Form INC-20A Explained: The Filing New Companies Forget

Your company is incorporated. The certificate is framed, the CIN is on the letterhead, and you are ready to invoice. There is one filing between you and legally being allowed to — and it is the one that newly incorporated companies miss more often than any other. Form INC-20A, the declaration for commencement of business, carries a penalty structure disproportionate to how small the filing is, and it accrues daily.

This is what Section 10A requires, what you have to prove, what happens if you trade before filing, and the handful of mistakes that cause the declaration to be rejected.

What Section 10A says

A company incorporated with a 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, and it must be filed within 180 days of the date of incorporation.

Read the prohibition carefully, because it has two limbs and people only remember one:

• No commencement of business. No invoicing, no trading, no revenue-generating operations.
• No exercise of borrowing powers. No loan, no overdraft, no credit facility — including, on a strict reading, a loan from a director brought in as borrowing rather than as share subscription.

The second limb catches founders who open a bank account, take a small facility to fund setup costs, and only file INC-20A later. The borrowing itself is the breach.

What you actually have to prove

The substance of the declaration is simple: the subscribers put in the money they said they would. The subscriber sheet of your Memorandum of Association records how many shares each founder agreed to take and at what value. INC-20A declares that each of them has paid for them.

So the sequence after incorporation is:

• Open the company's current account. Nothing else can happen until this exists, and bank account opening for a new company frequently takes longer than founders plan for.
• Each subscriber transfers their subscription amount from their own bank account into the company's account.
• Obtain the bank statement showing those credits, which is the attachment to the form.
• File INC-20A, digitally signed by a director and certified by a practising professional.

If your registered office was not declared at incorporation, the verification of registered office in Form INC-22 also has to be on file — see our guide to registered office address rules for what that involves.

The five ways the money goes wrong

Almost every rejected or problematic INC-20A comes down to how the subscription money was paid:

• Paid in cash. There has to be a bank trail. Cash cannot evidence subscription.
• Paid from the wrong account. Subscriber A's shares must be paid for by subscriber A. One founder funding everyone's subscription from a single account does not evidence that each subscriber paid for their own shares.
• Paid short. The amount credited has to match the value of shares that subscriber agreed to take in the MoA. A round-number transfer that is slightly under the subscribed amount fails the declaration.
• Treated as a director's loan. Money brought in and booked as unsecured loan from a director is not share subscription — and, worse, it is borrowing, which Section 10A prohibits before the declaration.
• Mixed with revenue. If the company started invoicing and the subscription credits are buried among customer receipts, the statement no longer cleanly evidences what it needs to. It also proves you commenced business before filing.

INC-20A is not a formality that confirms you exist. It is the filing that unlocks the right to trade — and the bank statement behind it has to be clean.

The penalty, and why it is the one worth avoiding

Section 10A attaches a specific penalty to non-filing, and unlike ordinary late-filing fees it is a penalty rather than a graduated fee:

• The company is liable to a penalty of fifty thousand rupees.
• Every officer in default is liable to one thousand rupees for each day the default continues, subject to a maximum of one lakh rupees.

Two features make this bite. First, the officer liability is personal and daily — it is not a company cost that gets absorbed. Second, there is a further consequence beyond money: where the declaration has not been filed and the Registrar has reasonable cause to believe the company is not carrying on business, it can initiate action to remove the company's name from the register under the striking-off provisions. A company that never filed INC-20A and never filed anything else is a prime candidate, and our guide to closing a private limited company explains how that route works from the Registrar's side.

Late filing is possible — the form can be filed after 180 days with the applicable additional government fees — but the penalty exposure under Section 10A sits on top of those fees, not instead of them. Filing late is far better than not filing; filing on time is better still.

Where INC-20A sits in the first-year timeline

It is the first of several deadlines that cluster in a new company's opening months, and treating them as one block is the way to not miss any:

Notice that the auditor appointment and the first board meeting are due inside thirty days — well before INC-20A — and both are missed at least as often. Our annual compliance guide maps the full financial-year cycle that follows, and DIR-3 KYC covers the director-level filing that keeps DINs active.

Who does not need to file it

The obligation attaches to companies incorporated with a share capital. A company incorporated without share capital — some non-profit structures, for instance — falls outside Section 10A. Entities that are not companies at all are also outside it: an LLP has no INC-20A equivalent, and neither does a partnership firm or a proprietorship. If you are still choosing a structure, the lighter compliance load of an LLP is one of the real trade-offs, and our Pvt Ltd vs LLP comparison sets out the rest.

A short checklist for the first 180 days

• Open the company current account as the first priority after incorporation.
• Have each subscriber transfer their exact subscribed amount from their own account, with a clear narration.
• Do not invoice, trade or borrow before the declaration is filed.
• Download the bank statement showing all subscription credits.
• File INC-20A with professional certification, well inside the 180-day window.
• Keep INC-22 and the auditor appointment on the same checklist so none of them slips.

Frequently asked questions

If you are inside the window — or past it

If your company was incorporated recently, this is a filing worth closing out this month rather than next quarter. If you are already past 180 days, it is worth getting filed now, because the officer penalty accrues daily until it is. Book a free consultation with our CA team and we will check your subscription credits against the MoA, tell you whether the bank statement will support the declaration, and file it with the required certification. We will also flag the two other first-year filings that are usually overdue by the time anyone asks about this one. Government fees are passed through at cost and itemised separately from our professional fee.