Starting a new business involves various legal requirements, one of which is obtaining a Certificate of Commencement of Business. This document is crucial for companies to begin operations legally. In this guide, we will cover everything you need to know about the commencement of business process, its importance, and how to obtain this certificate.

What is a Certificate of Commencement of Business?

A Certificate of Commencement of Business is a mandatory document that certain companies must obtain before they can begin their business activities. It is issued by the Registrar of Companies (ROC) under the Companies Act, 2013. This certificate serves as proof that a company has met the initial regulatory requirements and is legally allowed to start business operations.

Who Needs a Certificate of Commencement of Business?

According to the Companies Act, 2013, the following entities are required to obtain this certificate:

• Public limited companies with share capital
• Private limited companies incorporated after November 2018

Companies that fail to obtain this certificate within the stipulated time may face penalties and restrictions on their operations.

Importance of the Certificate of Commencement of Business

Obtaining this certificate is essential for several reasons:

1. Legal Compliance – It ensures that the company adheres to government regulations.
2. Bank Account Activation – Some banks require this certificate to activate the company’s current account.
3. Avoiding Penalties – Failure to obtain the certificate may lead to fines and other legal consequences.
4. Credibility – It enhances the company's credibility in the market.

Steps to Obtain a Certificate of Commencement of Business

To acquire this certificate, companies must follow these steps:

1. File Form INC-20A

Companies need to submit Form INC-20A to the Registrar of Companies (ROC) within 180 days of incorporation. This form must include the following details:

• Company’s incorporation details
• Bank account statement showing paid-up share capital
• Declaration by a director confirming compliance

2. Payment of Government Fees

A nominal government fee must be paid while submitting Form INC-20A. The amount varies based on the company’s authorized share capital.

3. Verification and Approval

The ROC will review the application and supporting documents. If everything is in order, the certificate will be issued.

Consequences of Not Obtaining the Certificate

If a company fails to obtain the Certificate of Commencement of Business, it may face the following consequences:

• A penalty of INR 50,000 for the company
• A fine of INR 1,000 per day for directors (up to INR 1 lakh)
• The company may be struck off by the ROC

Conclusion

A Certificate of Commencement of Business is a crucial legal requirement for newly incorporated companies in India. It ensures compliance with corporate laws and allows businesses to operate without legal hurdles. Companies must apply for this certificate within the specified timeframe to avoid penalties and maintain their credibility.

If you are planning to start a business, ensure that you complete the commencement of business formalities and obtain this certificate at the earliest.