Certificate of Commencement of Business The Companies (Amendment) Ordinance 2018

Certificate of Commencement of Business The Companies (Amendment) Ordinance 2018

Ministry of Corporate affairs (MCA) is again back with the very important and Much Harder decision of getting the Certificate of Commencement of Business Requirement which was also available in the erstwhile Companies Act, 1956.

Effective Date: On 2^nd of November, 2018 our President passed an ordinance called The Companies (amendment) ordinance, 2018 and passed a new section 10A to provide for a declaration by all companies having share capital before it commences its businesses or exercises borrowing power.

Provision: As per Section 10A, All Companies having Share Capital Incorporated on or after 2^nd of November 2018, shall have to file a declaration within 180 days from the Date of Incorporation in Eform Inc-20A declaring that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him.

Why COB: The concept of COB is a drive of Ministry to run the business in more legally & Transparent Manner without giving any chance of Curbing Black money in the form of Share Subscription Amount.

COB: Certificate of Commencement of Business is one of the steps we need to follow between registering and running business. It is issued by the Registrar of Companies after filing a declaration that all the subscribers to the MOA has paid the subscription amount agreed by them.

Applicable on:

• All Companies (Public, Private, OPC, Section 8 Company having Share Capital Incorporated on or after 2^nd November, 2018

Non Applicability:

• All Companies (Public, Private, OPC, Section 8 Company Not having Share Capital or Companies Limited by Guarantee incorporated before 2^nd November, 2018

Form for COB:  Eform Inc-20A is required to be filed by all companies for getting COB along with the Declaration

Purpose of the Eform Inc-20A:   The main purpose of the form to get a declaration that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him/her.

Verification of Declaration; The declaration in Inc-20A shall be verified by a company Secretary or a chartered Accountant or a cost Accountant in practice: 

Best Practice for Companies related to Capital Clause

• For Authorized Capital: Authorized capital of the company should be made at higher limit , so to issue shares at the later stage if required capital is introduced afterwards.
• For Paid Up capital: As normal practice every company is registered with Rs. Some capital ie. 1000/10,000/1,00,000 or higher. now it is compulsory that the subscribed/PUC should be compulsory deposited in Company Bank Account within 180 days of its registration, so it is advisable to avoid incorporating company with higher paid up amount and promoters should go with very less amount like Rs. 1000/10000 as paid up amount that can easily be paid to company account and
• Lesser amount can also be paid to company by cash , so having lesser amount of paid up capital will help you to better comply with this section. It Is always advisable to deposit the subscription amount to company bank Account as soon as Bank Account of newly incorporated company is opened

Fees:

What is the Fees of Form Inc-20A?

• Fees for Filing within Due Date

If the Nominal Share Capital is

Less than 1,00,000     –     Rs 200

1,00,000 to 4,99,999    –    Rs 300

5,00,000 to 24,99,999  –    Rs 400

25,00,000 to 99,99,999 –   Rs 500

                      1,00,00,000 or more     –    Rs 600   

In case of late filing of application, additional or higher Government fee as mentioned below would be applicable in addition to the Normal Fees.

• Period of delays

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

Advantages:

1. Company can commence its business or exercise any borrowing powers only after getting COB.
2. Status of Active Company – if the COB is applied, the Registrar has reasonable cause to believe that the company is carrying on its business or operations.
3. Timely Receiving of Share Subscription amount by the Company which can help the Company to grow and invest in its projects or working capital.
4. No Scope of letting the subscribers in making default or on payment of capital.
5. If the Subscription amount is not paid, the company and directors may be penalised.

Time:

• For Companies Incorporated on or after 2.11.2018 –   The Form Inc-22A is required to be filed within 180 days from the date of incorporation.
• However, as soon as the Amount is deposited, company must file the eform inc-22a but not later than 180 days from Incorporation.
• Time to be taken for preparing and filing of form by us: at least 2-3 days required for preparing and filing the e form inc-22a

Documents required:

Prerequisite of Filing the Form

1. Company must be incorporated with Share Capital
2. Company must open a Current Account
3. Subscribers to The MOA should deposit the Subscription Amount by Bank Mode.
4.  Company must filed with the Registrar Form Inc-22 for verification of its registered office.
5. In the case of a company pursuing objects requiring registration or approval from any sectoral regulators such as the RBI, SEBI, etc., the registration or approval, as the case may be from such regulator shall also be obtained and attached with the declaration.”.

Attachments required to be attached with form INC-20A

1. Certificate of Incorporation.
2. Subscribers proof of payment for value of shares.
3. Bank Account statement of Company having all credit entries for receipt of subscription money received from all subscribers to MOA.
4. Valid payment proof like NEFT / IMPS receipts.
5. Approval certificate by Regulator like RBI/SEBI if applicable.
6. Board Resolution Alongwith the declaration by directors.

Penalty for Not Obtaining Commencement of Business Certificate

Penalty Levied on Company: Any company that does not obtain commencement of business certificate within 180 days of incorporation will be liable for payment of a penalty of Rs.50,000.

Penalty Levied on Directors: Each of the Directors who have defaulted would be liable for payment of a penalty of Rs.1000 per day of default upto a maximum of Rs.1 lakh.

Other Non Monetary Consequences of on Filing of Form Inc-20A?

1. Company cannot commence any business or exercise any borrowing powers without applying COB.
2. Power of Registrar for Company Strike-Off: After 180 days of incorporation, if the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he/she may initiate action for the removal of the name of the company from the register of companies (i.e. Company Strike-off).

Format of Declaration?

Director’s Declaration Format

I am authorized by the Board of Directors of the Company vide resolution number ______ dated________  to sign this form and declare that all the requirements of Companies Act, 2013 and the rules made thereunder in respect of the subject matter of this form and matters incidental thereto have been complied with. I further declare that:

1. Whatever is stated in this form and in the attachments thereto is true, correct and complete and no information material to the subject matter of this form has been suppressed or concealed and is as per the original records maintained by the company.

2. All the required attachments have been completely and legibly attached to this form.

3. Every subscriber to the MOA has paid the value for shares agreed to be taken by him.

4. The company has filed with the registrar a verification of its registered office as provided in subsection (2) of section 12