Certificate of Commencement of Business (INC 20A)
The Ministry of Corporate Affairs has reestablished this crucial concept within the framework of the Company Ordinance 2018. Acquiring a Certificate of Commencement of Business is obligatory for all Indian companies with share capital during the Company Registration procedure. Grasping the significance of this certificate holds utmost importance for entrepreneurs aiming to initiate their business operations lawfully and transparently. This article will delve into the Certificate of Commencement of Business details.
SetupFiling.in has made company compliance easy for all. Take the first step towards hassle-free compliance by contacting our experts today!
What is a Certificate of Commencement of Business?
The Certificate of Commencement of Business is a declaration issued by a company’s directors within 180 days after its incorporation. This declaration certifies that the subscribers to the Memorandum of Association (MOA) paid the agreed-upon share value. This declaration, along with a Bank Statement as proof of the subscription money received by the company, must be filed with the RoC using Form 20A.
The form must also be approved by Chartered Accountants, Company Secretaries, or Cost Accountants. If errors or contradictions are discovered in the form following verification, these practicing professionals will be held accountable and may face negative consequences.
Eligibility Criteria for Certificate of Commencement of Business?
Under the provisions of the Companies Act of 2013, specific companies are obligated to secure a Commencement of Business (COB) Certificate before commencing their business operations. This requirement applies to companies with a share capital structure, and it is essential to adhere to Section 10A (1)(a) of the Companies Act in conjunction with the Companies (Incorporation) Rules, 2014.
The Certificate of Commencement of Business is a requisite for the following types of companies:
- Companies Formed after November 2nd, 2018: Companies incorporated after this date must procure a COB Certificate within 180 days from their incorporation date.
- Companies with Share Capital: Irrespective of the nature of business, all companies operating with a share capital framework must apply for and obtain the COB Certificate.
Significance of the Certificate of Commencement of Business (Form 20A Filing)
The Certificate of Commencement of Business is crucial since it formally indicates the start of a company’s operations.
- Confirmation of Operational Readiness: This certificate provides actual evidence that the company is completely equipped to engage in business activities and has satisfied all essential legal requirements.
- Legitimacy Assurance: The certificate ensures stakeholders, investors, and governmental organizations that the company’s operations are in accordance with the law. It establishes the validity and accountability of the company for its actions.
Who is not require to file Certificate of Commencement of Business (Form 20A Filing)
Form INC 20A is not necessary for some Company. These are some examples:
- Company Founded Before November 2nd, 2018: This exception applies to firms formed before the Companies (Amendment) Ordinance, 2018, especially before November 2nd, 2018.
- Company Registered After November 2nd, 2018, Without Share Capital: This exemption applies to firms formed after November 2nd, 2018. It only applies to companies that operate without a share capital structure, which means they have not issued shares.
Due Date for Certificate of Commencement of Business (Form 20A Filing)
For all companies operating with a share capital structure, securing the Commencement of Business Certificate is a requirement within the initial 180 days following incorporation. Strict adherence to this timeframe is crucial to prevent potential penalties and the risk of being struck off the Registrar of Companies records.
Directors’ Declaration
Each company director must declare that each individual subscribing to the memorandum has completed the payment obligations for the agreed-upon shares at the time of incorporation as part of the application process for the Commencement of Business Certificate. This declaration promotes transparency and accountability, which helps in the development of a strong and responsible corporate ecosystem.
Consequences of Non-filing of Certificate of Commencement of Business (INC-20A)
Failure to submit the required form within the stipulated timeframe has significant consequences:
The company is prohibited from commencing business operations and cannot secure borrowing privileges.
Penalty Imposed on the Company:
In cases where a company fails to obtain the commencement of business certificate (COB) within 180 days of incorporation, the company will incur a penalty amounting to Rs. 50,000.
Penalty Imposed on Directors:
Directors in default will individually face a penalty of Rs. 1,000 per day of default, up to a maximum of Rs. 1 lakh.
Potential Company Strike-Off:
If no declaration is submitted to the ROC within 180 days of the company’s incorporation date under Clause (a) of Sub-section (1), and if the Registrar of Companies has reasonable grounds to believe that the company is not engaged in business or operations, action may be initiated to remove the company’s name from the register of companies (Company Strike-Off), without prejudice to the provisions of Sub-section (2).
Govt Fee Structure for Companies with Share Capital for Filing of INC 20A
Sr No | Nominal Share Capital (INR) | Fee Applicable (INR) |
|---|---|---|
1 | Less than 1,00,000 | 200 |
2 | 1,00,000 to 4,99,999 | 300 |
3 | 5,00,000 to 24,99,999 | 400 |
4 | 25,00,000 to 99,99,999 | 500 |
5 | 1,00,00,000 or more | 600 |
Additional Fees for Delayed Form INC - 20A Filing
Sr No | Nominal Share Capital (INR) | Fee Applicable (INR) |
|---|---|---|
1 | Up to 30 days | 2 times of regular fees |
2 | More than 30 days up to 60 day | 4 times of normal fees |
3 | More than 60 days up to 90 days | 6 times of normal fees |
4 | More than 90 days up to 180 days | 10 times of normal fees |
5 | More than 180 days | 12 times of normal fees |
Documentation Needed for Obtaining Commencement of Business Certificate in India
To obtain the Certificate of Commencement Business in India, the following documents are required:
- Digital Signature Certificate (DSC):
- Full Registered Company Address:
- Company Bank Statement for Proof of Payment:
- Directors’ Consent and Board Resolution Details