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COMMENCEMENT OF BUSINESS

Mar 24, 2021 9 comment

• The Concept of Commencement of business is not new because it was there in Companies Act, 1956 also but applicable only on Public Company.
• The Ministry of Corporate Affairs re-introduced the concept of commencement of business in the Companies Act, 2013 for both Public and Private Company which was omitted vide companies (Amendment) Act, 2015 and become applicable again vide Companies (Amendment) Ordinance 2018. 
• Meaning

1. Certificate for Commencement of Business:- The Newly incorporate company having share capital cannot commence any business activities or exercise its borrowing powers without obtaining it.

• Changes occur in the applicability of the provision as per Act:-

Act/Notification	Applicability Duration	Types of Companies	E-forms	Time limit for Filing
Section 149 of Companies Act, 1956	Applicable on the companies incorporated till 31st March, 2014	Public Companies	19
Section 11 of Companies Act, 2013	Applicable on the companies incorporated from 1st April, 2014 to 28th May, 2015	Public and Private Companies	INC-21
The Companies (Amendment) Act, 2015 dated 29th May, 2015	Applicable on the companies incorporated from 29th May, 2015 till 1st Nov. 2018	Certificate of Commencement is not required for any type of Company	NA	NA
Insertion of Section 10A in the Companies Act, 2013 vide Companies (Amendment) Ordinance 2018 dated 14th Jan. 2019	Applicable on the companies incorporated After 2nd November, 2018   Companies incorporated between 2nd Nov. till 14th Jan. and already commence their business as notification issued on 14th Jan. also require to file E-Form 20-A may be with declaration that because of non-applicability of Sec. 10 A they have already commence their businesses.	Public and Private Companies	Form 20-A	180 days from the incorporation of Company

Till 31^st March, 2014, a private company could start its business immediately upon receiving certificate of incorporation and so not required to obtain a certificate of commencement of business from concerned Registrar of Companies under section 149 of Companies Act, 1956. Same relaxation was given to both Public and Private Company incorporated from 29th May, 2015 till 1st Nov. 2018. But now by inserting section 10 A in the Act now both public and private company having share capital are require to file E-Form 20-A for commencement of Business within 180 days from the incorporation

• IF NOT FILING EFORM INC-20A on time:-

 

1.  Additional Fees will be charged according to the paid up capital and as per delayed time in  filing by the company.

• Additional fee after 180 days from the date of Incorporation

Period of delays	Fees
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

 

2. Penalty:- Despite with the Additional Fees, the MCA may also imposed different penalties on the Company as well as its Directors, in case of Non-filing of E-FORM INC-20A on time. These are given below

   Applicability Duration	Types of Companies	On Company	On every officer who is in default
   Companies incorporated till 31st March, 2014	Public Companies	Penalty which may extend to five thousand rupees	Fine which may extend to one thousand rupees for every day during which the default continues.
   Companies incorporated from 1st April, 2014 to 28th May, 2015	Public and Private Companies	Penalty which may extend to five thousand rupees	Fine which may extend to one thousand rupees for everyday during which the default continues.
   Companies incorporated After 2nd November, 2018   As per section 11(2)	Public and Private Companies	Penalty which may extend to fifty thousand rupees	Fine which may extend to one thousand rupees for every day during which the default continues but maximum Rs. 1 Lakh

   3. Removal of name from register of companies: As per section 11(3) where no declaration has been filed with the Registrar within a period of 180 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 section 11(2), initiate action for the removal of the name of the company from the register of companies under Chapter XVIII.

Applicability Duration	Types of Companies
180 days passed after incorporation Not filed INC-22A Registrar has reasonable cause to believe that the company is not carrying on any business or operations	ROC may initiate action for the removal of the name of the company from the register of companies under Chapter XVIII.
180 days passed after incorporation File INC-22A	Additional fees as per table above Penalty also may imposed by the ROC
Company has commenced business without filing INC-22A	Penalty may imposed by the ROC as per table above
Applicability Duration	Types of Companies
180 days passed after incorporation Not filed INC-22A Registrar has reasonable cause to believe that the company is not carrying on any business or operations	ROC may initiate action for the removal of the name of the company from the register of companies under Chapter XVIII.

• DOCUMENTS REQUIRED FOR FILING E-FORM INC-20 A​

            Subscriber’s proof of payment for valuation of shares

           One has to attach the Bank Account statement of Company having all credit entries for receipt of subscription  money received from all subscribers to MOA. 

           However, in the case of Non-Banking Financial Company (NBFC), a Certificate of Registration issued by the RBI is also required.