEMENT OF BUSINESS ETC.

(1) A company incorporated after the commencement of the Companies (Amendment) Ordinance, 2018 and having a share capital shall not commence any business or exercise any borrowing powers unless—

(a) a declaration is filed by a director within a period of one hundred and eighty days of the date of incorporation of the company in such form and verified in such manner as may be prescribed, with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and

(b) The company has filed with the Registrar a verification of its registered office as provided in sub--section (2) of section 12.  

(2) If any default is made in complying with the requirements of this section, the company shall be liable to a penalty of fifty thousand rupees and every officer who is in default shall be liable to a penalty of one thousand rupees for each day during which such default continues but not exceeding an amount of one lakh  rupees.

(3) Where no declaration has been filed with the Registrar under clause (a) of sub-section (1) within a period of one hundred and eighty days of the date of incorporation of the company and the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he may, without prejudice to the provisions of sub-section (2), initiate action for the removal of the name of the company from the register of companies under Chapter XVIII.

Recently, MCA on December 20, 2018 had come up with the Fourth Amendment to Companies (Incorporation) Rules, 2014. Where in, it has made the following amendments / insertions:

RULE 23A OF COMPANIES (INCORPORATION) RULES, 2014

The declaration under section 10A of Companies Act, 2013, by the Director shall be in FORM NO. INC-20A and shall be filed as provided in the Companies (Registration Offices and Fees) Rules, 2014 and the contents of the said form shall be verified by a Company Secretary or a Chartered Accountant or a Cost Accountant in practice:

Provided that in the case of a company pursuing objects requiring registration or approval from any sectoral regulators such as the Reserve Bank of India, Securities and Exchange Board of lndia, etc., the registration or approval, as the case may be from such regulator shall also be obtained and attached with the declaration.

Under new Rule 23A of Companies (Incorporation) rules, 2014 read with section 10A of The Companies Act, 2013, form INC -20A has been introduced, wherein the existing company or newly incorporated has to file the form with ROC after getting the same certified by a Practicing Professional.

Filing of the above mentioned form should come with effect from the date of above mentioned ordinance introduced by the government in official gazette i.e. November 02, 2018. Now all the existing companies incorporated after the ordinance, came into existence, who has not filed a declaration as per Rule 10A of the Companies Act, 2013, shall not commence any business or exercise any borrowing powers, until they have filed form INC-20A with ROC.

Particulars of form INC-20A: Declaration for Commencement of Business

1.     Corporate identity Number CIN

2.     Name of the Company along with its address

3.     Whether the Company is regulated by any Sectoral Regulator ( YES or NO)

Attachments

1.     Subscribers proof of payment, for value of shares

2.     Certificate of registration issued by an Sectoral Regulator

3.     Optional Attachments

To be Digitally Signed by the Director of the Company along with a Practicing Professional.

COMMENTS: This step has been taken by MCA for the following reasons:

1.   To curb the Shell Companies out of the system.

2.   To encourage the companies, to actually perform their business activities.

3.   To discourage the use of newly incorporated companies to pass an entry.

4.   To boost the work of a practicing professional, as after introduction of this form, one more area of generating work has opened.