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What is the commencement of a business certificate in India?

All companies that were formed on or after November 2, 2018, must obtain a commencement of Business Certificate in accordance with the Companies (Amendment) Ordinance 2018. The directors of a business must file a Form 20A declaration within 180 days after the company's incorporation date.

The directors' declaration to the registrars of companies is known as the certificate of commencement of business. Furthermore, the chartered accountants, Company Secretary, or cost accountants has to verify the information filled in the form 20-A.

Once the declaration is entirely completed in E-form INC-20A by the company's director, it indicates that the verification of the company's registered office has been completed. In addition, borrowing rights are established and the company can launch their business or begin the business operations only after receiving the Certificate of Commencement of business.

What are the Provisions related to commencement of business certificate?

A declaration must be submitted to the registrar of companies [ROC] by the company's owners. The deadline for submitting the statement is 180 days from the day the company is formally established. If you fail to provide this declaration to the registrar as required by sub section 11(3) of the companies act, 2013, ROC has the authority to cancel your registered business name or company name from ROC.

If you have not filed the Form-20A within time, ROC may treat your incorporated company as dormant, since your company has shown no signs of wanting to move forward with the business. The registrar will then be able to take the necessary steps to have your company's name removed from the official registry.

Furthermore, Directors' Section 10A declarations must be included in the e-Form itself as Board Resolutions. Subscribers must also provide a copy of their paid-up share capital deposit proof in the e-Form. In addition to this declaration, the firm shall seek such registrations or approvals from sectoral regulators including the Reserve Bank of India and the Securities and Exchange Board of India, etc., as may be required by the purposes it pursues. Before the e-Form can be submitted to the ROC, it must be reviewed and signed by a practising CA, CS or Cost Accountant.

Business Entities to mandatorily get Commencement of Business Certificate(COB) in India?

Before doing business or exercising borrowing rights, newly formed Public and Private Companies with Share Capital must acquire a certificate of Commencement of Business from the relevant Registrar of Companies. This also includes Companies having OPC Registration.

Who is exempted from obtaining a commencement of business certificate in India?

You are exempted from obtaining a Commencement of Business Certificate in India if you fall into the following criteria:

- Companies incorporated before 2 November 2018

- Companies incorporated after 2nd November 2018 without share capital.

Time Limit to obtain the commencement of business certificate in India

Each newly formed corporation has 180 days from the date of its incorporation to submit Form 20A and obtain the commencement of business certificate in India.

Document Requirement to get commencement of business certificate in India

#1. Digital Signature Certificate

#2. Complete Address of the Registered Company

#3. Company Bank Statement evidencing Proof of payment done by subscribers/shareholders

#4. RBI issued a registration certificate, if any

#5. Consent letter or Confirmation Letter from all the Directors and Board Resolution Details

Penalties for not obtaining Commencement of Business Certificate in India

In order to reduce the prevalence of "shell" companies , severe fines or penalties have been instituted for those who fail to comply.

#1. If the company does not get Commencement of Business Certificate in India and begins the business operations, there will be a penalty of Rs 50,000.

#2. A penalty of Rs 1,000 per day for each day of default, up to a maximum of Rs 1,00,000, will be imposed against any such officer in default.

#3. Following 180 days of company registration if the Registrar has reasonable reasons to think the company is not doing any business or operations and has not obtained the Commencement of Business Certificate, the Registrar may remove the firm's name from the Register of Companies.

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