Everything you need to know on Company (Incorporation) Amendments Rules, 2022

Introduction

The Companies (Incorporation) Amendment Rules, 2022 have been published by the Ministry of Corporate Affairs (MCA) in order to further amend the Companies (Incorporation) Rules, 2014. With this notification, MCA introduces Form INC 20A (Declaration for Commencement of Business) and also inserted rule 12 (related to the Nidhi Company). Here is a brief summary of the MCA modifications to the Companies Act 2013, with effect from 1st April, 2022.

Amendments in Company (Incorporation)

1. New Proviso Added to the Rule 12 for Nidhi Company:

The following proviso has been added to Rule 12 (Application for company incorporation):

If a company is incorporated as a Nidhi Company, it must receive the Central Government’s declaration under section 406 of the Act before starting its operations, and a statement in this regard must be filed by the firm at the time of incorporation.

2. Old Form INC 20A Substituted with the new Form:

With this notification, the MCA also a substituted Form INC 20A (Declaration for Commencement of Business).

Read on MCA modification in format of Form INC 20A: New Form INC 20A

Form INC 20A – Declaration for Commencement of Business

According to Section 10A (1)(a) of the Companies Act of 2013 and Rule 23A of the Companies (Incorporation) Rules of 2014, Form INC-20A must be filed.

Insightful information on Section 10A of the Companies Act of 2013

• A director needs to file a declaration with the Registrar within 180 days of the company’s incorporation date, stating that each subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of such declaration.
• The company needs to verify its registered office with the Registrar.
• If any failure to comply with the requirements of this section occurs, the company will be fined INR 50,000, and each officer who fails to comply will be fined INR 1000 for each day that the failure continues, up to a maximum of INR 1 Lakh.
• The Registrar may take measures to have the name of the company removed from the register of companies if no declaration has been submitted to ROC within 180 days of the company’s incorporation date.
• Additionally, the Registrar may take steps to remove the company name from the register of companies if he has good reason to suspect that it is not conducting any business or operations.

Important points in Form INC 20A

• The declaration made by a director pursuant to Section 10A must be made on Form INC-20A and filed in accordance with the Companies (Registration Offices and Fees) Rules, 2014. A Chartered Accountant, Company Secretary or Cost Accountant in practice must certify the details in the Form.
• The registration or approval must also be sought and attached to the declaration if the company is pursuing objectives that call for registration or approval from any sectoral regulators, such as the Reserve Bank of India, Securities and Exchange Board of India, etc.
• Within 180 days of company incorporation, every company must submit Form INC 20A. If any business fails to comply, it will be required to pay a fine for failing to submit the form before the specific time period (i.e 180 days).

Companies that are not eligible for filing Form INC20A

• Companies that were established before November 2, 2018 (i.e., before the Companies (Amendment) Ordinance, 2018)
• Businesses established after November 2, 2018, without a share capital

Bottom Line

It is critical for all companies to register Form INC 20A and all other necessary information with the ROC (Registrar of Companies) within 180 days of company incorporation. Because if companies fail to do so, they face severe penalties. With the amendments to the Companies Incorporation Amendments Rules, the 2022 MCA is attempting to take a more comprehensive approach to company incorporation.