Certificate of Commencement of Business

The Companies (Amendment) Ordinance 2018

The Ordinance states that a company may not commence business, unless it-

1. files a declaration within 180 days of incorporation, confirming that every subscriber to the Memorandum of the company has paid the value of shares agreed to be taken by him, and
2. files a verification of its registered office address with the Registrar of Companies within 30 days of incorporation. If a company fails to comply with these provisions and is found not to be carrying out any business, the name of the Company may be removed from the Register of Companies.

Commencement of Business under Companies Act, 2013

UPDATE: As per section 11 of Companies Act, 2013, now all newly incorporated Public and Private Companies having Share Capital would be required to obtain a certificate of commencement of business from concerned Registrar of Companies before commencing the business or exercise of borrowing powers

Under Companies Act 2013, the date of incorporation of a company cannot be the date of commencement of business (COB). From the point of commencement of Business, companies may be divided into 2 categories:

3. Public and Private Companies not having Share Capital
   A public company or a private limited company not having share capital are not required to comply with any other formalities and may commence its business activities immediately after obtaining the certificate of incorporation from the concerned Registrar of Companies.
4. Public and Private Companies having Share CapitalAs per of Companies Act, 2013, now all newly incorporated Public and Private Companies having Share Capital would be required to obtain the certificate of commencement of business from concerned Registrar of Companies before commencing the business or exercise of borrowing powers.

Through this article, we discuss the procedure for obtaining the certificate of commencement of Business under Companies Act, 2013

Certificate of Commencement of Business under Companies Act, 2013

Ministry of Corporate affairs has finally get back a very well fine concept which was also available in the erstwhile Companies Act, 1956 i.e. Certificate of Commencement of Business. Now under Section 10A of the Companies Act, 2013, a company cannot commence business or exercise any borrowing powers, unless

1. A company incorporated after the commencement of the Companies (Amendment) Ordinance, 2018 and having a share capital shall not commence any business or exercise any borrowing powers unless—
   12. a declaration is filed by a director within a period of one hundred and eighty days of the date of incorporation of the company in such form and verified in such manner as may be prescribed, with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and the company has filed with the Registrar a verification of its registered office as provided in sub-section (2) of section 12.
   13. the company has filed with the Registrar verification of its registered office as provided in subsection (2) of section 12.
2. Where no declaration has been filed with the Registrar under clause (a) of sub-section (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.

“23A’ Declaration at the time of commencement of business –

The declaration under section 10A by a director shall be in Form No. lNC-20A and shall be filed as provided in the Companies [Registration Offices and Fees) Rules, 2014 and the contents of the said form shall be verified by a company Secretary or a Chartered Accountant or a Cost Accountant in practice:

Provided that in the case of a company pursuing objects requiring registration or approval from any sectoral regulators such as the Reserve Bank of India, Securities and Exchange Board of India, etc., the registration or approval, as the case may be from such regulator shall also be obtained and attached with the declaration.”.

 Consequences for Not Filing Certificate of Commencement of Business

1. Non-filling of form INC 20A allows Registrar of Companies one additional ground to strike off the name of your Company from its Register.
2. 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 the number of one lakh rupees.
3. On non-filling of form INC 20A ROC may strike off your Company which shall adversely affect all the Sectoral Approval taken after the incorporation by the Company.

Accordingly, the concept of a certificate of commencement of business is another welcome in ease of doing business and run the business in a more legally and a transparent manner.