Commencement of Business Certificate

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 the Companies (Amendment) Ordinance 2018 was introduced in November 2nd 2018, any company incorporated after 2nd November 2018 would be required to obtain Commencement of Business Certificate.

It is a Declaration to be issued by the directors within 180 days of incorporation of company stating that the subscribers to the Memorandum of the company has paid the value of shares so agreed by them. This declaration need to be filed along with Bank Statement (proof of subscription money received by the company) in form 20A with the Registrar of Companies.

Who need to file declaration for Commencement of Business?

Every company having share capital incorporated after 2nd November 2018

Even the Section 8 Companies having share capital need to file form 20A

Time limit for obtaining commencement of Business Certificate:

within 180 days of incorporation of the company.

Documents Required:

  • Subscribers proof of payment for value of shares i.e, Bank statement of company having all credit entries for receipt of subscription money received from all subscribers to MOA.
  • While filing the application for commencement, each of the Directors of the company must declare that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him/her on the date of the making of such declaration.
  • Certificate of Registration issued by the RBI is Required also in case of Non-Banking Financial Companies) from other regulators
CONSEQUENCES IF FORM IS NOT FILLED WITHIN TIME:

A company cannot start its business and also cannot Borrow Money.

Penalty to be levied on Company

Any company that does not obtain commencement of business certificate within 180 days of incorporation will be liable for payment of a penalty of Rs.50,000.

Penalty to be levied on Directors

Each of the Directors who have defaulted would be liable for payment of a penalty of Rs.1000 per day of default up to a maximum of Rs.1 lakh

Company Strike-Off

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 of Companies 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 (i.e. Company Strike-Off).