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MCA has come with a New Section 10A inserted after Section 10 by Companies (Amendment) Ordinance, 2018 dated 02.11.2018 and the same has been inserted in Companies (Amendment) Act, 2019.

This section is stated about "Filing of declaration of Commencement of Business" within 180 days of Incorporation of a Company. If a company fails to file such adelcaration then there are a lot of penalties and restrictions on the Company.

In this editorial, the author shall discuss one of all those restrictions i.e. "Whether Company can accept a loan from Directors or any other person before the filing of INC 20A" for general purposes like Opening of Bank Account, preliminary Expenses etc.


As per 10A, a company having Share Capital incorporated after ordinance i.e.,after 02.11.2018 shall not commence its business or exercise any borrowing powers unless,

A declaration is filed by the directors in e-form Form No. INC-20A within 180 days from date of incorporation of company with ROC that ‘every subscriber to the MOA has paid the value of the shares agreed to be Taken by him".

How to take loan, before filing of INC 20A


i. Situation loan may require after Incorporation

If a company incorporated with share capital of Rs. 10K and minimum required for opening of bank account in specific company is Rs. 25K. (However, these days bank accounts getting open with Incorporation of Company).

At this situation company may face difficulty to open bank account. Then question arise whether loan from director can be taken to open bank account of the Company.

Situation 2: Company may require funds for preliminary expense immediate after Incorporation of Company. In such case how to arrange to funds.

ii. Extract of Section 10A

a company having Share Capital incorporated after the ‘Ordinance’ i.e. 02.11.2018, shall not commence its business or exercise any borrowing powers unless; a declaration is filed by the directors in e-form Form No. INC-20A.

As mentioned in 10A to exercise borrowing power company is required to file 20A (declaration of commencement of business). The term Borrowing power includes acceptance of loan from any one i.e. whether Directors, Shareholders, Banks, NBFC etc.


iii. Answer

After reading the extract, one can opine that as it is specifically restricted under Section 10A that company can’t exercise borrowing power before filing of declaration in e-form 20A.

Therefore, it is very clear that no company can accept loan from anyone before filing of 20A, even for the purpose of opening of bank account, preliminary expenses etc.

Further, as it is not allowed to file Strike off form STK-2 before filing of Inc 20A, it is also concluded that, it is mandatory to deposit subscription money by subscribers before strike off of Company.

Because basis condition for filing of Inc -20A is proof of receipt of subscription money. Therefore, all will work in a sequence:

  1. Receiving of Subscription Money
  2. Filing of INC 20A for declaration of commencement of Business
  3. Filing of STK-2 for strike off Company, if company want to strike off.


It is not at all allowed under Companies Act, 2013 to file any form before filing of Declaration of Commencement of Business including STK-2

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Category Corporate Law, Other Articles by - CS Divesh Goyal