MCA has vide its Companies (Amendment) Ordinance 2018 inserted a new section 10A after the existing section 10 wherein companies incorporated after this Ordinance has come into force i.e. from 2nd November, 2018 are required to file a certificate of commencement of business before it commences business or exercises borrowing powers. Which means that unless this certificate of commencement of business is filed with the ROC, it cannot start issuing invoices and receiving moneys.
The declaration has to be filed by a Director of the company within a period of 180 days from the date of incorporation to the effect that the subscribers to the memorandum have paid in their subscription monies. The declaration will also include a verification about the registered office of the company. I guess the form of verification of the registered office i.e. form INC-22 will be modified to that extent.
Which means that the company can open a bank account and the bank account can be used only for accepting the subscription monies from the subscribers to the memorandum, but no other receipts can be made into that account unless the certificate of commencement of business has been filed. This is an onerous requirement which ensures that only genuine people start companies with an intention of doing business. We have seen many shell companies being incorporated with no business in it for years and years.
This requirement of certificate of commencement of business was there when the Companies Act, 2013 was promulgated in 2013 but subsequently removed by the MCA under the banner of "ease of doing business". Wonder what prompted the Ministry to bring this draconian requirement back into the statute books.
The penalty for non compliance with this section is huge. Rs.50,000 for the company and Rs.1000 per day for every officer in default. Max amount of penalty Rs.100,000/-
Where no declaration has been filed the ROC has now powers to strike off the name of the company from its records.
The declaration has to be filed by a Director of the company within a period of 180 days from the date of incorporation to the effect that the subscribers to the memorandum have paid in their subscription monies. The declaration will also include a verification about the registered office of the company. I guess the form of verification of the registered office i.e. form INC-22 will be modified to that extent.
Which means that the company can open a bank account and the bank account can be used only for accepting the subscription monies from the subscribers to the memorandum, but no other receipts can be made into that account unless the certificate of commencement of business has been filed. This is an onerous requirement which ensures that only genuine people start companies with an intention of doing business. We have seen many shell companies being incorporated with no business in it for years and years.
This requirement of certificate of commencement of business was there when the Companies Act, 2013 was promulgated in 2013 but subsequently removed by the MCA under the banner of "ease of doing business". Wonder what prompted the Ministry to bring this draconian requirement back into the statute books.
The penalty for non compliance with this section is huge. Rs.50,000 for the company and Rs.1000 per day for every officer in default. Max amount of penalty Rs.100,000/-
Where no declaration has been filed the ROC has now powers to strike off the name of the company from its records.
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