Starting a business is not an easy task with just an idea and registration of a company; some formalities should be followed and met before the legal commencement of operation. Among other formalities a company goes through before the commencement of its activities, the main one is usually the Certificate of Commencement of Business or COB. The commencement of business is the legal process that allows a company, after its incorporation, to start its operations and officially engage in commercial activities. In other words, incorporation gives a company its legal identity, but the commencement of business gives it the authority to begin functioning and earning revenue.
This time around, after the Companies (Amendment) Ordinance 2018 commenced in India, business started again as a condition precedent. It is now mandatory for all companies incorporated after November 2, 2018. A company cannot commence commercial activities, enter into contracts, or even open a bank account without obtaining the Certificate of Commencement of Business.
Commencement of Business Meaning
The legal process that authorises a company to start its commercial activities after it has been incorporated is the commencement of business. To acquire this right, the company has to go through more formalities like filling out specific forms and ensuring it meets certain financial and regulatory requirements.
In short, opening a business is the go-ahead that allows a company to begin its operations. For example, even if a company has been incorporated and has directors appointed, it cannot start selling products, offering services, or entering into business contracts until it has obtained the Certificate of Commencement of Business.
Certificate of Commencement of Business (COB)
The Certificate of Commencement of Business, issued by the Ministry of Corporate Affairs, India, is a vital legal document that proves a company has fulfilled all the legal and financial requirements to begin its business operations. Without this certificate, a company cannot engage in business activities, such as entering into contracts, opening a bank account, or conducting financial transactions.
- The requirement to Obtain Certificate of Commencement of Business All companies incorporated after November 2, 2018, are required by Companies (Amendment) Ordinance, 2018.
- Form INC 20A is to be filed with the Registrar of Companies or the ROC, seeking the issuance of a certificate of commencement of business.
- The directors have declared that they have received the subscribed share capital as resolved by the subscribers, and the company is now ready to start business.
How to Download Certificate Of Commencement Of Business?
The process of obtaining the Certificate of Commencement of Business involves several steps.
- Opening a bank account in its name and depositing paid-up share capital as declared at incorporation
- filing of Form INC-20A along with supporting documents such as a bank statement showing share capital deposited and a copy of the certificate of incorporation.
- Once the Registrar verifies the documents, the Certificate of Commencement of Business is issued.
- Failure to obtain this certificate within the stipulated timeframe can result in severe penalties, including fines for the company and its directors.
Eligibility Criteria for Commencement of Business Certificate
Eligibility for the COB Certificate of Commencement of Business. Before applying for the COB certificate, a company must fulfil the eligibility criteria.
The eligibility criteria ensure that the company has sufficient funds to run its business and has fulfilled all legal requirements before starting its operations. Those eligibility criteria, therefore, ensure that the company is legitimate and can conduct business, protecting stakeholders such as investors, employees, and customers.
- The primary eligibility criterion of the certificate is that the company must be incorporated after November 2, 2018. Therefore, those incorporated before this date do not need a certificate of commencement of business.
- This is because when the shareholders pay the subscription amount during incorporation, the company has to receive the money as subscribed. It refers to a deposit in the company’s bank account of the share capital agreed upon by the shareholders.
- In addition to the above monetary requirements, the company must submit Form INC-20A with the Registrar of Companies, declaring that all the conditions are fulfilled. The company should also have a registered address verified with the ROC. Furthermore, the company must not have any legal cases affecting the start-up operations.
- This certificate of commencement of business is a requirement for issuing the Certificate of Commencement of Business. Any companies that do not meet the said requirements will incur delays on their commencement of business and may face penalties for non-compliance.
Therefore, a company must study the qualification criteria before applying for the COB certificate to comply with all the conditions, which is very important.
Importance of the Commencement of Business Certificate
The Certificate of Commencement of Business is not a piece of paper; it’s a very critical document that plays a crucial role in a company’s legal and financial framework. Getting this certificate for a company is much more than a legal requirement; it is also one of those significant markers that signal a company’s readiness to enter the business world.
- One of the key reasons for getting the Certificate of Commencement of Business is that it is a legal authorization giving the go-ahead for a company to begin its operations. A company cannot carry out business practices such as signing contracts, sending invoices, or offering services without acquiring this certificate. Only legitimate companies with the resources and who comply with all legal necessities may be allowed to operate.
- The Certificate of Commencement of Business also enhances regulatory compliance. This document shows that all legal and financial requirements have been met, including depositing the minimum paid-up capital and submitting the required forms. Such compliance helps instil confidence in the investors, customers, and other stakeholders because they know that a company is very serious about the business and operates under the law.
- Business is that it enhances a company’s credibility. Investors and financial institutions are more likely to trust and invest in a company that has obtained this certificate, as it indicates that it is financially stable and compliant with legal requirements.
Exemptions from Form 20A Filing
While the requirement to obtain a Certificate of Commencement of Business applies to most companies, there are certain exemptions. These exemptions are designed to reduce the administrative burden on specific companies operating under different legal frameworks or were incorporated before the current regulations were introduced.
- One main exception is when a company is incorporated before November 2, 2018. As the obligation to obtain the Certificate of Commencement of Business was restored under the Companies (Amendment) Ordinance, 2018, companies registered before this date are not obligated to file Form 20A or to obtain the COB certificate.
- Another exemption applies to private companies that do not have share capital. Since depositing paid-up capital is a key part of the COB process, companies without share capital are exempt from this requirement. Similarly, Section 8 companies, non profit organizations registered under the Companies Act, are not required to file Form 20A.
Due Date for Commencement of Business (COB)
The commencement date of business is a significant deadline that companies must adhere to to ensure compliance with the legal procedure. For all those companies incorporated after November 2, 2018, a specific timeframe is required for obtaining the Certificate of Commencement of Business. Non-compliance with this deadline can lead to severe penalties and, if nothing else, the ultimate dissolution of the company.
- A company has to submit Form INC-20A and receive the Certificate of Commencement of Business within 180 days from its incorporation date. The period is long enough to enable a company to satisfy its financial and legal obligations, which include the payment of paid-up share capital and submission of required forms.
- Failure to receive the Certificate of Commencement of Business within this period exposes the company to a high cost in terms of penalties. Fines up to ₹50,000 can be imposed on the company and ₹1,000 on each director per day not done, up to a maximum of ₹1 lakh.
- In addition to the monetary compensation, the company’s name can be ordered to be stricken off by the Registrar of Companies if it does not obtain the COB certificate within the stipulated time frame. This shuts down the company and restrains it from conducting other business activities.
- Companies must be ahead of the bar, avoiding such penalties and legal consequences by starting the business process much in advance and meeting all conditions before the deadline. This ensures compliance and prevents any late start-up of companies.
How to Download Certificate of Commencement of Business?
A copy of this document for future reference is essential once a company has successfully obtained the Certificate of Commencement of Business. The certificate can be easily downloaded from the Ministry of Corporate Affairs (MCA) portal. This document is essential for various business activities, including opening bank accounts, applying for loans, and participating in audits.
- Companies must visit the official MCA portal to download the Certificate of Commencement of Business.
- Once they log in using the company’s credentials, they must reach the ‘MCA Services’ section. From there, they have to choose the ‘View Public Documents’ option.
- You must enter your company’s CIN to search for the available documents.
- By making all the other entries, one can easily determine their company’s commencement of business with a certificate and save it once clicked on with the download facility. Both its soft copy version and printed document are to be preserved so one can quickly retrieve them.
- Downloading the Certificate of Commencement of Business is easy, but it is one of the most important steps in maintaining proper documentation for your company.
- You will find that having this certificate at hand will help you maintain compliance with regulatory requirements and run your business smoothly.
Commencement of Business FAQs
1. What is the difference between incorporation and commencement of business?
Incorporation provides a company with a legal identity. Commencement of business gives it the ability to start operations. Without the Certificate of Commencement of Business, no business activity can be legally conducted by a company.
2. How to obtain a commencement of business certificate download link from the MCA portal?
Login to the MCA portal, go to ‘MCA Services’ click on ‘Company,’ enter your company’s CIN, and then download the commencement of business certificate from the available documents.
3. What if a company does not obtain the commencement of business certificate?
If a company fails to obtain the Certificate of Commencement of Business within 180 days of incorporation, it may face penalties and could be removed from the Registrar of Companies.
4. Is the Certificate of Commencement of Business required for private companies?
Yes, private companies incorporated after November 2, 2018, must obtain the Certificate of Commencement of Business unless exempt under specific conditions.
5. What is the Business Commencement day of Bank of Maharashtra?
Bank of Maharashtra business commencement day is the date when the bank started its operations officially, therefore marked the entry date into the banking sector.
