The Ministry of Corporate Affairs (MCA) has introduced the concept of Certificate of commencement of business which is covered under the Companies Act, 2013.
This is a mandatory document that every company needs to have under the Companies Act before initiating any business operation. This certificate is mandatory for companies having a share capital. The registrar of joint-stock companies issues the commencement of business certificate.
Basic Criteria to file the Business Commencement Certificate
- This is applicable for all the companies incorporated on or after 2nd November 2018.
- Compulsory compliance to be filed within 180 days from the date of Incorporation of the company.
Steps to obtain the Business Commencement Certificate
- The Bank statement of the company stating the credit entries of subscription money transferred needs to be attached.
- The e-form needs to be verified by a practising Professional i.e CS/CA/CWA.
- Filing e-Form 20A (a declaration) with the registrar.
- Certificate of Commencement of Business will be issued by the department upon verification.
Note: There is no electronic or manual certificate that would be generated from the department upon the filing of the form.
It is an auto-approved (STP) e-form, The confirmation of approval would be sent as an email draft from the ministry of corporate affairs to the email id of the directors of the company.
Companies that do not need to file Form 20A
Following are the companies that do not require filing Form 20A
- Companies that are incorporated before 2 November 2018 (which is before the commencement of the Companies (Amendment) Ordinance, 2018).
- Companies that are incorporated after 2nd November 2018 which do not have a share capital.
Penalties for default
The penalties for non-compliance are very high.
- A penalty of Rs 50,000 will be levied on the company that fails to comply with the mentioned requirement.
- Every director in default shall be liable to a penalty of Rs 1,000 per day for each day during which the default continues. This is subject to a maximum of Rs 1, 00,000.
- If the Registrar has reasonable grounds to believe that the company does not have a commencement of business certificate even after 180 days of incorporation, the registrar can remove the name of the company from the Register of companies.
The business commencement certificate is covered under the Companies Act, 2013. This certificate is mandatory for every company before initiating its business.
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