How to obtain Certificate of Commencement of Business

CERTIFICATE OF COMMENCEMENT OF BUSINESS

Commencement of Business’ this concept was there in the erstwhile Companies Act, 1956 and it was also introduced by the Companies Act, 2013 under the Section 11 of the Companies Act, 2013. However, section 11 was omitted (deleted) LATER ON by the companies (Amendment) Act, 2015 w.e.f. 29th May 2015. Declaration for Commencement of business is re-introduced by way of inserting a new Section 10A after section 10 of the Companies Act, 2013.

Extract of Section 10A. Commencement of business etc.

(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—

(a) 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

(b) The company has filed with the Registrar a verification of its registered office as provided in sub-section (2) of section 12.

(2) If any default is made in complying with the requirements of this section, 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.

(3) 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.

CERTIFICATE OF COMMENCEMENT OF BUSINESS:

The Ministry of Corporate Affairs in Companies Act, 2013 has re-introduced the concept of commencement of business certificate. Under the newly introduced The Companies (Amendment) Ordinance, 2018, all companies registered in India after the commencement of the Companies (Amendment) Ordinance, 2018 and having a share capital is required to obtain commencement of business certificate before commencing any business or exercising any borrowing powers. Since Companies (Amendment) Ordinance, 2018 was introduced in November 2nd 2018, any company incorporated after November 2018 would be required to obtain Commencement of Business Certificate.

Procedure for Obtaining Commencement of Business Certificate

a. E-form INC-20A is required to be filed pursuant to Pursuant to Section 10A(1)(a) of the Companies Act, 2013 and Rule 23A of the Companies (Incorporation) Rules, 2014.

b. A declaration is to be filed by a director within a period of one hundred and eighty days of the date of incorporation of the company in form INC-20A 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

c. The amount deposited in bank should be reflected in the Bank account statement and should be attached in Form INC-20A as subscribers’ proof of payment for value of shares.

d. The company has filed with the Registrar a verification of its registered office as provided in Section 12(2). This declaration is to filed by the Company in Spice plus Part-B

e. Where the affairs of the Company is regulated by any sectoral regulator (like RBI in case of NBFI activities), the Company has to attach the approval letter from the Regulatory under the attachment section Certificate of Registration issued by the RBI.

f. Under Rule 23-A Declaration at the time of commencement of business, the contents of the Form INC-20A must 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.