Newly incorporated companies will now require Certificate Of Commencement Of Business

Commencement of Business:

As per MCA notification dated December 18, 2018, every public and private limited company having share capital incorporated after December 18, 2018 cannot commence its business or exercises any borrowing powers until it has obtained the certificate of commencement of business (COB) from the concerned Registrar of Companies (ROC). The company can commence its business activities only when:

  1.  A declaration in form 20A is filed by a director with the ROC within 180 days of company incorporation, to the effect that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him; and

  2.  The company has filed with the ROC all the documents with respect to situation of its registered office in form INC-22 within 30 days of incorporation of company.

For e.g.: A newly incorporated company can enter into employment agreement but it cannot enter into any service contract or provide services without obtaining the COB.

Consequences of non-filing for commencement of business:

  1.  Penal Provision: In addition to late filing fees levied by ROC, Penalty upto Rs. 5,000/- and every officer who is in default shall be punishable with fine upto Rs. 1,000/- for every day during which the default continues.

  2.  Removal of name from register of companies:  In case of default in filing with the ROC for commencement of business within a period of 180 days of the date of incorporation of the company and the ROC has reasonable cause to believe that the company is not carrying on any business or operations, the ROC may initiate action for the removal of the name of the company from the register of companies.

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