Hurdle for company incorporated after 2nd November for commencing business

The President of India has given his assent to the Re-promulgation of the Companies Amendment (Ordinance), 2019 on Friday 12 January 2019.

To amend the Companies Act, the government had first issued The Companies Amendment (Ordinance), 2018 on 2 November 2018 and the same would have ceased to be operational from 21 January 2019. The Lok Sabha passed the Bill on 4 January 2019. Since the Bill to make amendments to the Companies Act, 2013, is pending in the Rajya Sabha, the ordinance has been re-promulgated. The same shall have effect from 2 November 2018.

In the ordinance, an old provision similar to Commencement of business is reintroduced as section 10A. The section is applicable to the companies having share capital incorporated after 2 November 2018.

Pursuant to the Section 10A of the Companies Act, 2013, a Company cannot commence business and exercise borrowing power unless the declaration is filed with the Registrar within a period of 180 days from the date of incorporation in e-Form 20A to the effect that:

• Every subscriber has paid the value of shares as agreed; and
• The registered office is verified by filing a necessary return with the registrar i.e. e-Form INC-22

The Ministry of Corporate Affairs (MCA) has also amended the Companies (Incorporation) Rules on 18 December 2018 to give effect to said amendment. However, the e-form 20A is not yet available on MCA for filing purpose.  

Non- Availability of e-form is major setback against the ease of doing business in India. The Company cannot commence its business and even board cannot exercise borrowing power till the time form is filed with the registrar.  

Any Company incorporated after 2^nd November 2018 should take note of this compliance.