What is CERTIFICATE OF COMMENCEMENT OF BUSINESS ?

Under the newly introduced 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 The 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.

 ‘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. 29^th 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. The DETAIL of Section 10A is as follow;

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.]]

SECTION 10 A- COMMENCEMENT OF BUSINESS

*MANDATORY TO OBTAIN CERTIFICATE OF COMMENCEMENT OF BUSINESS FOR REGISTERED COMPANIES:*

Companies registered on or after November 02, 2018 are required to file the declaration for commencement of business with the Registrar of companies

*Time limit:*

The declaration for commencement of business shall be filled within 180 days from the date of getting CERTIFICATE OF INCORPORATION.

Fee for filing e-Form 20A:

1. In case of company have share capital

2. In case of company do not have share capital: Rupees 200 

Additional fee after 180 days from the date of Incorporation

The ordinance was come into force on 2^nd Nov 2018 therefore all the provisions of this section become applicable from 2^nd November 2018. Therefore every company having share capital incorporated after 2^nd November 2018 has to file form 20A with 180 days i.e. before 1^st May 2019. The Ministry of Corporate affairs has launched the form 20A and it’s available on it portal.

CERTIFICATION OF FORM 20A

This e-form 20A needs to be verified by a practicing professional i,e, (Company Secretary) CS /(Chartered Accountant) CA/ (Cost accountant) CWA. For any negligence or default in certification practicing professional shall be liable for face the consequences as per the PROVISION of section 448 and 449 of the companies Act, 2013.

*VERIFICATION OF REGISTERED OFFICE – SEC-12(2)

Declaration in E-form INC-20A by a director, also states a point i.e. point no – 4 that “The company has filed with the registrar a verification of its registered office as provided in subsection (2) of section 12”, now the question is who is required to file this verification with the registrar of companies and by what time period?

While incorporation of company, in company incorporation form SPICE – INC-32, if you have selected option “No” in point 4(b) i.e. whether the address for correspondence is the address of registered office of the company, then you need to file verification of registered office with the registrar of companies within 30 days from the date of incorporation of the company.

VERIFICATION SHALL BE FILE IN E-FROM INC-22 WITHIN 30 DAYS FROM THE DATE OF INCORPORATION.

Attachments of E-form INC-22: –

(a) Proof of registered office – Rent Agreement/Lease agreement or Conveyance agreement

(b) Copy of Utility Bill (not older than two months) – Electricity Bill/Water Bill/Telephone Bill (any one)

(c) A proof that the Company is permitted to use the address as the registered office of the Company if the same is owned by any other entity/ Person – NOC from the owner of the premises (in case of rented premises)

(d) List of all the companies (specifying their CIN) having the same registered office address, if any

 {The author is a Company Secretary based at Delhi and Jaipur and can be reached at (M) 7021848742 and (E) [email protected]}