₹2.5 Lakh Penalty, a Frozen Bank Account and Strike-Off: The INC-20A Trap Every Founder Must Avoid in 2026
By CS Sapna Malpani, Practising Company Secretary, Bangalore · Last updated 15 June 2026
One missed form cost a small Hyderabad company and its four directors ₹2,50,000. The company, Abhayahastha Information Services Private Limited, did exactly what thousands of founders do every year: it incorporated, started working, and never got around to filing Form INC-20A. The Registrar of Companies, Hyderabad, levied ₹50,000 on the company and ₹50,000 on each of the four directors, payable from their personal income. The form itself costs a few hundred rupees and takes an afternoon. This is the single cheapest mistake in Indian company law to avoid, and one of the most expensive to ignore.
Quick Summary
Deadline: Within 180 days of incorporation (every company with share capital incorporated on or after 2 November 2018).
Who must comply: Every newly incorporated private limited company, startup and public company having share capital.
Penalty for non-compliance: ₹50,000 on the company + ₹1,000 per day on each officer in default (capped at ₹1,00,000 each), plus strike-off risk.
Key action: Receive subscription money, then file INC-20A on MCA V3 with a practising professional’s certificate and DSC.
Time to act: Treat day 1 of incorporation as the start of the clock. Filing late never gets cheaper.
What is Form INC-20A and why does it matter?
Form INC-20A is the declaration for commencement of business. It is filed under Section 10A(1)(a) of the Companies Act, 2013, read with Rule 23A of the Companies (Incorporation) Rules, 2014. Every company with share capital incorporated on or after 2 November 2018 must file it within 180 days of the date of incorporation.
The form confirms two simple facts. First, that every subscriber to the Memorandum of Association has actually paid for the shares they agreed to take. Second, that the company is ready to begin business or borrow funds. Until the form is on record, the law treats the company as incorporated but not yet operational. That status carries three immediate handicaps: the company cannot legally commence business, it cannot borrow money or raise funds, and banks may refuse to activate or operate the account.
For a startup, that third point is the one that hurts. A term sheet means nothing if the company cannot legally accept investment because its commencement declaration is missing. INC-20A is a routine item on any investor or lender due-diligence checklist, and an open default is exactly the kind of red flag that delays a closing.
The 180-day clock: how the deadline actually runs
The deadline is not tied to a financial year or a calendar date. It runs from your own incorporation date, which makes it easy to forget. A company incorporated on 1 February 2026 has until roughly 30 July 2026. There is no separate reminder from the MCA, no email alert, and the SPICe+ incorporation process does not file INC-20A for you. The clock starts the day the certificate of incorporation is issued.
Day 0 — Certificate of incorporation issued. The 180-day clock starts.
Day 1–30 — Open the company bank account, collect subscription money, appoint the first auditor (ADT-1), hold the first board meeting.
By Day 180 — File INC-20A. This is the safe window. File well before the limit.
Day 181 onwards — Default under Section 10A. Penalty accrues and strike-off becomes possible.
What non-compliance actually costs
Section 10A(2) sets the price. If the declaration is not filed in time, the company is liable to a penalty of ₹50,000, and every officer who is in default is liable to ₹1,000 for each day the default continues, subject to a maximum of ₹1,00,000 per officer. The penalty is adjudicated by the Registrar under Section 454 without going to court, and directors are directed to pay from their personal income, not from company funds.
| Default under Section 10A | Penalty on the company | Penalty on each officer in default | Other consequence |
|---|---|---|---|
| Failure to file INC-20A within 180 days | ₹50,000 | ₹1,000 per day (max ₹1,00,000) | Cannot borrow or commence business |
| Continued non-filing with no business activity | As above, continuing | As above, continuing | Strike-off under Section 248 |
| Pattern of compliance defaults | Cumulative | Cumulative | Director disqualification risk |
The strike-off risk is the part founders underestimate. Section 10A(2) lets the Registrar initiate removal of the company’s name under Section 248 if it has reasonable cause to believe the company has not commenced business. A company that exists on paper but never filed its commencement declaration is the textbook target. Reviving a struck-off company means a petition to the National Company Law Tribunal, which costs far more in time, fees and disruption than the original form ever would have.
Two real ROC orders that show how this plays out
Adjudication orders are public, and two recent ones tell the whole story.
Case 1 (ROC Hyderabad): Abhayahastha Information Services Private Limited. The company was incorporated on 18 October 2021 and was required to file INC-20A by around 15 April 2022. It did not. The Registrar issued notices and received no corrective action. Invoking Section 10A(2) read with Section 454, the Adjudicating Officer imposed ₹50,000 on the company and ₹50,000 on each of the four directors, a total of ₹2,50,000. The order directed that directors pay from personal income, deposit the penalty on the MCA21 portal within 90 days, and file proof in Form INC-28. This is what silence costs: the ROC acted on its own, and every director shared the bill.
Case 2 (ROC Delhi): Anunnaki International India Private Limited (Order PO/ADJ/12-2025/DL/01292, dated 24 December 2025). Incorporated on 20 January 2023, due to file by 19 July 2023, the company filed only on 18 May 2024, a delay of 304 days. Crucially, it filed a suo-moto adjudication application in Form GNL-1 rather than waiting to be caught. The Registrar imposed ₹50,000 on the company and ₹1,00,000 on the director in default, but let two other directors off, accepting that one was appointed after the default and another was a non-executive professional director. The company also tried to claim the reduced small-company penalty under Section 446B and was refused, because it was held by a holding entity (Anunnaki Group Limited) and therefore fell outside the small-company definition in the proviso to Section 2(85).
According to CS Sapna Malpani, the contrast between these two orders is the lesson. Both companies defaulted, but the company that voluntarily disclosed and filed its own GNL-1 ended up with a cleaner, more defensible outcome and protection for directors who genuinely were not in default. The company that went silent paid the maximum on every director. Voluntary action does not erase the penalty, but it reliably shapes how the ROC treats the people behind the company.
⚡ INC-20A By The Numbers
days from incorporation to file
flat penalty on the company
on each officer, up to ₹1,00,000
total paid in the Hyderabad order
How to file INC-20A: the step-by-step process
The filing is straightforward once the subscription money is in. Here is the sequence a new company should follow.
- Receive the subscription money. Every subscriber must pay for the shares agreed in the MoA, into the company’s own current account. This is the substance the form certifies, so do it first.
- Confirm the registered office. If the registered office was not verified at incorporation, file Form INC-22 before or alongside INC-20A.
- Gather the attachments. The mandatory attachment is a photograph of the registered office showing the external view and the inside, with at least one director or KMP visible. Keep the bank statement evidencing the paid-up capital ready.
- Enter the basic details. On MCA V3, open INC-20A under Company e-Filing → Informational Services. Enter the CIN, the latitude and longitude of the registered office, the sectoral regulator (RBI, SEBI, IRDAI or other, if applicable) and the number of shareholders.
- Get professional certification. A Chartered Accountant, Company Secretary or Cost Accountant in practice must certify the declaration along with the director’s approved DIN.
- Sign and pay. Affix the director’s valid DSC, submit, note the SRN, and pay the government fee. The fee is based on the company’s authorised share capital; additional fees apply if you are already past the 180-day mark.
Where INC-20A sits among your first-year filings
Founders often confuse INC-20A with the other post-incorporation tasks. Each has its own clock. INC-20A is the one with the longest runway and the sharpest teeth, which is exactly why it gets forgotten.
| Filing | Deadline from incorporation | What it does |
|---|---|---|
| First board meeting | Within 30 days | Constitutes the board and records initial resolutions |
| ADT-1 (first auditor) | Within 15 days of board appointment (auditor appointed within 30 days) | Appoints the statutory auditor |
| INC-22 (registered office) | Within 30 days, if not done at incorporation | Confirms the registered office address |
| INC-20A (commencement) | Within 180 days | Permits the company to start business and borrow |
Already missed the deadline? Do this now
A past deadline is not a reason to keep waiting; delay only grows the per-day penalty and the strike-off risk. File INC-20A immediately with the applicable additional fees. If the delay is significant, consider a suo-moto adjudication application in Form GNL-1, exactly as the Delhi company did. Disclose the lapse in the next Board’s Report, and if directors changed during the default period, keep the appointment and resignation records ready, because the ROC does distinguish between officers who were genuinely in default and those who were not. Where a penalty order has already been passed, an appeal lies to the Regional Director in Form ADJ within 60 days of receiving the order.
The deeper implication for founders
INC-20A is a discipline test disguised as a form. The MCA does not chase you on day 181; the default simply sits on the company’s record until an investor’s lawyer, a bank’s compliance team or the ROC’s own review surfaces it. According to CS Sapna Malpani, the companies that get hurt are almost never the ones that decided to break the rule. They are the ones that incorporated, got busy building, and assumed incorporation was the finish line rather than the starting line. As MCA’s adjudication machinery becomes faster and more data-driven, expect first-year defaults like this to be picked up earlier in a company’s life, not years later. The cheapest insurance is a calendar entry on day one of incorporation.
📋 Key Takeaways
- ✅ File INC-20A within 180 days of incorporation, for every company with share capital incorporated on or after 2 November 2018.
- ✅ Penalty is ₹50,000 on the company plus ₹1,000 per day on each officer in default, up to ₹1,00,000 each.
- ✅ Directors pay from personal income; in the Hyderabad order four directors plus the company paid ₹2,50,000.
- ✅ Until INC-20A is filed, the company cannot borrow, commence business or close a funding round, and the ROC can move to strike it off under Section 248.
- ✅ Receive subscription money first; the form certifies that subscribers have paid for their shares.
- ✅ A practising CA, CS or CMA must certify the form, and the director’s DSC is mandatory.
- ✅ Missed the deadline? File now with additional fees, consider a suo-moto GNL-1, and disclose in the Board’s Report.
- ✅ The small-company reduced penalty does not apply if the company is held by a holding entity.
Just incorporated, or unsure if your INC-20A is on record?
Estimate your exposure with the MCA Penalty Calculator, then lock in your first-year filings before they become defaults.
For a confidential post-incorporation compliance review: Contact CS Sapna Malpani | WhatsApp
Frequently asked questions
What is Form INC-20A and who must file it?
Form INC-20A is the declaration for commencement of business under Section 10A of the Companies Act, 2013. Every company with share capital incorporated on or after 2 November 2018 must file it within 180 days of incorporation. A director files it and a practising CA, CS or CMA certifies it. Until it is filed, the company cannot legally start business or borrow money, which is why INC-20A matters from the very first week of a company’s life.
What is the penalty for not filing INC-20A?
Under Section 10A(2), the company is liable to a penalty of ₹50,000 and every officer in default is liable to ₹1,000 per day of continuing default, capped at ₹1,00,000 each. In the ROC Hyderabad order against Abhayahastha Information Services, the company and four directors paid ₹2,50,000 in total, with directors directed to pay from personal funds rather than company money.
Can the ROC strike off my company for not filing INC-20A?
Yes. Section 10A(2) allows the Registrar to initiate removal of the company’s name under Section 248 if it has reasonable cause to believe the company has not commenced business. Non-filing of INC-20A is a recognised strike-off ground that runs alongside the monetary penalty, and reviving a struck-off company requires a Tribunal petition.
Can a startup raise funds before filing INC-20A?
No. Until INC-20A is on record the company cannot legally borrow or commence business, and banks may decline to operate the account. Investors and lenders check INC-20A status during due diligence, so an open default can hold up a closing. File it early so the form is never the thing standing between you and a term sheet.
What if I have already missed the 180-day deadline?
File the form immediately with additional fees. For longer delays, file a suo-moto adjudication application in Form GNL-1, as Anunnaki International did after a 304-day delay. Voluntary disclosure does not remove the penalty, but it tends to produce a more measured view on which directors are treated as officers in default.
Does the small company benefit reduce the INC-20A penalty?
Only if the company genuinely qualifies as a small company under Section 2(85). In the Anunnaki order, ROC Delhi refused the reduced penalty under Section 446B because the company was held by a holding entity, which the proviso to Section 2(85) excludes from the small-company definition.
Sources and references
- India Code, Companies Act, 2013, Section 10A (Commencement of business): indiacode.nic.in
- ROC Delhi adjudication order PO/ADJ/12-2025/DL/01292 dated 24 December 2025 (Anunnaki International India Pvt Ltd), reproduced at TaxGuru
- ROC Hyderabad adjudication order (Abhayahastha Information Services Pvt Ltd), ₹2.5 lakh penalty, reported at IndiaFilings
- MCA, Form INC-20A (Declaration for Commencement of Business): mca.gov.in
- Form INC-20A filing guide (Section 10A(1)(a), Rule 23A): CS Pratik K Shah Learning Center
Disclaimer: This article is for general information based on the Companies Act, 2013 and public adjudication orders as on 15 June 2026. It is not legal advice. Verify current MCA requirements and consult a practising professional for your specific filing.