Steps for Commencing Business After Incorporation

Getting a company incorporated with the Registrar of Companies feels like the finish line, but it is actually the starting gun. A private limited company with share capital cannot simply start signing contracts, opening bank accounts for business, or borrowing money the day its certificate of incorporation arrives. There is one more legal checkpoint to clear first, and skipping it can cost the company and its directors real money, or worse, get the company struck off the register before it ever does business. This checkpoint is called commencement of business, and it is governed by Section 10A of the Companies Act, 2013.

Why this rule exists 🔗

Before this provision came into the picture, a company could be incorporated on paper with a declared share capital that subscribers never actually paid up. The company would exist legally, complete with a CIN and a registered office address, without a rupee of real investment behind it. This created a mess of shell companies that regulators struggled to track. To fix this, the government introduced the Companies (Amendment) Ordinance, 2018, which added Section 10A to the Act, and this was later replaced by the Companies (Amendment) Act, 2019. The section requires proof that shareholders have genuinely paid for their shares and that the company has a real, traceable office before it is allowed to trade.

Who does section 10A apply to 🔗

The rule applies to every company incorporated on or after 2 November 2018 that has a share capital. If your company falls into this category, you cannot commence business or exercise any borrowing powers until you comply with the two conditions laid out below. A few categories of companies are left out of this requirement, and it helps to know them clearly:

• Companies without share capital, since there is no share value to declare as paid up.
• Section 8 companies (not-for-profit entities) that do not have share capital are exempt, as confirmed by legal commentary on the applicability of Section 10A to companies without capital.
• Companies incorporated before 2 November 2018, since the law does not apply retrospectively to older entities.

On the other hand, if a company later increases its authorised share capital, or converts from a company without share capital to one with share capital, the requirement kicks in from that point.

The two conditions you must satisfy 🔗

Section 10A lays out exactly what a company must do before it can lawfully start operating. The provision states that a company having a share capital cannot commence business or exercise borrowing powers unless two things happen.

1. A director’s declaration on paid-up capital 🔗

One of the directors must file a declaration confirming that every subscriber to the memorandum has paid the value of the shares they agreed to take, and this must happen within 180 days of the date of incorporation. This is not a self-certification alone. The declaration is filed through Form INC-20A, and its contents must be verified by a practising Company Secretary, Chartered Accountant, or Cost Accountant, as required under Rule 23A of the Companies (Incorporation) Rules, 2014. Practically, this means the company needs a bank statement showing that subscription money has actually landed in its account before the professional will sign off.

2. Verification of the registered office 🔗

The second condition is that the company must have already filed a verification of its registered office with the Registrar, as required under Section 12(2) of the Act. This is typically done through Form INC-22 if it was not already filed at the time of incorporation. Together, these two conditions confirm that the company has real capital and a real, physical presence, not just a certificate.

A special condition for regulated sectors 🔗

If the company’s objects require registration or approval from a sectoral regulator, such as the Reserve Bank of India or the Securities and Exchange Board of India, that approval must also be obtained and attached along with the INC-20A declaration. So an NBFC or a company dealing in securities cannot simply file the form and move on; the underlying regulatory licence has to be in place first.

What happens if the deadline is missed 🔗

The 180-day window is not a suggestion. If a company fails to comply, Section 10A(2) prescribes clear monetary consequences, and enforcement has been active in recent years. Adjudication orders from the Registrar of Companies show these penalties being applied in practice, sometimes running into lakhs of rupees once officer-level fines are added up.

These are penalties under the Act itself, separate from the late filing fee that the MCA portal charges on a rising scale the longer the form is delayed. So a company that waits too long ends up paying twice: the escalating government filing fee, and then the statutory penalty on top of it.

The bigger risk: removal from the register 🔗

Money is not the only thing at stake. Section 10A(3) gives the Registrar the power to initiate the removal of the company’s name from the register of companies if no declaration has been filed within 180 days and the Registrar has reasonable cause to believe the company is not carrying on any business. In practice, this plays out through a notice under Form STK-1 followed by strike-off proceedings under Section 248 of the Act, a process explained in detail by compliance advisories on non-filing of INC-20A. A struck-off company effectively ceases to exist in the eyes of the law, and reviving it later means an appeal to the National Company Law Tribunal, a route that case commentary on strike-off orders for non-filing of INC-20A shows companies have had to pursue when they were caught off guard by a strike-off notice.

It is worth noting that once a strike-off notice has effectively been triggered, some professionals have observed that the MCA system does not allow a company to file other routine forms, including a voluntary strike-off application, until the INC-20A defect is addressed. This traps non-compliant companies in a difficult position: they can neither operate normally nor exit cleanly without first sorting out the very compliance they skipped.

A quick example to make it concrete 🔗

Say a private limited company is incorporated on 1 January 2026 with an authorised and subscribed capital of ₹5 lakh. The two founder-subscribers need to transfer ₹2.5 lakh each into the company’s bank account. Once that money is in and the registered office is confirmed, a director files Form INC-20A, verified by a practising professional, well before 30 June 2026 (the 180-day mark). Only after the Registrar takes this declaration on record can the company legally sign its first vendor contract, raise an invoice, or take a loan from a bank. Miss this window, and the company is technically not allowed to trade at all, regardless of how ready it feels operationally.

Why this matters for students of company law 🔗

For anyone studying the formation of a company, Section 10A is a good illustration of how company law layers procedural safeguards on top of formal incorporation. Incorporation gives a company legal personality, but commencement of business is the additional test that confirms the company is financially and physically genuine before it is trusted to deal with the outside world, including creditors, customers, and regulators. It is also a useful case study in how legislative amendments respond to real gaps, since this entire requirement exists specifically because the original 2013 Act did not have a strong enough check against shell company formation.

What do you think? If a company genuinely could not raise its subscribed capital within 180 days due to circumstances beyond its control, should the law offer more flexibility before penalties and strike-off risk kick in? And does tying commencement of business to a registered office verification still make sense in an age of largely remote and digital-first businesses?

References

1. https://www.indiacode.nic.in/show-data?actid=AC_CEN_22_29_00008_201318_1517807327856&orderno=12
2. https://csgauravpingle.com/whether-company-incorporated-u-s-8-of-companies-act-is-under-any-legal-obligation-to-file-e-form-for-commencement-of-business/
3. https://ibclaw.in/section-10a-of-the-companies-act-2013-commencement-of-business-etc/
4. https://taxguru.in/company-law/commencement-business-section-10a-companies-act-2013.html
5. https://www.indiafilings.com/learn/mca-imposes-rs-2-5-lakh-penalty-on-company-for-not-filing-form-inc-20a
6. https://www.compliancecalendar.in/learn/company-closure-non-filling-of-form-inc-20a
7. https://www.lexology.com/library/detail.aspx?g=c25370a2-cf69-43f4-ad02-329dd64a4c85