What is certificate of commencement of business?

In an ordinance in 2018, the government decided to re-introduce the requirement of certificate of commencement of business. Now you must be wondering what is certificate of commencement of business? If that is the case, perhaps I can answer your question. According to the The Companies (Amendment) Ordinance 2018, all the companies registered in India after the said ordinance with a share capital must obtain the certificate of business commencement. This will allow such companies to exercise commencement of business and borrowing powers.

Now that you know what is commencement of business certificate, let us take a look at the time frame under which it should be obtained as per the law. 

The law suggests that commencement of business certificate should be obtained within 180 days of commencement or incorporation of the company. While applying for this certificate, the directors of the company must declare that every subscriber to the memorandum has duly paid the value of shares agreed to be taken by them.

The government has also decided on the penalties. These are:

• The payment of penalty for not obtaining commencement certificate of business within 180 days is Rs. 50000

• Each defaulted director will pay the penalty of Rs. 1000 for each day of default for up to Rs. 1 lakh

• The registrar has the right to strike off company after 180 days if he finds it valid

I hope now you have clarity on what is certificate of commencement of business.