Commencement of Business Certificate (COB)

Running a business is not for the faint of heart. To ensure a smooth start for your business, it is crucial that you understand all the documents that the government requires from your company.

The Commencement of Business Certificate is one such essential document allowing companies to operate their businesses legally.

This article explains the application process and fees required to obtain a certificate of Commencement of Business.

What is the Commencement of Business Certificate?

A Commencement of Business Certificate (COB) is a mandatory declaration that confirms that a company is legally permitted to commence business operations. It highlights your company’s adherence to legal regulations and allows you to start business activities and secure funds.

The declaration must be made within 180 days of incorporation of the company to avoid penalties and legal consequences.

Form INC 20A

Form INC 20A is the declaration form that must be filed to obtain a certificate to commence business. It ensures that your company meets all statutory requirements, which is essential to maintaining its legal status and avoiding penalties. 

Timely and accurate filing of Form INC 20A ensures a smooth start for your company.

Eligibility for Commencement of Business Certificate

According to the Companies Act of 2013, it is mandatory for the following companies to obtain a commencement certificate of company before commencing business operations:

1. Public and private companies incorporated after November 2nd, 2018
2. All companies operating with a share capital framework

Companies that do not meet the criteria above are not required to file Form 20A.

Documents Required for a Commencement of Business Certificate

The following documents are required to obtain a certificate of business commencement:

1. Digital Signature Certificate (DSC)
2. Registered Company’s Proof of Address
3. Company Bank Statement as evidence of payments done by shareholders or subscribers
4. (If applicable) Registration Certificate issued by RBI
5. Consent Letter or Confirmation Letter from all directors of the company
6. Details of the board resolution of the company

Application Process for Commencement of Business Certificate

You must fill out Form INC 20A in order to apply for a certificate of commencement of business for a private limited company.

The application process is as follows:

1. Log in to the official Ministry of Corporate Affairs (MCA) website.
2. Go to “MCA services” and choose the “E-filing” option, then select “Company Forms Download”.
3. Find the form titled Form No. INC-20A.
4. Enter the required information regarding your company. Optionally, select CIN from the drop-down menu and complete the form.
5. Submit the form. After submission, a serial request number (SRN) will be generated, which can used for correspondence with the MCA.
6. Attach the Digital Signature Certificate form on the MCA website.
7. Pay the required fees through the portal.

Once verification is complete, you will receive an acknowledgment email.

Fee Structure for Companies with Nominal Share Capital

The fee payable by your company will be based on its nominal share capital:

Additional fees will be required if the form is not filed within 180 days. The additional fees will depend on the duration of the delay:

Consequences for Non-compliance in Filing Form INC 20A

It is essential for your company to submit the required form within the stipulated time, as non-compliance may have severe consequences for your business.

These consequences can include:

1. Penalties imposed on the company: If your company fails to acquire a Commencement of Business Certificate within 180 days of incorporation, the company can face a penalty of ₹50,000.
2. Penalty imposed on the directors: Directors of the defaulting company can face individual penalties of ₹1,000 per day of default, up to a maximum penalty of ₹1 Lakh.
3. Striking off of the company: Your company’s name may be removed from the Registrar of Companies if there are reasonable grounds to believe that the company is not engaged in business operations even after 180 days from the date of incorporation.

Wrapping up

Obtaining a Commencement of Business Certificate is essential for ensuring a smooth start for your company. It not only helps you avoid various penalties but also helps build trust with shareholders.

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