Companies Act Section 10A — Commencement of business, etc
CHAPTER II INCORPORATION OF COMPANY AND MATTERS INCIDENTAL THERETO
Commercial / Corporate
Summary
Sub-section (1) states that a company incorporated after the commencement of the Companies (Amendment) Act, 2019, which has a share capital, cannot start any business or exercise any borrowing powers unless two conditions are met.
Under clause (a) of sub-section (1), a director must file a declaration with the Registrar within one hundred and eighty days of the company's incorporation date. This declaration must be in the prescribed form, verified in the prescribed manner, and state that every subscriber to the memorandum has paid the value of the shares they agreed to take on the date the declaration is made.
Under clause (b) of sub-section (1), the company must also file with the Registrar a verification of its registered office, as provided under sub-section (2) of section 12.
Sub-section (2) provides that if there is any default in complying with the requirements of this section, the company will be liable to a penalty of fifty thousand rupees. Additionally, every officer who is in default will be liable to a penalty of one thousand rupees for each day the default continues, but this amount cannot exceed one lakh rupees.
Sub-section (3) states that if no declaration has been filed with the Registrar under clause (a) of sub-section (1) within one hundred and eighty days of incorporation, and the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, the Registrar may initiate action for the removal of the company's name from the register of companies under Chapter XVIII. This is without prejudice to the provisions of sub-section (2).
Official Text
(1) A company incorporated after the commencement of the Companies (Amendment) Act, 2019 and having a share capital shall not commence any business or exercise any borrowing powers unless—
(a) a declaration is filed by a director within a period of one hundred and eighty days of the date of incorporation of the company in such form and verified in such manner as may be prescribed, with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and
(b) the company has filed with the Registrar a verification of its registered office as provided in sub-section (2) of section 12.
(2) If any default is made in complying with the requirements of this section, the company shall be liable to a penalty of fifty thousand rupees and every officer who is in default shall be liable to a penalty of one thousand rupees for each day during which such default continues but not exceeding an amount of one lakh rupees.
(3) Where no declaration has been filed with the Registrar under clause (a) of sub-section (1) within a period of one hundred and eighty days of the date of incorporation of the company and the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he may, without prejudice to the provisions of sub-section (2), initiate action for the removal of the name of the company from the register of companies under Chapter XVIII.]