The Ministry of Corporate Affairs has re-introduced the concept of commencement of business certificate. Under the newly introduced The Companies (Amendment) Ordinance 2018, all companies registered in India after the commencement of the Companies (Amendment) Ordinance, 2018 and having a share capital is required to obtain commencement of business certificate before commencing any business or exercising any borrowing powers. Since The Companies (Amendment) Ordinance 2018 was introduced in November 2nd 2018, any company incorporated after November 2018 would be required to obtain Commencement of Business Certificate.
Time Limit for Obtaining Commencement of Business Certificate
The commencement of business certificate must be obtained within 180 days of incorporation of the company. While filing the application for commencement, each of the Directors of the company must declare that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him/her on the date of the making of such declaration.
Penalty for Not Obtaining Commencement of Business Certificate
The penalty for non-compliance is very high as under:
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.
Also, 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).