Certificate of Commencement of Business

The Companies (Amendment) Ordinance 2018 has reintroduced the concept of Certificate of Commencement of Business with effect from 2 November 2018. Under the new Ordinance, no company will be entitled to commence its operations or exercise any borrowing powers unless it has filed within 180 days from its Incorporation a “declaration” stating:

  • That the Subscribers to the Memorandum of the company have paid the value of shares agreed to be taken;
  • That the Company has filed a verification of its registered office address with the Registrar of Companies.

Procedure:

  • The declaration shall be in Form No INC 20A and mention that all the subscribers to the memorandum have remitted the total value of the shares agreed to be taken by them in the Companies Bank Account.
    Note: One has to attach the Bank Account statement of Company having all credit entries for receipt of subscription money received from all subscribers to the Memorandum. If the Bank Statement is not available, then valid payment proof like NEFT/IMPS receipt shall be accepted.
  • The Form shall be filed with the Registrar of Companies within 180 days from the date of Incorporation and shall be certified by a Company Secretary or Chartered Accountant, Cost Accountant, in practice.
  • In case the Company is pursuing such objects which require approval from any sectoral regulators such as Reserve Bank of India, Securities & Exchange Board of India etc, then such approval should also be obtained at the time of making the declaration.

Consequences of non-compliance:

If the Certificate of Commencement of Business is not filed within the stipulated time, then:

  • Company cannot commence its business and cannot borrow money
  • Penalties will be imposed by the concerned Registrar for non-compliance
  • Registrar may initiate action for the removal of the name of Company

Penal Provisions:

If any default is made in complying with the above, the company shall be liable to a penalty which may extend to five thousand rupees and every officer who is in default shall be punishable with fine which may extend to one thousand rupees for every day during which the default continues.

Removal of company name from Register of Companies:

Where Certificate of Commencement of Business has not been filed with the Registrar within a period of 180 days from 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, initiate action for the removal of the name of the company from the register of companies under Chapter XVIII.