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COMMENCEMENT OF BUSINESS

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COMMENCEMENT OF BUSINESS
By: Mr. M. GOVINDARAJAN
February 7, 2019
  • Contents

Certificate for commencement of business

Under the Companies Act, 1956 a private company and a public 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.

A public limited company having share capital cannot commence business until it has obtained the certificate to commence business from the concerned Registrar of Companies.  Under the Companies Act, 1956 a new company would comply with the required formalities and obtain the commencement of business certificate from the Registrar as soon as possible after formation because it could not commence any business activities or exercise its borrowing powers without it.

The following is the procedure to obtain the certificate of incorporation under Companies Act, 1956-

  •  the company shall file with the Registrar a statement in lieu of prospectus(signed by every director) electronically at the MCA portal in the form given in Schedule III to Act together with the E-Form 62 and shall pay the prescribed fee by online or offline as per Schedule X of the Companies Act, 1956;
  • the directors should pay the value of the shares to the extent money is payable in cash with application/allotment;
  • a duly certified declaration should be filed electronically at the MCA portal in the E-Form 20 and a stamped copy should be simultaneously filed with the Registrar signed by a director/secretary or by secretary in practice where there is no secretary, to the effect that the requirements of section 149(2) have been complied with.
  • the company shall not allot any share or debenture at least for three days after filing of statement in lieu of prospectus with the Registrar.;
  • the company shall pay the prescribed filing fee by online or offline under Schedule X on SLP and on e-Form 20 to the Registrar of Companies.

The Registrar of Companies shall then issue the requisite certificate of commencement of business.

Under Companies Act, 2013

At the time of enactment of the Companies Act, 2013 the requirement of getting the certificate of incorporation was not found place.  This has been considered as a salient feature of the new Act which is helpful for the ease of doing business.  But at present the Act requires to give a declaration about the commencement of business, slightly differed procedure from the old Act which requires obtaining certificate from the Registrar of Companies.

New provision

Section 10A was inserted in the Companies Act, 2013 vide the Companies (Amendment) Act, 2019 which came into effect from 02.11.2019.  Section 10A requires the declaration to be given by a new company for its commencement of business in the prescribed form.  A new rule 23A has been inserted in the Companies (Incorporation) Rules, 2014 vide Notification No. G.S.R. 1219(E), dated 18.12.2018.

Declaration

Section 10A provides that a company incorporated after the commencement of the Companies (Amendment) Act, 2019 and having a share capital shall not commence any business or exercise any borrowing powers unless-

  •  A declaration is filed by a director within a period of 180 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 section 12 (2).
  • Rule 23A provides that the declaration under section 10A by a director shall be in Form No.INC-20A and shall be filed as provided in the Companies (Registration Offices and Fees) Rules, 2014.  The contents of the said form shall be verified by a Company Secretary or a Chartered Accountant or a Cost Accountant, in practice.

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.

Form No. INC – 20A

The following details are to be furnished in Form No. INC – 20A-

  • Corporate identity number (CIN) of company;
  • Global location number (GLN) of company;
  • Name of the Company;
  • Address of the Company;
  • Email id of the company;
  • Whether the affairs of the company is regulated by any sector regulator (like RBI in case of NBFCs) – Yes/No;
  • The name of the regulator;
  • The letter No./registration number and date of approval/registration;

The following documents are to be attached along with the form-

  • Subscribers proof of payment for value of shares;
  • Certificate issued by Reserve Bank of India (Only in case of Non Banking Financial Companies)/from other regulators;
  • Optional attachments (if any)

Declaration by the Director

The declaration shall be given by the Director of the company as detailed below-

I am authorized by the Board of Directors of the Company vide resolution number______, dated______to sign this form and declare that all the requirements of Companies Act, 2013 and the rules made there under in respect of the subject matter of this form and matters incidental thereto have been complied with. I further declare that:

  1. Whatever is stated in this form and in the attachments thereto is true, correct and complete and no information material to the subject matter of this form has been suppressed or concealed and is as per the original records maintained by the company.
  2. All the required attachments have been completely and legibly attached to this form.
  3. Every subscriber to the MOA has paid the value for shares agreed to be taken by him.
  4. The company has filed with the registrar a verification of its registered office as provided in subsection (2) of section 12.

The form is digitally signed by the Director along with furnishing his Director Identification Number.

Certificate by practicing professional

The certificate may be given either by a practicing Chartered Accountant or a practicing Company Secretary or a practicing Cost Accountant.   The professional is to be mention whether he is an Associate Member or fellow member.  His membership number as well as certificate of practice number is to be mentioned in this form.  The certificate is to be given as detailed below-

I declare that I have been duly engaged for the purpose of certification of this form. It is hereby certified that I have gone through the provisions of the Companies Act, 2013 and Rules there under relevant to this form and I have verified the above particulars (including attachment(s)) from the original records maintained by the Company/applicant which is subject matter of this form and found them to be true, correct and complete and no information material to this form has been suppressed.

Penalty

  If any default is made in complying with the requirements of this section, the company shall be liable to a penalty of ₹ 5000/-  and every officer who is in default shall be liable to a penalty of ₹ 1000/- for each day during which such default continues but not exceeding an amount of ₹ 1 lakh.

Where no declaration has been filed with the Registrar within a period of 180 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 this section, initiate action for the removal of the name of the company from the register of companies under Chapter XVIII.

Section 448 and 449 provide for punishment for false statement / certificate and punishment for false evidence respectively in this form.

 

By: Mr. M. GOVINDARAJAN - February 7, 2019

 

 

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