Declaration for commencement of business.
A newly incorporated company with share capital cannot begin business or borrow a rupee until a director declares that every subscriber has actually paid for the shares they took. The declaration is Form INC-20A, the window is 180 days from incorporation, and the penalty runs on the company and on every officer daily until it is filed.
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The certificate of incorporation is not permission to trade.
Incorporation creates the company. It does not entitle it to do anything. Section 10A provides that a company incorporated with share capital shall not commence any business or exercise any borrowing powers until a director files a declaration that every subscriber to the memorandum has paid the value of the shares agreed to be taken by them.
That declaration is Form INC-20A, it has to be filed within 180 days of incorporation, and it has to be certified by a practising chartered accountant, company secretary or cost accountant. The certification is not a formality — the professional is confirming that the money actually arrived, which means there has to be a bank account and a bank statement showing it.
The order of events trips up almost every first-time founder. The company is incorporated, a bank account is opened, business starts, invoices go out, a loan is taken — and the subscription money, which is often a token amount, sits unpaid because nobody explained that it had to move at all. By the time INC-20A is looked at, the company has already been trading without the entitlement to do so.
The consequences are two-fold. There is a penalty on the company and a daily penalty on every officer in default. And separately, where no declaration is filed within 180 days and the Registrar has reasonable cause to believe the company is not carrying on business, the Registrar may begin the process of removing the company's name from the register. A company can be struck off for never having done the one thing that let it start.
Four things must be true before the form can be filed.
The filing itself takes an hour. Getting to a position where it can be filed is the work.
| Requirement | What it means in practice | Common problem |
|---|---|---|
| A company bank account | Opened in the company's name, on the strength of the incorporation documents and the PAN | Account opening is delayed by KYC, and weeks of the 180 days are lost before anything can be paid in |
| Subscription money actually paid | Each subscriber pays the full value of the shares they agreed to take in the memorandum | Founders treat the subscription amount as notional, or one subscriber pays for everyone |
| Paid from the subscriber's own account | The credit has to be traceable to the person who subscribed | Cash deposits, or transfers from a spouse's or firm's account, which the certifying professional cannot certify |
| Registered office verified | The registered office is verified with the Registrar within 30 days of incorporation | Handled at incorporation for most companies, but missed where the address changed immediately afterwards |
Where the company operates in a sector requiring registration with a regulator such as the Reserve Bank, the Securities and Exchange Board or the insurance regulator, the certificate of that registration is also attached to the form.
Six ways this goes wrong.
The subscription money was never paid
By far the most common. The memorandum records that two subscribers took shares, nobody transferred anything, and the company has been running for months on money that came in some other way. The declaration cannot be made until the subscription is genuinely paid — it is a statement of fact, not a formality.
One person paid for everybody
A single promoter funds the whole subscription because the other subscriber is abroad, or a family member, or simply not around. Each subscriber has to pay for their own shares, from their own account, or the credit cannot be tied to them and the certification fails.
The company borrowed before filing
Section 10A withholds borrowing powers, not just the ability to trade. A loan taken, a facility drawn or a director's money brought in as a loan before the declaration is filed is an exercise of a power the company did not yet have.
The bank account took two months to open
Nothing can be paid in without an account, and account opening for a new company routinely runs weeks. The 180 days do not pause for it. Starting the account process the week of incorporation is the single most useful thing a new company can do.
Money came in as cash
A cash deposit into the company account does not evidence who paid it. The professional certifying the form is confirming that each subscriber paid the value of their shares, and a cash credit does not support that confirmation.
The 180 days passed unnoticed
The company is trading, the founders are busy, and nobody was tracking a date set at incorporation. Late filing is possible with additional fee, but the penalty under Section 10A applies regardless — and the strike-off exposure begins once the window closes.
What you receive.
From incorporation to a company that can trade.
Open the bank account immediately
Started in the week of incorporation, because it is the long pole. Nothing else on this page can happen until the company has an account in its own name that can receive the subscription money.
Map the subscription
The memorandum is read to establish exactly what each subscriber agreed to take, and the amount each person owes is confirmed to them in writing along with the account to pay from.
Collect the money
Each subscriber transfers the value of their own shares from their own account through banking channels. Cash is not used, and one person paying for another is not accepted.
Board meeting
The board notes receipt of the subscription money, authorises a director to make the declaration, and approves the issue of share certificates to the subscribers.
File INC-20A
The declaration is prepared with the bank statement attached, certified by a practising professional, signed by a director and filed. Filing is what lifts the restriction on commencing business and borrowing.
Complete the first-year set-up
Share certificates issued and stamped, statutory registers opened, first auditor appointed within the statutory window, and the first-year compliance calendar handed over so nothing else is discovered late.
Four things to start.
The incorporation papers
The memorandum tells us exactly what has to be paid and by whom.
- Certificate of incorporation with the date and CIN
- Memorandum and articles as registered
- PAN and TAN of the company
The bank position
This is what the certification rests on, so it is checked before the form is drafted.
- Whether the account is open, and with which bank
- Statement from opening to date
- Any credits already received, and from whom
The subscribers
Each of them has to pay from their own account, so each of them has to be reachable.
- Names and shares taken as per the memorandum
- Whether any subscriber is a body corporate or non-resident
- Contact details for collecting payment
What has already happened
If the company has started trading, that changes the urgency rather than the process.
- Whether the company has invoiced or contracted
- Whether any loan or facility has been taken
- How many days have passed since incorporation
What this looks like in Goa.
Hospitality companies incorporated in the monsoon to be ready for the season start trading the moment bookings open, often before the subscription money has moved. The declaration should be done in the quiet months, not the busy ones.
Account opening for a brand new company here regularly takes three to six weeks, and longer where a director is overseas. It is the reason the 180 days feel generous and then are not.
Where a subscriber is resident outside India, the subscription is an inward investment and carries its own pricing and reporting obligations alongside INC-20A. That needs planning at incorporation, not at day 170.
Companies incorporated with a very small authorised capital treat the subscription as symbolic. The amount is irrelevant — whatever the memorandum says was taken has to be paid, even if it is a few thousand rupees.
Promoters routinely fund a new company by putting money in as a loan in the first month. That is an exercise of borrowing power the company does not have until the declaration is filed, and it is worth structuring differently.
Usually needed alongside this.
Commencement of business, answered.
What is Form INC-20A?
A declaration by a director that every subscriber to the memorandum has paid the value of the shares agreed to be taken by them. It is filed with the Registrar within 180 days of incorporation and certified by a practising chartered accountant, company secretary or cost accountant.
Until it is filed, the company cannot commence any business and cannot exercise any borrowing powers. It applies to every company with share capital incorporated on or after 2 November 2018.
What is the deadline?
180 days from the date of incorporation — the date on the certificate, not the date the bank account opened or the date business actually started.
Late filing is possible with additional fee, but the penalty under Section 10A applies independently of the fee. And once the window closes without a declaration, the Registrar acquires a ground to begin removing the company's name from the register.
Can we start business before filing it?
No. That is precisely what the section prohibits. A company that has not filed the declaration may not commence any business and may not exercise any borrowing power.
In practice a great many companies do trade before filing, usually without realising the restriction exists. The answer is not to argue about it afterwards but to complete the subscription and file as quickly as possible — the exposure grows with every day and every transaction.
What is the penalty for not filing?
A penalty on the company, and a separate per-day penalty on every officer in default for as long as the default continues, subject to a prescribed maximum for the officers.
The more serious consequence is not the money. Where the declaration is not filed within 180 days and the Registrar has reasonable cause to believe the company is not carrying on business, the Registrar may initiate action to remove the company's name from the register. The exact penalty figures are confirmed against the current position at the time of filing.
Does every company have to file it?
Every company with share capital incorporated on or after 2 November 2018. That covers private limited companies, public limited companies and one person companies.
A company incorporated without share capital — typically a Section 8 company limited by guarantee with no share capital — is outside the requirement, because there is no subscription money to declare. Companies incorporated before the section came into force are also outside it. An LLP has no equivalent obligation at all.
Can the subscription money be paid in cash?
It should not be. The form is supported by a bank statement showing the credits, and the professional certifying it is confirming that each subscriber paid for their own shares.
A cash deposit does not identify who paid it, so it does not support that confirmation. The money should reach the company's account through banking channels, from each subscriber's own account, with a narration that makes the purpose clear.
Can one promoter pay the whole subscription?
No. The declaration is that every subscriber has paid the value of the shares agreed to be taken by him. Payment by someone else, however convenient, does not satisfy that.
Where a subscriber is genuinely unable to transfer — abroad, without an Indian account, elderly — that is worth raising at the outset. There are ways to handle it, but constructing the payment record afterwards is not one of them.
What happens if the 180 days have already passed?
File as soon as the subscription position allows. Late filing is accepted with additional fee, and doing it voluntarily is materially better than waiting for the Registrar to act.
The immediate work is usually collecting subscription money that was never paid, which takes as long as the subscribers take. Alongside that, the company's position on anything it has already done — contracts entered into, borrowings taken — is worth reviewing rather than ignoring.
What else has to be done after incorporation?
More than most founders expect, and on tighter timelines than INC-20A. Verification of the registered office within 30 days. Appointment of the first auditor by the board within 30 days of registration. The first board meeting within 30 days. Share certificates to subscribers within two months, with stamp duty paid.
Then the statutory registers, the disclosure of interest by directors, and the first-year filing calendar. INC-20A is the one with the longest fuse, which is exactly why it is the one that gets forgotten.
How long does the filing take?
The form itself is a day's work once the money is in and the bank statement is available.
The realistic timeline is set by the bank. Account opening runs three to six weeks for a new company, and longer where a director is overseas, and the subscribers then take as long as they take to transfer. Start on the day of incorporation and the 180 days are ample; start at day 120 and they are not.
Send the certificate of incorporation and the bank statement.
Those two, plus the memorandum, tell us exactly what is owed and by whom. If the 180 days have already passed, say so — it changes the urgency and the sequence, not whether it can be fixed.