By the introduction of Section10A, by Companies Amendment Ordinance 2018 with effect from 2nd November 2018 in the Companies Act 2013, obtaining of Certificate of Commencement of Business has been made mandatory for all companies in order to commence business activities. Before the introduction of this requirement, the government observed that the in most of the cases, members of the Company fails to transfer the subscription money in the Company Bank account which will be observed by them at a later stage and sometimes fails to transfer the same.

Section 10A (1)(a) states that a company with share capital incorporated after the introduction of the ordinance shall not commence any business or exercise any borrowing powers unless

  1. A declaration is filed by a director, in the prescribed format within 180 days of date of incorporation of the company with the Registrar of Companies, to the effect that every subscriber to the memorandum of the company has paid the value of the shares agreed to be taken by him and the paid-up share capital of the company on the date of making of this declaration’;
  2. and the company has field verification of its registered office, with the ROC

Steps to be followed after incorporation

  1. Open a bank account in the name of the company
  2. Deposit subscription money in the bank account
  3. File form INC 22 for verification of registered office within 30 days of incorporation
  4. File form INC-20A not later than 180 days of Incorporation of Company

Consequences of non-compliance

For directors

Every officer who is in default shall be liable to a penalty of Rs. 1000 per day during which such default continues but not exceeding an amount of one lakh rupees.

For the company

  1. A penalty of Rs. 50,000 and
  2. Where no declaration has been filed with the ROC within the prescribed time, the ROC initiate action for the removal of the name of the company (strike off) from the register of companies.

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