Certificate of Commencement of Business

Once you have registered your company, you would want to start it at some point if you have specified initial capital for the company in its Memorandum. Under the certificate of commencement of business, within 180 days after company registration, the shareholders have to pay that initial capital and only after paying up and filing a specific application, they will get approval to start doing business.

To be a bit clearer, Certificate of commencement of business is the authorization from the Ministry to start your business. The ministry only gives the certificate if the initial capital of the company has been paid.

The specific application that I specified is called INC-20A. This form is needed to be filed by every company registered on or after 2nd November 2018 within 180 days of the said registration.

There are certain rules and regulations you need to follow while establishing anything and everything. These rules and regulations help you form a strong base for your work. These rules are especially mandatory when dealing with any legal venture. Similarly, when you set up your business, you need to follow certain rules and regulations, prescribed by the Government. It gives your entity a legal identity as well as provides you with other benefits. Obtaining Certificate of Commencement of Business is one of the steps you need to follow between registering and running your business. It was a mandatory step until Companies Act, 2015 was introduced. The Act has now removed the previous compulsion of having this certificate. Now, it depends on you whether to obtain one or not. Howsoever, discussed below is what is a certificate of commencement of business.

The certificate of commencement of business was a mandatory step under Companies Act, 2013. It was mandatory for public companies with share capital. The certificate is issued by the registrar of joint stock companies.

The certificate of commencement of business was important because only after obtaining the certificate were you allowed to start any business related activities. Before that, you were not allowed to exercise any kind of powers or benefits which come along with company registration.

Steps to obtain Certificate of Commencement

• First, file e-Form 20 (a declaration).
• Attach the statement in the prospectus of your company ( a legal document which provides all the securities you offer to the public upon the purchase of your product in written).
• File it with the registrar after which a verification will take place.
• After the successful verification, you are issued with the Certificate of Commencement of Business.

While registering the above documents you will need some other documents too;

• Identity and Address Proof.
• DSC (Digital Signature Certificate).
• Certificate of Registration (which is issued by RBI in the case of non-banking financial companies only).
• A consent letter from all the Directors (Director Declaration as well as board resolution).
• All these documents are submitted along with prescribed fees.

The application for the Certificate of Commencement of Business is generally applied within one hundred and eighty days of incorporation of the company.

Previously, there were consequences of doing business without the certificate of commencement of business, including penalty as well as cancellation of registration of the company. However, with the new Companies Act, 2015 in power, there are no such consequences. It is your will to have the certificate or not. We, at LegalRaasta, can help you to obtain this certificate as well with the company formation.