Section 10A of the Companies(Amendment) Act 2013, the Companies Act, Certificate of Incorporation, Erstwhile Companies Act 1956

A company having a share capital shall not commence any business or exercise any borrowing power unless –

(a) A director files a declaration with the Registrar in such form and in such manner as may be prescribed, stating that each subscriber to the memorandum has paid the value of the shares agreed to be taken by him and that the company’s paid-up share capital is not less than five lakh rupees in the case of a public company and not less than one lakh rupees in the case of a private company on the date of this declaration.

(b) the company has filed a verification of its registered office with the Registrar, as required by section 12 sub-section (2).

(2) If the firm fails to comply with the requirements of this section, the company will be subject to a penalty of up to five thousand rupees, and each officer who is in default will be subject to a punishment of up to one thousand rupees for each day the default persists.

(3) If no declaration is filed with the Registrar under clause (a) of sub-section (1) within 180 days of the company’s incorporation date and the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he may, without prejudice to the provisions of sub-section (2), take action to remove the company’s name from the register of companies under Chapter XVIII.

Commencement of Business under Companies Act, 2013

The concept of a Certificate of ‘Commencement of Business’ was first established in the Companies Act, 1956, and it was reintroduced in the Companies Act, 2013 under Section 11 of the Act. The Companies (Amendment) Act, 2015, however, excluded (deleted) section 11 with effect from May 29, 2015. Companies can be classified into two groups based on when they started doing business:

Companies with no share capital, both public and private:-

A public company or a private limited company without share capital is not necessary to follow any other procedures and may begin operating immediately after receiving a certificate of incorporation from the Registrar of Companies.

Fee for Filing E-Forms or Documents In Case Of Company Not Have Share Capital

According to Section 10A of the Companies Act 2013, a company that does not have a share capital and intends to commence business immediately after its incorporation must file a declaration in the prescribed form, called “Form INC-20A,” with the Registrar of Companies (ROC) within 180 days of its incorporation.

The fee for filing Form INC-20A varies based on the authorized share capital of the company, as follows:

For companies with authorized share capital up to Rs. 1 lakh – Rs. 200.
For companies with authorized share capital between Rs. 1 lakh to Rs. 5 lakhs – Rs. 300.
For companies with authorized share capital between Rs. 5 lakhs to Rs. 25 lakhs – Rs. 400.
For companies with authorized share capital between Rs. 25 lakhs to Rs. 1 crore – Rs. 500.
For companies with authorized share capital above Rs. 1 crore – Rs. 600.

Please note that these fees are subject to change and should be confirmed with the ROC at the time of filing

Companies with Share Capital, both public and private:-

All newly constituted Public and Private Companies with Share Capital will now be required to obtain a certificate of commencement of business from the concerned Registrar of Companies before commencing business or exercising borrowing rights, as per section 11 of the Companies Act, 2013.

Fee for Filing E-Forms or Documents In Case Of Company Have Share Capital

The fee for filing e-forms or documents with the Registrar of Companies (ROC) in case of a company having share capital under the Companies Act 2013 depends on the specific form or document being filed. The fee structure varies depending on the type of form, the authorized share capital of the company, and the date of filing.

Here is a general fee structure for some of the commonly filed forms:

Form INC-7 (Application for Incorporation of Company): The fee for this form varies based on the authorized share capital of the company as follows:

For companies with authorized share capital up to Rs. 10 lakhs: Rs. 5,000
For companies with authorized share capital between Rs. 10 lakhs to Rs. 50 lakhs: Rs. 200 for every Rs. 10,000 of share capital, subject to a maximum of Rs. 12,000
For companies with authorized share capital above Rs. 50 lakhs: Rs. 500 for every Rs. 10,000 of share capital, subject to a maximum of Rs. 5 lakhs

Form DIR-12 (Appointment of Directors): The fee for this form is Rs. 500.
Form MGT-14 (Filing of Resolutions and Agreements): The fee for this form is Rs. 300.
Form ADT-1 (Appointment of Auditor): The fee for this form is Rs. 200.

Please note that these fees are subject to change and should be confirmed with the ROC at the time of filing.Regenerate response

Additional Fee Rules

Under the Companies Act 2013, there are certain additional fee rules that apply when a company fails to file or delays in filing certain e-forms or documents with the Registrar of Companies (ROC). These additional fees are designed to encourage companies to file their documents and e-forms on time and discourage them from delaying filings.

Here are some of the additional fee rules under the Companies Act 2013:

Late filing fees: If a company fails to file its e-forms or documents within the prescribed time, it is liable to pay additional fees for every day of delay. The amount of additional fees varies depending on the type of form and the period of delay.
Penalty for non-compliance with provisions of the Act: If a company fails to comply with any provisions of the Companies Act 2013, it may be liable to pay a penalty. The penalty amount may vary depending on the nature of the non-compliance.
Penalty for default in complying with the order of the National Company Law Tribunal (NCLT): If a company fails to comply with the order of the NCLT, it may be liable to pay a penalty. The penalty amount may vary depending on the nature of the non-compliance.
Additional fee for delayed filing of annual return and financial statements: If a company fails to file its annual return or financial statements within the prescribed time, it is liable to pay additional fees for every day of delay. The amount of additional fees varies depending on the period of delay.

Certificate of Incorporation issued under the Companies Act, 2013 –

A public or private limited company with share capital cannot start doing business until the Registrar of Companies issues a certificate of commencement of business (COB). A new company will usually complete the necessary formalities and obtain the certificate of commencement of business (COB) from the Registrar as soon as possible after formation because it will be unable to conduct business or exercise its borrowing powers without it.

Now, under Section 11 of the Companies Act, 2013, a company cannot start a business or borrow money unless a director files a declaration with the Registrar stating that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him and the company’s paid-up share capital is not less than five lakh rupees in the case of a public company and not less than one lakh rupees in the case of a private company on the date of the declaration; and

As required by section 12 sub-section (2), the firm has filed a verification of its registered office with the Registrar.

WHO NEED TO FILE DECLARATION FOR COMMENCEMENT OF BUSINESS?

As per Section 10A of the Companies Act 2013, a company having a share capital and registered on or after 2nd November 2018, is required to file a declaration for commencement of business before commencing any business or exercising any borrowing powers.

The following companies need to file the declaration for commencement of business:

Companies incorporated on or after 2nd November 2018 that have share capital.
Companies that have increased their authorized share capital after 2nd November 2018.
Companies that have converted from companies without share capital to companies with share capital after 2nd November 2018.

It is important to note that companies that do not have share capital are exempt from filing the declaration for commencement of business. Also, if a company has been incorporated before 2nd November 2018, it does not need to file the declaration for commencement of business

PENALTY FOR NOT FILING

Under the Companies Act 2013, there are various penalties and consequences for not filing the required documents and forms with the Registrar of Companies (RoC) within the prescribed time limit. Some of the penalties for non-compliance are as follows:

Late filing fees: If a company fails to file the required documents within the prescribed time limit, it may be liable to pay late filing fees, which can vary depending on the nature of the document and the duration of the delay.
Additional fees: In addition to late filing fees, the company may also be required to pay additional fees, which can be up to ten times the normal filing fees.
Disqualification of directors: If a company fails to file its annual returns and financial statements for three consecutive years, all its directors may be disqualified from being appointed or re-appointed as directors of any other company for a period of five years

WILL COMPANY GET THE “CERTIFICATE OF COMMENCEMENT OF BUSINESS ?”

Yes, as per the Companies Act 2013, every company is required to obtain a Certificate of Commencement of Business (CoC) before it can start its business operations.

After incorporation, the company is required to file a declaration with the Registrar of Companies (RoC) stating that all the necessary requirements for incorporation have been complied with, and that the company is entitled to commence its business. Upon verifying the declaration and ensuring that all legal requirements have been met, the RoC issues a CoC to the company.

It is important to note that the CoC is applicable only to companies that have issued shares to the public, and not to private companies. Additionally, the CoC is only required for companies that have been incorporated after the Companies Act 2013 came into effect in April 2014. Companies incorporated before this date are not required to obtain a CoC.

ATTACHMENT TO FORM 20A

Form INC-20A is a declaration for the commencement of business that needs to be filed by companies having share capital, as per the provisions of the Companies Act, 2013. Along with the form, certain documents need to be attached to complete the filing process. The attachments required are as follows:

Certificate of incorporation: A copy of the certificate of incorporation issued by the Registrar of Companies (ROC) needs to be attached as proof of the company’s incorporation.
Bank account statement: A copy of the bank account statement or a certificate from the bank that shows the receipt of the subscribed share capital must be attached to the Form INC-20A.
Board resolution: A copy of the Board resolution authorizing the filing of Form INC-20A must be attached as proof that the company has passed a resolution to commence business operations.
Memorandum of Association (MOA) and Articles of Association (AOA): Copies of the MOA and AOA of the company must be attached.

WHO WILL CERTIFY THE FORM 20A?

Form INC-20A is a declaration for commencement of business that needs to be filed by companies having share capital, as per the provisions of the Companies Act, 2013. The form needs to be certified by a practicing Chartered Accountant (CA), Cost Accountant (CMA), or Company Secretary (CS) who is either in whole-time practice or employed with a company as a whole-time employee.

The certification by the practicing CA, CMA, or CS confirms that the company has complied with all the provisions of the Companies Act, 2013, and is eligible to commence its business operations and exercise borrowing powers. The certification is an assurance that the company has utilized the funds raised through the issuance of shares for the purposes mentioned in the prospectus or offer document and has maintained the requisite amount of minimum paid-up share capital as per the provisions of the Companies Act, 2013.

It is important to note that the person certifying Form INC-20A must ensure that the information provided in the form is true and correct and must take responsibility for any misstatement or non-disclosure of material facts. The certification must be based on proper verification of the books, records, and documents of the company.

Detailed Procedure for Obtaining Commencement of Business Certificate

The procedure for obtaining a Commencement of Business (COB) certificate in accordance with the Companies Act, 2013 is as follows:

Hold Board Meeting: The first step is to hold a Board Meeting to authorize the filing of Form INC-20A with the Registrar of Companies (ROC) for obtaining the COB certificate. The Board of Directors must pass a resolution approving the commencement of business and authorizing the director or any other person to file Form INC-20A with the ROC.
Verify the details: Verify the details of the company such as the registered office address, directors, subscribers, etc., and ensure that they match the details provided in the application form.
File Form INC-20A: File Form INC-20A with the ROC within 180 days of incorporation of the company. The form can be filed through the MCA portal by paying the required fees. The form must be digitally signed by a director or the manager or the secretary of the company.

Important Points to Be Considered While Obtaining Commencement of Business Certificate

Obtaining a Commencement of Business (COB) certificate is an important step for companies incorporated on or after 2nd November 2018 and having share capital, as it allows them to commence their business operations and exercise borrowing powers. Here are some important points to be considered while obtaining a COB certificate:

File Form INC-20A: To obtain the COB certificate, the company needs to file Form INC-20A with the Registrar of Companies (ROC) within 180 days of its incorporation. The form must be digitally signed by a director or the manager or the secretary of the company.
Verify the details in Form INC-20A: Before filing the Form INC-20A, it is important to verify the details provided in the form, such as the registered office address, details of subscribers, and directors, etc. Any errors or discrepancies in the form may result in the rejection of the COB application.
Pay the requisite fees: The company must pay the requisite fees for filing the Form INC-20A with the ROC. The fee varies based on the authorized share capital of the company.
Submit the required documents: Along with Form INC-20A, the company needs to submit certain documents such as the certificate of incorporation, Memorandum of Association (MOA), and Articles of Association (AOA).
Ensure compliance with other regulations: Before obtaining the COB certificate, the company must ensure compliance with other regulations, such as obtaining the necessary licenses and permits required to commence business operations.

Consequences of failing to file a certificate of business start-up –

• Penal Provision: section 11(2) provides that if a corporation fails to comply with the provisions of this section, the company is responsible to a penalty of up to fifty thousand rupees, and each officer who is in default is liable to a punishment of up to one thousand rupees for each day the failure persists (maximum Rs. 1,00,000).

• Removal of name from the register of companies: Under section 11(3), if no declaration is filed with the Registrar within 180 days of the company’s incorporation date and the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, the Registrar may, without prejudice to the provisions of section 11(2), initiate action to remove the company’s name from the register of companies under Chapter XVI.

• Within 180 days after its incorporation, a firm must file Form 20A, the form 20A is in STP mode, which means the eForm will be auto-approved (STP) and the Ministry of Corporate Affairs will not give a certificate.

Provision of Companies Act, 1956 –

A private company can begin doing business immediately after acquiring a certificate of establishment under the old Companies Act of 1956. Under section 149 of the Businesses Act 1956, private companies are not required to seek a certificate of commencement of business from the concerned registrar of companies.

Provision of Companies Act, 2013 –

The need of obtaining a certificate of incorporation was not included in the Companies Act of 2013, which was enacted in 2013. This has been hailed as a key component of the new Act, one that will make conducting business easier. However, the Statute now needs you to make a declaration regarding the start of your firm, which is a slightly different approach from the old act, which required you to seek a certificate from the registrar of companies.

What is Section 10a of the Companies Act? –

Section 10A of the Companies Act of 2013 was amended by the Companies (Amendment) Act 2019, which took effect on November 2, 2019. A new corporation must make a declaration in the prescribed form before it can begin doing business, according to Section 10A. With notification no. G.S.R. 1219(E) dated 18.12.2018, a new eule23A has been inserted into the Companies (Incorporation) Rules, 2014.

Section 10A states that a company with a share capital that is formed after the Companies Amendment Act, 2019 takes effect may not start a business or borrow money unless it is registered.

• A director files a declaration with the Registrar within 180 days of the company’s incorporation date, in such form and verified in such manner as may be prescribed, stating that each subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of such declaration, and the company has filed with the Registrar a verification of its registered office as provided in section 12 of the Act (2).

According to Rule 23A, a director’s declaration under section 10A must be in Form No.INC-20A and filed in accordance with the Companies (Registration Offices and Fees) Rules, 2014. In practice, a Company Secretary, a Chartered Accountant, or a Cost Accountant will verify the contents of the aforementioned document.

If a company is pursuing objectives that need registration or approval from sectoral authorities such as the Reserve Bank of India, the Securities and Exchange Board of India, or others, such registration or approval must be sought and attached to the declaration.

FAQ’s

What is commencement of business under Companies Act, 2013?
- As per section 11 of Companies Act, 2013, now all newly incorporated Public and Private Companies having Share Capital would be required to obtain a certificate of commencement of business from concerned Registrar of Companies before commencing the business or exercise of borrowing powers.
What is the date of commencement of Companies Act, 2013?
- The Companies Act, 2013 passed by the Parliament has received the assent of the President of India on 29th August, 2013.
What is the difference between incorporation and commencement of business?
- Formation of a company is a long and complicated process. The first step involved in forming the company is the incorporation of the company. After the incorporation of the company, there are other procedures that are to be followed by the company before it can commence its business.
What is commencement period?
- Commencement period means the period of days’ from the date of signing of Contract.
Do all companies need certificate of commencement of business?
- Howsoever, discussed below is what is a certificate of commencement of business. The certificate of commencement of business was a mandatory step under Companies Act, 2013. It was mandatory for public companies with share capital.
Who provides certificate of commencement of business?
- Under Rule 23-A Declaration at the time of commencement of business, the contents of the Form INC-20A must be verified by a Company Secretary or a Chartered Accountant or a Cost Accountant in practice; Provided that in the case of a company pursuing objects requiring registration or approval from any sectoral ..

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