# Commencement of Business (Section 10A)

## Concept

Mere incorporation does not give a company the right to commence business. A formal declaration of payment of subscription money and verification of registered office must be filed.

## Two-Fold Requirement Before Commencing Business

### Requirement 1 — Declaration of Paid-Up Value

A director shall file a declaration within 180 days from incorporation that:

> All subscribers to the MOA have paid the agreed value of shares they subscribed to.

### Requirement 2 — Verification of Registered Office

The company must file verification of its registered office under Section 12.

## Verification by Professionals

The declaration must be verified by a practicing professional:

CS (Company Secretary), OR
CA (Chartered Accountant), OR
CMA (Cost & Management Accountant)

## Special Entities — Sectoral Regulator Approval

Where the company requires approval from a regulator like RBI or SEBI, that approval/registration must accompany the declaration.

## Penalty for Default

Defaulter	Penalty
Company	₹50,000
Officer in default	₹1,000 per day, max ₹1,00,000

## Consequence of Non-Filing Within 180 Days

If the declaration is NOT filed within 180 days AND the ROC has reasonable cause to believe the company is not operating:

> The ROC may initiate action under Chapter XVIII to remove (strike off) the company from the register.

## Visual Flow

```

Incorporation Day 0

↓

180-Day Window: File Declaration + Register Office Verification

↓ (verified by CS/CA/CMA)

↓ (with sectoral approval if applicable)

Commence Business

```

Worked example

### Example 1

Example 1: ABC Ltd was incorporated on 1 January 2026. Subscribers paid up the share value on 15 February. By when must the declaration be filed?

Answer: The declaration must be filed within 180 days from incorporation, i.e., by 30 June 2026. The director files Form INC-20A verified by a practicing CS/CA/CMA.

### Example 2

Example 2: XYZ Ltd, an NBFC, failed to obtain RBI registration before filing the Section 10A declaration. Is the declaration valid?

Answer: No. For companies requiring sectoral regulator approval (RBI for NBFC), the regulator's approval/registration must be attached. The declaration is incomplete without it.

### Example 3

Example 3: A company defaults in filing the declaration for 120 days. Calculate the officer's penalty.

Answer: 120 × ₹1,000 = ₹1,20,000 → capped at ₹1,00,000. The company additionally pays ₹50,000.

⚠️ Common exam mistakes

Confusing this 180-day timeline with other timelines like the 30-day registered office filing under Section 12.
Forgetting that the company penalty (₹50,000) is fixed, while the officer's penalty is per-day with a cap.
Missing that a CS/CA/CMA must verify — a director cannot self-verify.
Overlooking sectoral regulator approval requirement for NBFCs, insurance companies, etc.
Assuming the ROC will automatically strike off — strike-off requires the ROC to have reasonable cause to believe the company is non-operational.

Bare-Act text Section 10A · Companies Act, 2013 · click to expand

10A. (1) A company incorporated after the commencement of the Companies (Amendment) Ordinance, 2018 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.

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