Consequesce for Delay in Filling of Form INC-20A

Consequesce for Delay in Filling of Form INC-20A. In this article we will take you through the Adjudication order in the matter of Hadaf Management Private Limited, incorporated under the jurisdiction of the Southern Region (Chennai) which mandates to file a declaration under Section 10A of the Companies Act, 2013. This section mandates to file a declaration in Form INC-20A within 180 days of its incorporation. It refers that every company with share capital must declare that subscribers to the memorandum have paid the value of shares agreed upon. Failure to comply these requirements can attract penalties under the company shall be liable to a penalty of fifty thousand rupees and every officer who is in default shall be liable to a penalty of one thousand rupees for each day during which such default continues but not exceeding an amount of one lakh rupees.
Applicable Provision – Section 10A of the Companies Act, 2013
Section 10A states that a company incorporated after the commencement of the Companies (Amendment) Act, 2019, shall not commence business or exercise any borrowing powers unless:
• A declaration is filed by a director within 180 days of incorporation, confirming that every subscriber to the memorandum has paid the value of shares agreed upon.
• The company has filed verification of its registered office with the ROC.
Non-compliance with this provision results in penalties imposed on the company and its officers in default.
Facts of the Case
Hadaf Management Private Limited, incorporated under the jurisdiction of the Southern Region (Chennai), was incorporated on 17.12.2018 failed to comply with the provisions of Section 10A. The company did not file the required declaration within 180 days of incorporation and had filed said belatedly with a delay of 35 days on 20.07.2019 
ROC Kerla & Lakshadweep examined the said default and passed the adjudication order under section 454 (3) & (4) of the Act for the delay of 35 days delay in filling the Form INC-20A under section 10A (2) of the Act.
Aggrieved by the order company has filled the appeal within the prescribed time period of 60 days in term of section 454 (6) of the Act. A series of opportunities of being heard was afforded to the Appellants and none have responded or tendered their appearance either in person or through Authorized Representative and presented the matter before the undersigned
Penalty Imposed by the Registrar of Companies
Upon identifying the non-compliance, the ROC imposed penalties as per the prescribed legal framework:
• Company Penalty: Rs. 50,000 for failure to comply with Section 10A.
• Officers in Default: Rs. 35,000 @ 1000 per day
Reduction in Penalty on Appeal (If Any)
If the company or its officers responded on the hearing date then Regional Director, may have been reconsidered based on mitigating factors such as unintentional delay, genuine hardship, or technical lapses.
However, in this case concerned RD upheld the order of ROC and appellants are directed to remit the penalties within the 30 days of receipt of this order failing to which ROC was directed to initiate the prosecution under section 454 (8)(ii) of the companies Act, 2013 without any further notice. 
Exemption to Startups, Small Companies, and OPCs Under Section 446B
Section 446B provides relief to startups, small companies, and One Person Companies (OPCs) by reducing the penalty amount levied under various provisions of the Companies Act. However, Section 10A is not explicitly covered under Section 446B, and hence, no exemption is available in such cases. The full penalty amount applies unless reduced through appeal.
Conclusion
The case of Hadaf Management Private Limited highlights the critical importance of timely regulatory compliance. Non-compliance with Section 10A leads to financial penalties and regulatory scrutiny, impacting a company’s credibility. Startups and newly incorporated entities should ensure adherence to statutory declarations to avoid penalties and operational disruptions. Companies must prioritize compliance with initial incorporation requirements, ensuring a seamless business commencement and avoiding unnecessary legal consequences.
Download MCA Adjudication Order

In this article we will take you through the Adjudication order in the matter of Hadaf Management Private Limited, incorporated under the jurisdiction of the Southern Region (Chennai) which mandates to file a declaration under Section 10A of the Companies Act, 2013. This section mandates to file a declaration in Form INC-20A within 180 days of its incorporation. It refers that every company with share capital must declare that subscribers to the memorandum have paid the value of shares agreed upon. Failure to comply these requirements can attract penalties under the company shall be liable to a penalty of fifty thousand rupees and every officer who is in default shall be liable to a penalty of one thousand rupees for each day during which such default continues but not exceeding an amount of one lakh rupees.

Applicable Provision – Section 10A of the Companies Act, 2013

Section 10A states that a company incorporated after the commencement of the Companies (Amendment) Act, 2019, shall not commence business or exercise any borrowing powers unless:

• A declaration is filed by a director within 180 days of incorporation, confirming that every subscriber to the memorandum has paid the value of shares agreed upon.

• The company has filed verification of its registered office with the ROC.

Non-compliance with this provision results in penalties imposed on the company and its officers in default.

Facts of the Case

Hadaf Management Private Limited, incorporated under the jurisdiction of the Southern Region (Chennai), was incorporated on 17.12.2018 failed to comply with the provisions of Section 10A. The company did not file the required declaration within 180 days of incorporation and had filed said belatedly with a delay of 35 days on 20.07.2019

ROC Kerla & Lakshadweep examined the said default and passed the adjudication order under section 454 (3) & (4) of the Act for the delay of 35 days delay in filling the Form INC-20A under section 10A (2) of the Act.

Aggrieved by the order company has filled the appeal within the prescribed time period of 60 days in term of section 454 (6) of the Act. A series of opportunities of being heard was afforded to the Appellants and none have responded or tendered their appearance either in person or through Authorized Representative and presented the matter before the undersigned

Penalty Imposed by the Registrar of Companies

Upon identifying the non-compliance, the ROC imposed penalties as per the prescribed legal framework:

• Company Penalty: Rs. 50,000 for failure to comply with Section 10A.

• Officers in Default: Rs. 35,000 @ 1000 per day

Reduction in Penalty on Appeal (If Any)

If the company or its officers responded on the hearing date then Regional Director, may have been reconsidered based on mitigating factors such as unintentional delay, genuine hardship, or technical lapses.

However, in this case concerned RD upheld the order of ROC and appellants are directed to remit the penalties within the 30 days of receipt of this order failing to which ROC was directed to initiate the prosecution under section 454 (8)(ii) of the companies Act, 2013 without any further notice.

Exemption to Startups, Small Companies, and OPCs Under Section 446B

Section 446B provides relief to startups, small companies, and One Person Companies (OPCs) by reducing the penalty amount levied under various provisions of the Companies Act. However, Section 10A is not explicitly covered under Section 446B, and hence, no exemption is available in such cases. The full penalty amount applies unless reduced through appeal.

Conclusion

The case of Hadaf Management Private Limited highlights the critical importance of timely regulatory compliance. Non-compliance with Section 10A leads to financial penalties and regulatory scrutiny, impacting a company’s credibility. Startups and newly incorporated entities should ensure adherence to statutory declarations to avoid penalties and operational disruptions. Companies must prioritize compliance with initial incorporation requirements, ensuring a seamless business commencement and avoiding unnecessary legal consequences.