Section 10A of the Companies Act, 2013 requires a company incorporated after the commencement of the section to file a declaration in Form INC-20A before commencing business or exercising borrowing powers. The declaration states that the subscribers to the memorandum have paid the value of the shares agreed to be taken, and that the company has filed the verification of the registered office. The filing is due within 180 days of incorporation.
The Filing Requirement
The declaration in INC-20A must be accompanied by the verification of the registered office in INC-22. The company cannot commence business or exercise borrowing powers until the declaration is filed. The 180-day window is the outer limit; a company that intends to commence earlier should file earlier.
The Penalty Architecture
Where the company commences business or exercises borrowing powers without filing INC-20A, Section 10A(2) applies. The company is liable to a penalty of ₹50,000, and every officer in default is liable to ₹1,000 per day during the continuance of the default, capped at ₹1 lakh per officer. The penalty is adjudicated under Section 454.
The small-company and startup relief under Section 446B can reduce the penalty by half, but it applies only if the company qualifies as a small company under Section 2(85) or a DPIIT-recognised startup. A company that does not qualify pays the full ₹50,000 and the full per-day officer penalty. ROC Bangalore’s 2026 adjudication in Metropolis Technologies India Private Limited imposed ₹50,000 on the company and ₹1,00,000 on each defaulting officer for a 179-day delay, with the Section 446B benefit denied because the company did not qualify as a small company. ROC Pune’s 2026 orders show the same arithmetic in smaller cases, and the half-rate where Section 446B applies.
The Practical Risk
The penalty is not the only consequence. A company that has commenced business without INC-20A has done so in contravention of the Act, and the contravention can affect the validity of the business activity and the company’s borrowing powers. The filing should be treated as a condition precedent to operations, not as a post-incorporation formality.
Call to Action: We advise newly incorporated companies on INC-20A, Section 10A compliance and penalty adjudication. For a commencement-compliance review, contact office@anujdesaiassociates.com, Ph No. 9619456656, Website https://anujdesaiassociates.com, LinkedIn linkedin.com/in/ca-anuj-desai-122547230.