Question 1

What is the purpose of appointing the first auditor in a newly incorporated company?

Accepted Answer

The first auditor is responsible for auditing the company’s financial statements from the date of incorporation until the first annual general meeting (AGM). This ensures that the company’s financial records are accurate and comply with legal requirements.

Question 2

When must the first auditor be appointed?

Accepted Answer

The Board of Directors must appoint the first auditor within 30 days of the company’s incorporation. If the board fails to do so, the shareholders must appoint an auditor within 90 days during an Extraordinary General Meeting (EGM).

Question 3

What is a share certificate, and why is it important?

Accepted Answer

A share certificate is a legal document that certifies ownership of shares in a company. It is important because it serves as proof of ownership and entitles the shareholder to the rights and privileges associated with the shares.

Question 4

When should share certificates be issued to shareholders?

Accepted Answer

Share certificates must be issued to shareholders within two months of the company’s incorporation, after the subscription money has been received and the share allotment process has been completed.

Question 5

What is the Declaration of Commencement of Business (INC-20A)?

Accepted Answer

The Declaration of Commencement of Business (INC-20A) is a mandatory filing that confirms a company has received the required subscription money from shareholders and has started its business operations. It must be filed with the Registrar of Companies (RoC).

Question 6

What is the deadline for filing INC-20A?

Accepted Answer

The INC-20A form must be filed within 180 days of the company’s incorporation. Failure to file this declaration can result in penalties and restrictions on the company’s ability to conduct business.

Question 7

What documents are needed to file the INC-20A form?

Accepted Answer

The primary document required for filing INC-20A is the bank statement showing the receipt of subscription money from shareholders. This serves as proof that the company has met the financial requirements to commence business.

Question 8

What are the consequences of not appointing the first auditor or filing INC-20A on time?

Accepted Answer

Failure to appoint the first auditor or file INC-20A on time can lead to penalties, including fines for the company and its directors. Additionally, the company may be restricted from borrowing funds or conducting business until compliance is met.

Question 9

Can a company start business operations before filing INC-20A?

Accepted Answer

No, a company cannot legally commence business operations or exercise borrowing powers until the INC-20A form is filed with the RoC. This filing confirms that the company has received its initial capital and is ready to operate.

Question 10

Why should I choose Legal Corner to handle these compliance tasks?

Accepted Answer

Legal Corner offers expert guidance to ensure that all compliance tasks, including appointing the first auditor, issuing share certificates, and filing INC-20A, are completed accurately and on time. We manage the entire process, minimizing the risk of penalties and ensuring your company is fully compliant from the start.

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