Commencement of Business Suspended

Yes, you rightly read. Commencement of business suspended. One of fellow professional colleague told me with exclamation!!

Ministry of Corporate affairs few days ago announced about launch of updated versions of few forms including Form INC – 21 which is a declaration required to be filed before commencement of business or exercising borrowing powers. But suddenly stakeholders found that while updated version of all other forms is there, there was no Form INC – 21 on the portal.

A statement issued just said that due to deletion of Section 11 of the Companies Act, 2013 by relevant section of the Companies (Amendment) Act, 2015, which came into force on or before there is no requirement of Form INC – 21 remain. Earlier, the companies (Incorporation) Second Amendment Rules 2015 were also notified.  The Form was removed from MCA 21 Portal on date 4th June 2015. By virtue of commencement of the Companies (Amendment) Act, 2015, this date legally is 29th May 2015.

I received a query, what is status of companies which was incorporated within last 6 month and yet to file Form INC – 21?

Whether Incorporation of a company has any condition subsequent that Form INC – 21 shall be filed. No. Even if there was a condition, it is removed on commencement of the amendment.

Incorporation of a company and commencement of business by a company are two different and independent events. A company may incorporate and strike off even without commence its business. Law as applicable on the day, when a company commence its business shall apply. That law is not in book on the day of commencement of business. Hence, there is no requirement of filing Form INC – 21.

Poser 1

Now, I propose a rider or say a poser.

Proviso of deleted Rule 21 correctly said that in the case of a company requiring registration from sectoral regulators such as Reserve Bank of India, Securities and Exchange Board of India etc, the approval from such regulator shall be required. Up to the date of enforcement of amendment of law, these companies, on which this proviso, has a precondition of incorporation that such approval shall be, obtain before commencement of business. Such companies incorporated on and after 30th November 2014 were incorporated with such condition subsequent. How, they may comply with such condition of incorporation after withdrawal of Form INC – 21?

My opinion is such companies may file Form INC – 21 in Form GNL – 2 as an attachment, which is a usual practice for filing forms which are yet to be available on MCA – 21 portal.

Poser 2

I quote Sub – section (3) of Section 11:

Where no declaration has been filed with the Registrar under clause (a) of subsection (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.

Many companies incorporate before 30th November 2014 whose period of for filing Form INC – 21 lapse, what would be consequence?

The Register MAY initiate action to remove the name of the company form register of companies under Chapter XVIII.

My opinion is such companies may file Form INC – 21 in Form GNL – 2 as an attachment, which is a usual practice for filing forms which are yet to be available on MCA – 21 portal.

Added Precaution is in Sub – section (2) of Section 2013 which was deleted with effect from 29th May 2015, If any default is made in complying with the requirements of this section, the company shall be liable to a penalty which may extend to five thousand rupees and every officer who is in default shall be punishable with fine which may extend to one thousand rupees for every day during which the default continues. Please calculate this fine up to 29th May 2015 only.

Please note: I welcome your comments and feedback. This blog post is not a professional advice. Readers may share this post on social media by using buttons given here.


2 responses to “Commencement of Business Suspended

  1. Pingback: Index of Companies Law Posts | AishMGhrana

  2. Pingback: COMMENCEMENT OF BUSINESS | AishMGhrana

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