Starting a business in India involves various legal formalities, especially when you want to incorporate as a Private Limited Company. One of the most important compliance requirements is filing Form INC-20A – a declaration of commencement of business. This is one of the compliance requirements a lot of new business owners overlook and never take seriously, but an INC-20A is a requirement and is a post-incorporation compliance not an optional/document formality. Failing to file an INC-20A form can lead to penalties as the formality is not legally, non-compliance can lead to penalties, legal complications, and worst of all, the company can be declared inactive. The same is applicable if you ignore filing of INC-20A or delay filing of INC-20A as a class 2 violation that can carry a penalty and eventually lead to or keep your Indian registered company from operating by the Registrar of Companies (RoC) as a defunct or inactive company. In this blog, we will get into why filing an INC-20A is important for your company legal compliance, your company business activation and the other important details regarding filing an INC-20A.
What Is INC-20A and Who Needs to File It?
Form INC-20A is a director declaration form that a director of a company must file with the Registrar of Companies (ROC) under the Companies Act, 2013. The declaration is that the company has received its paid-up share capital and is prepared to commence its operations. Applicability:
• All companies have an incorporation date after 2^nd November 2018
• It only applies to companies with share capital
• The form must be filed within 180 days from the incorporation date
Why Filing INC-20A Is Mandatory: Legal Grounds & Compliance Impact
As part of a larger approach to combat shell companies, fraudulent practices, and accountability in business, the Indian government launched Form INC-20A. Here is a reason this filing is not optional:
1.Legal Requirement Under Companies Act
Filing INC-20A is a requirement under Section 10A of the Companies Act, 2013. It is important to note that there are significant ramifications if you do not file it which would affect both the company and its directors.
2. It Must Be Filed to Activate Commercially
Without filing INC-20A you cannot:
• Open a current bank account
• Lawfully commence business
• Raise funding or loans
• Issue an invoice
• Enter into a contract
The filing of this form activates the company for being commercial.
3. To Avoid Penalties and Company Deactivation
If INC-20A is not filed in the time prescribed:
• You could be subjected to a penalty of ₹50,000 on the company.
• Each of the defaulting directors exposed to ₹1,000 per day (max ₹1,00,000).
• The ROC has the authority to strike off your company for non-compliance.
4. It Ensures Directors Legal Reputation
Non-filing of INC-20A could impact the director’s legal reputation as a legal entity and in the not-too-distant future may preclude them from setting up or managing other companies due to their status as defaulting directors.
Why Is Filing INC-20A So Important?
1.Legal Requirement for Business Activation
The filing of INC-20A is mandatory, not optional. Until the submission is filed and accepted by the ROC, your company cannot:
• Legally commence business activities
• Raise capital or secure lending
• Enter into contracts on behalf of the company
• Open and conduct bank accounts
The business entity remains in a certain legal limbo until the Online File INC-20A Service is utilized.
2. Required to Open a Bank Account
An important aspect of the filing of INC-20A is the requirement to attach some proof of depositing share capital, like a bank statement. Although the significance of this might be minimized, many banks explicitly require the filing of INC-20A prior to completing or activating your corporate bank account - especially related to transactions for raising share capital. Even if you don't care about opening or conducting business, if you don't act on this quickly, your whole financial situation may be in a state of limbo.
3. Avoid Heavy Penalties and Legal Consequences
If non-filing or the late filing occurs, there may be:
• ₹50,000 penalty on the company
• ₹1,000 per day penalty on each individual director (up to ₹1,00,000)
• The Registrar may start a strike-off action
By engaging with a credible INC-20A Form Filling Service, businesses can avoid these potential consequences and still be in good legal standing.
4. Strengthens Credibility and Compliance
Before doing business with a company, its investors, lenders, and partners typically do some due diligence. Filing INC-20A on time is a thumbs-up that indicates your company is following legal compliance procedures from day one. This increases:
• Credibility with stakeholders
• Eligibility for government schemes or funding
• Smoothness of future regulatory approvals
Business Benefits of Filing INC-20A on Time
In addition to complying with the law, timely filing of Form INC-20A has several strategic business advantages:
Builds corporate credibility
When you file INC-20A you are demonstrating a positive intent to comply with the law. This will contribute positively to your reputation with stakeholders, clients, and banks.
Enables Fundraising & Loan Approvals
Investors and most banks require evidence of business commencement. When you are raising capital, a filed INC-20A will be a must-have document.
Smooth ROC compliance track record
By complying with ROC requirements soon after registry, you start a good legal record, and minimize scrutiny during your future compliance checks or audits.
What Documents Are Required for INC-20A Filing?
The company will be required to upload the following documents to file the application correctly:
• Bank Statement of the company (showing the receipt of share capital)
• Certificate of Incorporation
• Subscribers' declaration of the capital deposit
• Board Resolution (if applicable)
• Digital Signature Certificate (DSC) of a director
The submission has to be performed carefully. This will clarify the need for expert INC-20A Form Filling Service.
Why Legal Compliance with INC-20A Matters for New Companies
Filing the INC-20A is one of the first statutory compliance that a new company will have to file, and it can affect your legal reputation and future business:
1.Developing trust with authorities
Filing on time, will elevate the trust of your company with the regulators such as the ROC, SEBI, and banks.
2. Improving Transparency
It allows investors and lenders to confirm to themselves that you are a viable and legal company with committed capital and financial backing for the operations of the business.
3. Minimizing risk
Avoiding compliance early minimizes the chances of delays in operation, financial penalties, and litigation risk.
What Happens After Filing INC-20A?
Once Form INC-20A is successfully filed, the following occurs:
• MCA will issue an Acknowledgment of Commencement of Business
• Your company is now officially dormant
• You are now allowed to start operating, get GST registered, open a current bank account and enter into contracts.
Legal Penalties for Non-Filing of INC-20A
Default
Penalty
Company
₹50,000
Directors (each)
₹1,000 per day (up to ₹1,00,000)
Non-compliance beyond 180 days
ROC may strike off the company from its record
Not filing means your company's existence is paper only - no commercial activity is allowed. The financial and reputational cost of not filing is so much greater than the minimal effort to file the form. It is no wonder therefore that companies want the reliability of trusted INC-20A Form Filling Services to ascertain compliance.
Common Mistakes While Filing INC-20A
Even the smallest mistake can cause rejection or delay. Here are just a few potential mistakes to make errors including:
• Not submitting the form within 180 days
• Incorrect details or details that do not match with incorporation docs
• Not attaching adequate proof of capital received
• Invalid DSCs or Din
• Not uploading the form and having an adequate Board resolution to issue shares
Take your time to avoid these errors by using a trusted File INC-20A Service to avoid problems in the future to keep the accuracy and compliance of your startup.
Consequences of Non-Compliance with INC-20A
If INC-20A is not filed within the stipulated time, the company faces the following:
Consequence
Impact
Monetary Penalties
₹50,000 (Company) + ₹1,000/day (Directors)
Strike-off Risk
Registrar can remove the company from MCA records
Legal Proceedings
ROC may initiate adjudication
Operational Block
Cannot conduct lawful business, access funds, or enter into contracts
Hence, filing INC-20A is not just a formality it’s the legal ignition switch for your business.
Conclusion:
Filing Form INC-20A is one of the first significant post-incorporation compliances and arguably the most important. If you do not file this form, your company ultimately is legally not activated and potentially could cause penalties, compliance issues, and even shutdown. If this is your first time starting a company or you are an experienced business person, it doesn't matter--if you can't complete in time form INC-20A, your startup journey starts in reverse. Using a professional File INC-20A Service in India will eliminate the stress of being compliant and ready to officially commence the business that you have worked so hard to achieve. At the end of the day, your company's legitimacy and business are time sensitive and require you to act timely.
(FAQ)
1. What is Form INC-20A used for?
It is a declaration filed by directors of a company to confirm that the company has received the subscribed share capital and is ready to start business operations.
2. Who needs to file INC-20A?
All companies incorporated in India after 2nd November 2018 and having a share capital must file INC-20A within 180 days of incorporation.
3. Can I file INC-20A myself?
Yes, but it's advisable to use a professional INC-20A Form Filling Service to avoid errors, rejections, or compliance issues, especially with documentation and DSC requirements.
4. What are the penalties for late or non-filing?
The company may face a fine of ₹50,000 and each director up to ₹1,00,000. The ROC may also strike off the company for non-compliance.
5. How long does it take to file INC-20A online?
With complete documents, an Online File INC-20A Service can file and submit the form within 2–3 working days.
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