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The Tax Publishers Procedure for Obtaining Certificate of Commencement of Business--Company with Share Capital having Issued Prospectus A. INTRODUCTORY NOTE A public limited company after obtaining certificate of incorporation is required to obtain a certificate to commence business. Unless, the company obtains certificate of commencement of business, it cannot commence its business or exercise borrowing powers. Such company might or might not have issued a prospectus. When a company has issued a prospectus, it has to follow a procedure to obtain certificate of commencement of business which procedure is somewhat different from one, which has not issued a prospectus. In this Chapter, the procedure in respect of a public limited company having share capital that has issued a prospectus is discussed. The procedure laid down in this Chapter is not applicable to the private companies or the companies registered before 1-4-1914, since such companies cannot invite the public to subscribe to their share capital. B. REQUIREMENT OF MINIMUM SUBSCRIPTION Ensure that the shares at least equal to the amount of minimum subscription have been allotted. [Section 149(1)(a)] C. PAYMENT OF SHARE MONEY BY THE DIRECTORS Ensure that the directors have paid the application and allotment money on shares taken or undertaken to take them in cash to the extent of such moneys as are payable by the public. [Section 149(1)(b)] D. OBTAINING PERMISSION FROM A RECOGNIZED STOCK EXCHANGE FOR LISTING Obtain necessary permission from the stock exchange for listing of the shares and debentures of the company so that money of applicants for shares and debentures does not become refundable on account of non-listing. [Section 149(1)(c)] E. BOARD RESOLUTION Pass a Board Resolution for the following purpose : (i) To obtain certificate of commencement of business. (ii) To file a declaration in the e-Form 19. F. TIME LIMIT FOR OBTAINING CERTIFICATE OF COMMENCEMENT OF BUSINESS No time limit has been prescribed in the Act for the purpose of filing documents for obtaining certificate of commencement of business. However, if the company fails to obtain certificate of commencement of business within one year from the date of its incorporation, it is liable to be would up under section 433(c) by an order of the company court. G. ELECTRONIC FILING OF e-FORM 19 WITH RoC 1. Filing of e-Form 19 A declaration in e-Form 19 should be filed with RoC through MCA portal; www.mca.gov.in. 2. Stamp Duty The declaration in e-Form 19 should be duly stamped in accordance with the stamp duty prevailing in the State in which registered office of the company is situated. 3. Attachment The following documents should be filed with e-form 19 : (i) The Board Resolution authorising the company to obtain certificate of commencement of business. (ii) The agreements, if any, which the company proposes to enter into with any individual or firms/companies for business transactions. (iii) Power of attorney, if any. 4. How to attach documents ? Note that the documents are to be attached in PDF format. A physical document can be converted into an electronic document through scanning. A soft copy may also be converted into PDF format and used as an attachment. 5. Who can file ? A person duly authorised by the Board of directors such as a managing director, director, manager and secretary of the company. 6. Digital Signatures e-Form 19 should be digitally signed by an authorised person who name is incorporated in the Articles of Association as managing director, director, manager or secretary of the company. 7. Filing Fee Filing fee is to be paid in accordance with the authorised capital of the company, as per Schedule X of the Companies Act, 1956. H. MODE OF PAYMENT 1. The fee can be paid through one of the specified modes, viz., remittance in authorised banks, credit cards or through internet banking. In case of online payment, filing process shall be complete immediately. 2. When payment is tendered through authorised bank (Punjab National Bank, State Bank of India, Indian Bank, ICICI Bank and HDFC Bank), a pre-filled challan (GAR-7) containing SRN, date of challan, expiry date, name and designation of user by whom challan is tendered, name and address of the company, particulars of remittance, total amount and head of account shall be generated by the system. The challan should be used for making payment before the date of expiry mentioned therein and the transaction shall be completed by the concerned banks. I. EFFECT OF NON-PAYMENT BEFORE DUE DATE Note if payment is not made by the date mentioned on the challan, the submission of form shall be treated as incomplete and message through e-mail will be received that form cannot be regarded as filed due to non-payment. Status of application and payment can be verified through MCA portal. J. PHYSICAL SUBMISSION OF STAMPED DOCUMENTS Immediately after filing e-Form 19 and the Board Resolution on MCA portal, the original and duly stamped and digitally signed e-Form 19 alongwith original copy of the Board resolution (supra) should be physically submitted to the RoC with a forwarding letter quoting the Service Request Number (SRN) of e-Form 19 filed electronically. K. SCRUTINY OF DOCUMENTS BY RoC The RoC on receipt of fee alongwith documents and e-Form 19, will scrutinise the form and resolution to satisfy himself about the proper compliance of all the requirements pertaining to the issuance of certificate of commencement of business. If the documents are not in order or not in conformity with the legal requirements as per Companies Act, 1956, the RoC may send the same back to the company for corrections, etc. The company in turn would authorise one of its officer to comply with the requirements as directed by the RoC. L. ISSUE OF CERTIFICATE OF COMMENCEMENT OF BUSINESS On being satisfied that the company has fulfilled all the relevant requirements pertaining to the issuance of certificate of commencement of business, shall issue a certificate to entitle the applicant company to commence business. M. EFFECT OF OBTAINING CERTIFICATE OF COMMENCEMENT OF BUSINESS The effect of obtaining the certificate of commencement of business is that all the contracts, if any, entered by the company provisionally with any person, firms, companies shall automatically be treated as regular and valid and binding on the company, only with effect from the date of certificate of commencement of business. However, the company is already authorised to simultaneous offer the shares to the subscribers of any shares or debentures or receipt of any money payable for allotment of shares/debentures. N. LIABILITIES INCURRED BEFORE COMMENCEMENT No company, before obtaining the certificate of business from the RoC is authorised to enter into any contract with any body. In case, it does so, the shareholders cannot be compelled to contribute to the assets of the company in case of winding up of the company.--Vide In re, Merchants Ltd. (1932) 2 Comp Cas 407 (Lahore) and In re, Ambika Textile Ltd. (1950) 20 Comp Cas 160 (Cal). O. LIABILITY TOWARDS CONTRACTS ENTERED BEFORE OBTAINING CERTIFICATE OF COMMENCEMENT OF BUSINESS A contract made before obtaining the certificate of commencement of business are not valid until ratified by obtaining certificate of business. In the event, a company fails to obtain certificate of commencement of business, all the officers, who were responsible for contravention of the provision of the Act shall be liable to be punishable with a fine, which may extend to five thousand rupees for every day during which such contravention continues. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers Procedure for Obtaining Certificate of Commencement of Business--Company with Share Capital having Issued Prospectus
A. INTRODUCTORY NOTE

A public limited company after obtaining certificate of incorporation is required to obtain a certificate to commence business. Unless, the company obtains certificate of commencement of business, it cannot commence its business or exercise borrowing powers. Such company might or might not have issued a prospectus. When a company has issued a prospectus, it has to follow a procedure to obtain certificate of commencement of business which procedure is somewhat different from one, which has not issued a prospectus. In this Chapter, the procedure in respect of a public limited company having share capital that has issued a prospectus is discussed. The procedure laid down in this Chapter is not applicable to the private companies or the companies registered before 1-4-1914, since such companies cannot invite the public to subscribe to their share capital.

B. REQUIREMENT OF MINIMUM SUBSCRIPTION

Ensure that the shares at least equal to the amount of minimum subscription have been allotted. [Section 149(1)(a)]

C. PAYMENT OF SHARE MONEY BY THE DIRECTORS

Ensure that the directors have paid the application and allotment money on shares taken or undertaken to take them in cash to the extent of such moneys as are payable by the public. [Section 149(1)(b)]

D. OBTAINING PERMISSION FROM A RECOGNIZED STOCK EXCHANGE FOR LISTING

Obtain necessary permission from the stock exchange for listing of the shares and debentures of the company so that money of applicants for shares and debentures does not become refundable on account of non-listing. [Section 149(1)(c)]

E. BOARD RESOLUTION

Pass a Board Resolution for the following purpose :

(i) To obtain certificate of commencement of business.

(ii) To file a declaration in the e-Form 19.

F. TIME LIMIT FOR OBTAINING CERTIFICATE OF COMMENCEMENT OF BUSINESS

No time limit has been prescribed in the Act for the purpose of filing documents for obtaining certificate of commencement of business. However, if the company fails to obtain certificate of commencement of business within one year from the date of its incorporation, it is liable to be would up under section 433(c) by an order of the company court.

G. ELECTRONIC FILING OF e-FORM 19 WITH RoC
1. Filing of e-Form 19

A declaration in e-Form 19 should be filed with RoC through MCA portal; www.mca.gov.in.

2. Stamp Duty

The declaration in e-Form 19 should be duly stamped in accordance with the stamp duty prevailing in the State in which registered office of the company is situated.

3. Attachment

The following documents should be filed with e-form 19 :

(i) The Board Resolution authorising the company to obtain certificate of commencement of business.

(ii) The agreements, if any, which the company proposes to enter into with any individual or firms/companies for business transactions.

(iii) Power of attorney, if any.

4. How to attach documents ?

Note that the documents are to be attached in PDF format. A physical document can be converted into an electronic document through scanning. A soft copy may also be converted into PDF format and used as an attachment.

5. Who can file ?

A person duly authorised by the Board of directors such as a managing director, director, manager and secretary of the company.

6. Digital Signatures

e-Form 19 should be digitally signed by an authorised person who name is incorporated in the Articles of Association as managing director, director, manager or secretary of the company.

7. Filing Fee

Filing fee is to be paid in accordance with the authorised capital of the company, as per Schedule X of the Companies Act, 1956.

H. MODE OF PAYMENT

1. The fee can be paid through one of the specified modes, viz., remittance in authorised banks, credit cards or through internet banking. In case of online payment, filing process shall be complete immediately.

2. When payment is tendered through authorised bank (Punjab National Bank, State Bank of India, Indian Bank, ICICI Bank and HDFC Bank), a pre-filled challan (GAR-7) containing SRN, date of challan, expiry date, name and designation of user by whom challan is tendered, name and address of the company, particulars of remittance, total amount and head of account shall be generated by the system. The challan should be used for making payment before the date of expiry mentioned therein and the transaction shall be completed by the concerned banks.

I. EFFECT OF NON-PAYMENT BEFORE DUE DATE

Note if payment is not made by the date mentioned on the challan, the submission of form shall be treated as incomplete and message through e-mail will be received that form cannot be regarded as filed due to non-payment. Status of application and payment can be verified through MCA portal.

J. PHYSICAL SUBMISSION OF STAMPED DOCUMENTS

Immediately after filing e-Form 19 and the Board Resolution on MCA portal, the original and duly stamped and digitally signed e-Form 19 alongwith original copy of the Board resolution (supra) should be physically submitted to the RoC with a forwarding letter quoting the Service Request Number (SRN) of e-Form 19 filed electronically.

K. SCRUTINY OF DOCUMENTS BY RoC

The RoC on receipt of fee alongwith documents and e-Form 19, will scrutinise the form and resolution to satisfy himself about the proper compliance of all the requirements pertaining to the issuance of certificate of commencement of business.

If the documents are not in order or not in conformity with the legal requirements as per Companies Act, 1956, the RoC may send the same back to the company for corrections, etc. The company in turn would authorise one of its officer to comply with the requirements as directed by the RoC.

L. ISSUE OF CERTIFICATE OF COMMENCEMENT OF BUSINESS

On being satisfied that the company has fulfilled all the relevant requirements pertaining to the issuance of certificate of commencement of business, shall issue a certificate to entitle the applicant company to commence business.

M. EFFECT OF OBTAINING CERTIFICATE OF COMMENCEMENT OF BUSINESS

The effect of obtaining the certificate of commencement of business is that all the contracts, if any, entered by the company provisionally with any person, firms, companies shall automatically be treated as regular and valid and binding on the company, only with effect from the date of certificate of commencement of business. However, the company is already authorised to simultaneous offer the shares to the subscribers of any shares or debentures or receipt of any money payable for allotment of shares/debentures.

N. LIABILITIES INCURRED BEFORE COMMENCEMENT

No company, before obtaining the certificate of business from the RoC is authorised to enter into any contract with any body. In case, it does so, the shareholders cannot be compelled to contribute to the assets of the company in case of winding up of the company.--Vide In re, Merchants Ltd. (1932) 2 Comp Cas 407 (Lahore) and In re, Ambika Textile Ltd. (1950) 20 Comp Cas 160 (Cal).

O. LIABILITY TOWARDS CONTRACTS ENTERED BEFORE OBTAINING CERTIFICATE OF COMMENCEMENT OF BUSINESS

A contract made before obtaining the certificate of commencement of business are not valid until ratified by obtaining certificate of business. In the event, a company fails to obtain certificate of commencement of business, all the officers, who were responsible for contravention of the provision of the Act shall be liable to be punishable with a fine, which may extend to five thousand rupees for every day during which such contravention continues.