A Certificate of Commencement of Business (CoB) is a mandatory document for certain companies in India, signifying their readiness to commence operations legally. This certificate is particularly crucial for companies incorporated after November 2, 2018 that have a share capital structure.

The CoB is an official declaration filed with the Registrar of Companies (RoC) confirming that:

• All subscribers to the company's Memorandum of Association have paid the agreed-upon value of shares.
• The company's registered office address has been verified.

This declaration must be submitted within 180 days of incorporation using Form 20A, which requires verification by a Chartered Accountant (CA), Company Secretary (CS), or Cost Accountant in practice.

Applicability:

The CoB is compulsory for:

• Private Limited Companies
• Public Limited Companies
• Section 8 Companies (with share capital)

These companies must obtain the CoB before initiating any business activities or borrowing funds.

Companies which are not required to file Form 20A

The following companies are not required to file form 20A:

Companies incorporated before 2 November 2018 ( i.e before the commencement of the Companies ( Amendment) Ordinance, 2018).Companies incorporated after 2nd November 2018 without share capital.

• Companies incorporated before 2 November 2018 ( i.e before the commencement of the Companies ( Amendment) Ordinance, 2018).
• Companies incorporated after 2nd November 2018 without share capital.

Importance of the CoB:

• Legal Requirement and Compliance:

Under the Companies Act, 2013, specifically Section 10A, companies incorporated after November 2, 2018, and having share capital are mandated to obtain the CoB within 180 days of incorporation. This requirement ensures that companies do not commence operations prematurely and have fulfilled all statutory obligations

• Operational Legitimacy:

The CoB signifies that a company is legally authorized to commence business activities. Without this certificate, a company cannot initiate operations or exercise borrowing powers, as it lacks the formal approval from the Registrar of Companies (RoC).

• Access to Financial Resources:

Financial institutions require the CoB as a prerequisite for processing business loans or credit facilities. Possessing this certificate demonstrates the company's commitment to regulatory adherence, enhancing its credibility and facilitating smoother loan approval processes.

• Enhancing Business Credibility:

The CoB enhances a company's reputation by demonstrating compliance with legal and regulatory requirements. This credibility is crucial for attracting investment, forming partnerships, and establishing a strong market presence.

Timeline and Filing Requirements:

• Deadline: The CoB must be filed within 180 days of incorporation.
• Form: Form 20A must be submitted to the RoC.
• Verification: The form must be verified by a CA, CS, or Cost Accountant.
• Supporting Documents:
  • Bank statement evidencing receipt of subscription money.
  • Proof of registered office address.

Failure to comply with these requirements can result in penalties and legal consequences.

Consequences of Non-Compliance:

Failure to obtain the CoB within the stipulated 180-day period can result in:

• Company: Fixed penalty of ₹50,000
• Director: Penalty of ₹1,000 per day for each defaulting director, up to a max of ₹1,00,000
• In addition Strike-off action by the RoC if the company is not conducting business operations.

In short, the Certificate of Commencement of Business is not merely a procedural formality but a critical document that ensures a company's legal standing, operational readiness, and credibility in the business ecosystem. Timely acquisition of this certificate is essential for the smooth and lawful commencement of business activities.