Appointment of First Auditor, Share Certificate, Filing of Declaration of Commencement of Business (INC-20A)

Overview

In India, after the incorporation of a company, several essential compliance tasks must be completed to ensure the legal standing and smooth operation of the business. These tasks include the appointment of the first auditor, issuing share certificates to shareholders, and filing the Declaration of Commencement of Business (INC-20A) with the Registrar of Companies (RoC). Each of these steps is critical for maintaining compliance with the Companies Act, 2013. Legal Corner offers expert assistance in managing these initial compliance requirements, helping you establish a strong legal foundation for your business from the outset.

Eligibility

• Newly Incorporated Companies:
  All companies incorporated under the Companies Act, 2013, are required to appoint their first auditor, issue share certificates, and file the INC-20A form. These tasks must be completed within specific timelines to avoid penalties.
• Authorized Share Capital:
  The company must have an authorized share capital as defined in its Memorandum of Association (MOA). The share certificates issued must reflect the company’s authorized and paid-up capital as per the details registered with the RoC.
• Board of Directors’ Approval:
  The appointment of the first auditor and the issuance of share certificates must be approved by the company’s Board of Directors. This requires passing a board resolution during a duly convened board meeting.
• Bank Account and Subscription Money:
  The company must have a valid bank account to deposit the subscription money received from shareholders. The INC-20A declaration can only be filed after the company has received the subscription money and the bank account is operational.
• Compliance with Statutory Timelines:
  The company must adhere to the statutory timelines: appointing the first auditor within 30 days of incorporation, issuing share certificates within two months, and filing INC-20A within 180 days of incorporation. Compliance with these timelines is mandatory.

Benefits

• Legal Compliance:
  Completing these initial compliance tasks ensures that your company complies with the Companies Act, 2013, avoiding penalties, legal issues, and potential disqualification of the company’s status.
• Credibility with Stakeholders:
  Timely issuance of share certificates and filing of the Declaration of Commencement of Business (INC-20A) establishes your company’s credibility with shareholders, investors, and other stakeholders, building trust and confidence in your business operations.
• Smooth Business Operations:
  By appointing the first auditor and completing the necessary filings, your company can maintain smooth financial operations, ensuring accurate accounting practices, timely audits, and transparent financial reporting.
• Foundation for Future Growth:
  Establishing compliance from the start lays a solid foundation for future business growth. It ensures that your company’s legal structure is robust, allowing you to focus on expanding your business without the worry of unresolved compliance issues.
• Avoidance of Penalties:
  Fulfilling these requirements within the prescribed timelines helps your company avoid hefty fines and legal penalties, safeguarding your financial resources and ensuring uninterrupted business activities.

Procedure

• Appointment of First Auditor:
  The Board of Directors must appoint the first auditor of the company within 30 days of incorporation. This requires passing a board resolution during a board meeting. If the board fails to appoint an auditor, the shareholders must appoint one within 90 days at an Extraordinary General Meeting (EGM).
• Issuance of Share Certificates:
  After the receipt of subscription money, the company must issue share certificates to its shareholders within two months of incorporation. The share certificates must be prepared in accordance with the Companies Act, 2013, and signed by authorized directors and the company secretary (if applicable).
• Opening of Bank Account and Filing INC-20A:
  The company must open a bank account and receive the subscription money. Once this is completed, the company is required to file the Declaration of Commencement of Business (INC-20A) with the Registrar of Companies (RoC) within 180 days of incorporation. The form must be filed online through the MCA portal, along with a bank statement as proof of the receipt of the subscription money.
• Document Preparation and Filing:
  Prepare all necessary documents, including the board resolution for the appointment of the first auditor, share certificates, and the INC-20A form. Ensure that all information provided is accurate and complete to avoid any delays or rejections in the process.
• Compliance Verification and Follow-up:
  After filing, it’s essential to verify compliance by checking the status of filings on the MCA portal. Any discrepancies or issues should be addressed promptly to ensure that the company remains in good standing with the regulatory authorities.

Why Legal Corner

• Dedicated Support Team:
  Our dedicated support team is always available to answer your questions, provide updates on the status of your filings, and guide you through every step of the compliance process, ensuring a hassle-free experience.
• Expert Guidance in Compliance:
  Legal Corner specializes in managing the critical initial compliance requirements for newly incorporated companies. Our team’s expertise ensures that these tasks are completed accurately and within the required timelines, avoiding any potential legal issues.
• Comprehensive Documentation Support:
  We assist in the meticulous preparation of all necessary documents, including board resolutions, share certificates, and the INC-20A form. Our attention to detail ensures that your filings are complete, accurate, and compliant with the law.
• Streamlined Process Management:
  Legal Corner manages the entire process, from the appointment of the first auditor to the filing of the INC-20A form. We handle the administrative burdens, allowing you to focus on building and growing your business.
• Timely and Efficient Service:
  We understand the importance of meeting statutory deadlines. Legal Corner ensures that all compliance tasks are completed promptly, helping you avoid penalties and maintain smooth business operations.

FAQ