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Certificate of commencement of business

Nihit Dalmia (CA) (140 Points)

15 June 2011

hi.

i have incorporated a limited co. today certificate of incorporation is obtained. now i want to know the process for obtaining the certificate of commencement of business and the minimum time required to obtain it.

pls reply as soon as possible its urgent.

regards

nihit dalmia

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Pravin Gupta CS (trainee) (789 Points)
Replied 15 June 2011

Originally posted by : nihit dalmia
	hi. i have incorporated a limited co. today certificate of incorporation is obtained. now i want to know the process for obtaining the certificate of commencement of business and the minimum time required to obtain it. pls reply as soon as possible its urgent. regards nihit dalmia

A public limited company having share capital cannot commence business until it has obtained the certificate to commence business (COB) from the concerned Registrar of Companies.

Normally a new company will comply with the required formalities and obtain the commencement of business certificate (COB) from the Registrar as soon as possible after formation because it cannot commence any business activities or exercise its borrowing powerswithout it.

Action required on the part of the company to obtain commencement of business certificate (Refer Section 149)

1. Where A Company Not Issues Prospectus For Public Subscripttion

For obtaining a certificate to commence business, the following actions are required to be taken:—

(i) the company shall file with the Registrar a statement in lieu of prospectus (SLP) (signed by every director) electronically at the MCA portal in the form given in Schedule III to Act together with the E-Form 62 and shall pay the prescribed fee by online or offline as per Schedule X of the Companies Act, 1956.

(ii) the directors should pay the value of the shares to the extent money is payable in cash with application/allotment;

(iii) a duly certified declaration shall be filed electronically at the MCA portal in the E-Form 20 and a stamped copy shall be simultaneously filed with the Registrar signed by a director/secretary
or by secretary in practice where there is no secretary, to the effect that the requirements of section 149(2) have been complied with.

(iv) the company shall not allot any share or debenture at least for three days after filing of statement in lieu of prospectus with the Registrar. [Section 70(1)];

(v) the company shall pay the prescribed filing fee by online or offline under Schedule X on SLP and on e-Form 20 to the Registrar of Companies.

The Registrar of Companies shall then issue the requisite certificate of commencement of business.

Note: It was decided in the case of Malabar Iron & Steel Works Ltd. V Registrar of Companies (1963) that COB cannot be issued if the company has not complied with the provisions of section 149(1), even though it has issued a SLP u/s 70.

2. Where A Company Issues Prospectus For Public Subscripttion

Where a company issues a prospectus immediately after its formation, it need not file a statement in lieu of prospectus. The following points have to be ensured in this connection:—

(i) shares arranging the amount at least equal to the amount of minimum subscripttion under section 69 have been allotted. [Section 149(1)(a)]

(ii) every director has paid to the company, in respect of shares taken or contracted to be taken by them subject to payment in cash, a sum equal to at least the amount payable on application and allotment on the shares offered to public for subscripttion. [Section 149(1)(b)];

(iii) application has to be made to the recognised stock exchange for obtaining permission for dealing in shares/debentures;

(iv) filing of following documents electronically with the ROC is necessary:–

(a) prospectus;

(b) E-Form 19 duly certified by a director/secretary or by secretary in whole time practice where there is no secretary declaring that all the conditions as stated in (i) to (iii), above have been duly fulfilled and stamped copy shall be physically delivered simultaneously to the Registrar.

(v) payment of prescribed filing fee under Schedule X on prospectus and E-Form 19 by online or off line system.

The Registrar of Companies shall thereupon issue the requisite certificate of commencement of business.

Certificate to commence business is conclusive evidence

The Registrar, on perusal of the declaration in e-Form 19 or 20 and the statement in lieu of prospectus, as may be applicable, shall certify that the company is entitled to commence business and to exercise borrowing powers. The certificate shall be the conclusive evidence that the company is entitled to commence its business. [ Refer Section 149(6)].

Pravin Gupta

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Rajnikant Vadigoppula (CA, CS And CMA Final) (919 Points)
Replied 15 June 2011

certificate of commence is required only to public company.

it is issued when minimum subscripttion is completed.

minimum subscripttion is subscripttion of 90% issued share capital by public within 60 days of issue.

Nihit Dalmia (CA) (140 Points)
Replied 16 June 2011

thanks

my company will not issue prospectus for public subscripttion.

now my question is whether form 62 is mandatory to file & if filed then the minimum time limit to file form 20 after filling form 62.

pls reply

regards

nihit dalmia

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17848 Points)
Replied 16 June 2011

1. Requirement for obtaining commencement of business certificate

A public limited company having share capital cannot commence business until it has obtained the certificate to commence business from the Registrar of Companies. Normally, when a public company is incorporated, it may take sometime before it decides to make a public offer and issue a prospectus. However, a new company will comply with the required formalities and obtain the commencement of business certificate from the Registrar as soon as possible after formation because it cannot commence any business activities or exercise its borrowing powers without it.

COMMENCEMENT OF BUSINESS

(I) In case of Statement in Lieu of Prospectus.

For obtaining a certificate to commence business, the following actions are required to be taken:—

(i) the company shall file with the Registrar a statement in lieu of prospectus electronically in the form given in Schedule III to Act together with the e-Form 62.

This will be signed by every director of the company. [See sections 70,

149(2)(b)]

(ii) the directors should pay the value of the shares to the extent money is payable in cash with application/allotment;

(iii) a duly signed declaration shall be filed in the e-Form 20 and an original duly filled in and signed stamped copy shall be simultaneously filed with the Registrar signed by a director/secretary or by secretary in practice where there is no secretary, to the effect that the requirements of section 149(2) have been complied with, failing which the filing

will not be considered;

(iv) the company shall not allot any share or debenture at least for three days after filing of statement in lieu of prospectus with the Registrar. [Section 70(1)];

The Registrar of Companies shall then issue the requisite certificate of commencement of business.

A certificate of commencement of business cannot be issued if the company has not complied with the provisions of section 149(1), even though it has issued a statement in lieu of prospectus under section 70.

[Malabar Iron & Steel Works Ltd. v Registrar of Companies (1963) 33 Comp Cas 813 (Ker)]

Bhagyashri (CS FINAL ) (48 Points)
Replied 11 July 2012

Querry About SLP-

For obtaining a certificate to commence business, the following actions are required to be taken:—

(i) the company shall file with the Registrar a statement in lieu of prospectus electronically in the form given in Schedule III to Act together with the e-Form 62.

MY QUESTION IS THAT WHETHER THERE IS ANY TIMELIMIT SPECIFIED WITHIN WHICH A LIMITED COMPANY SHOULD FILE SLP WITH E-FORM 62 AFTER GETTING CERTIFICATE OF INCORPORATION?