Form INC-20A: Consequences of delay in filing

CA Sarath R Krishnan | Last updated: 24 March 2020

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Quick Summary

Form INC-20A is a crucial declaration that companies incorporated after November 2nd, 2018, must file within 180 days of incorporation. This form confirms that shareholders have paid for their shares. Failure to file on time can result in significant penalties for both the company and its officers, with no provision for waiving or reducing these fines.

What is Form INC-20A?

As per the provisions of Section 10A of the Companies Act, 2013, a Company incorporated after the commencement of the Companies (Amendment) Ordinance, 2018 (2nd November 2018) and having a share capital shall not commence any business or exercise any borrowing powers unless a declaration (INC-20A) 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.

CONSEQUENCES of delay in filing INC-20A:

a) If any default is made in complying with the requirements of Section 10A, 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.

b) The Registrar of Companies shall issue a show-cause notice as to why the penalty should not be imposed on the company and the officers in default for non-compliance of Section 10A of the Companies Act, 2013. The reply to show cause notice should be given within 15 days from the date of receipt of show cause notice. If your reply is not received within the stipulated period or found to be unsatisfactory, the adjudicating authority shall pass the necessary orders for imposing the penalty.

c) After reply to show cause notice is received, the ministry of corporate affairs shall issue Adjudication Order(ADJUDICATION OF PENALTY UNDER SECTION 454 FOR DEFAULT IN COMPLIANCE WITH THE REQUIREMENTS OF SECTION 10A OF THE COMPANIES ACT, 2013 READ WITH THE COMPANIES (ADJUDICATION OF PENALTIES) RULES, 2014.)

The Ministry of Corporate Affairs shall appoint the Registrar of Companies, as Adjudicating Officer under the Companies Act, 2013. Under the provisions of section 454 and 10A read with adjudication rule, the adjudicating authority is not vested with the power to extend the statutory limit of 180 days for filing or to condone the delay in filing resulting the waiver of prescribed penalty. Hence the adjudicating authority has no power to reduce or waive the penalty.

d) It may be remarkable to note that provisions(Sec 446-B) of lesser penalty for small companies and one-person companies is not applicable for default in complying with the requirement of Section 10A of the Companies Act, 2013 and further that such rebate is not extendable to Section 8 companies and or Producer Companies.

Form INC-20A Delay: Penalties and Consequences

APPEAL

a) ROC was not able to levy a lower fee in view of the mandatory requirement to levy the minimum penalty for adjudication as per the Companies (Adjudication of Penalties)Rules, 2014. However, the respective Regional Director has the power to consider the facts and reduce the quantum of penalty.

b) An appeal against the adjudication order can be filed with the respective Regional Director, Ministry of Corporate Affairs, within a period of sixty days from the date of receipt of the adjudication order.

c) Forms to be filed with MCA for appeal

Form No. ADJ(Memorandum of Appeal)- It should be filed within 60days from the date of adjudication order.
Form No. GNL-2(Form for submission of documents with the registrar).

(Based on authors observation)

FAQ :

Form INC-20A is a declaration that must be filed by a company incorporated after November 2nd, 2018, within 180 days of its incorporation. It confirms that every subscriber to the memorandum has paid the value of the shares agreed to be taken by them.

If Form INC-20A is not filed within 180 days, the company faces a penalty of fifty thousand rupees. Every officer in default is liable to a penalty of one thousand rupees per day, up to a maximum of one lakh rupees.

The Registrar of Companies will issue a show-cause notice regarding the penalty. A reply must be submitted within 15 days. If the reply is unsatisfactory or not received, an adjudication order imposing penalties will be issued by the Ministry of Corporate Affairs.

No, the adjudicating authority does not have the power to extend the statutory limit of 180 days or condone the delay, meaning they cannot waive or reduce the prescribed penalty.

Yes, the provisions for lesser penalties for small companies and one-person companies do not apply to defaults in complying with Section 10A. This rebate also does not extend to Section 8 companies or Producer Companies.

Yes, an appeal against the adjudication order can be filed with the respective Regional Director, Ministry of Corporate Affairs, within sixty days of receiving the order, using Form ADJ and Form GNL-2.