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COMMENCEMENT CERTIFICATE




Introduction



The Companies (Amendment) Ordinance 2018 has reintroduced the concept of Certificate of Commencement of Business. Under the new Ordinance, no company will be entitled to commence its operations except by filing a declaration within 180 days of its incorporation stating that the subscribers to the Memorandum of the company has paid the value of shares so agreed by them, and files a verification of its registered office address with the Registrar of Companies (ROC) within 30 days of its incorporation. Non-compliance with this provision will result in the removal of the company’s name from the Registrar of Companies.

Form 20A is a declaration that needs to be filed by the directors of the company at the time of the commencement of the business. It should be verified by a Chartered Accountant (CA) or Company Secretary (CS) or a Cost Accountant in practice.


overview


Non-applicability



The following companies are not required to file form 20A:

  • Companies incorporated before 2 November 2018 ( i.e. before the commencement of the Companies ( Amendment) Ordinance, 2018).
  • Companies incorporated after 2nd November 2018 without share capital.
     


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Requirement and procedure



  • A certificate of business commencement has to be obtained within 180 days from the date of incorporation and an eForm has to be filed with the concerned ROC (Registrar Of Companies) regarding the same.
  • A declaration under section 10A from the directors has to be provided in the form of a Board Resolution in the eForm itself.
  • In addition to this, a proof of deposit of the paid-up share capital by the subscribers also needs to be attached in the eForm.
  • If a company pursues objects requiring registration or approval from any sectoral regulators such as The Reserve Bank of India and Securities and Exchange Board of India etc, then it shall obtain such registration or approval along with the attached declaration.
  • The eForm has to be verified and certified by a practising professional before filing with the ROC (Registrar Of Companies).



Penalty for not obtaining commencement of business certificate



The penalty for non-compliance is very high as under:

Penalty 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 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 upto a maximum of Rs.1 lakh.

Company Strike-Off:
Also, after 180 days of incorporation, if the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he/she may initiate action for the removal of the name of the company from the register of companies (i.e., Company Strike-off).




Applicable fees



The Government fee for obtaining Commencement of Business Certificate is as below:

Nominal Share Capital Fee applicable
Less than 1,00,000 Rs. 200
1,00,000 to 4,99,999 Rs. 300
5,00,000 to 24,99,999 Rs. 400
25,00,000 to 99,99,999 Rs. 500
1,00,00,000 or more Rs. 600

If a company does not have share capital, a fee of Rs.200 would be applicable. Further, in case of late filing of application for Commencement of Business certificate, additional or higher Government fee as mentioned below would be applicable on top of the penalty payable.

Period of delays Penalty
Up to 30 days 2 times of normal fees
More than 30 days and up to 60 days 4 times of normal fees
More than 60 days and up to 90 days 6 times of normal fees
More than 90 days and up to 180 days 10 times of normal fees
More than 180 days 12 times of normal fees



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FAQ



No. If the Commencement Certificate is not available, it suggests that the property could be illegal, or the property is under dispute.

The property owner is responsible, and the property can be considered illegal. The local authorities can penalize the owner with fines as the per the law.

As per section 56, every company shall deliver the certificates of all securities allotted, transferred or transmitted within a period of two months from the date of incorporation, in the case of subscribers to the memorandum.

Every Company incorporated on or after 02nd November, 2019 is required to file e-form INC-20A with ROC. (Including OPC, Section 8, Normal Company etc.)



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