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Private Limited

When Can a Private Limited Company Commence Business

7 Compliances For Private Limited Companies

9 April 2024

2,849 2 mins read

Section 2(68) of the Companies Act, 2013 defines a Private Company as a company. But when and how can a private limited company commence business? Let’s find out.

Did you know that the date of a company incorporation cannot be the same as the date of its first business transaction or business commencement, according to the Companies Act of 2013?

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In 2013, MCA introduced a new amendment to CA, 2013, by including section 10A, which requires companies incorporated on or after November 2, 2018, to file a declaration and verification.

When Can a Private Limited Company Commences Business?

A public or private limited company with share capital cannot commence doing business unless the Registrar of Companies issues a certificate of commencement of business (COB).

A new company must follow the relevant procedures to receive the certificate of commencement of business (COB) from the Registrar as soon as possible after its establishment because unless it does so it will be unable to conduct business or exercise its borrowing rights without it.

To that end, a private limited company can no longer start a business or borrow money unless it complies with Section 11 of the Companies Act, 2013.

A director must file a declaration within 180 days with the Registrar stating that each subscriber to the memorandum has paid the value of the shares agreed to be taken by him and that the company’s paid-up share capital is not less than five lakh rupees in the case of a public company and not less than one lakh rupees in the case of a private company on the date of this declaration.

Rule 23A of The Companies (Incorporation) Rules, 2014 requires that

The declaration shall be in Form No, lNC-20A and shall be filed as provided in the Companies (Registration Offices and Fees) Rules, 2014
A company secretary or a chartered accountant or a cost accountant in practice shall verify this form.
If a company is pursuing objectives that need registration or permission from authorities such as the Reserve Bank of India, the Securities and Exchange Board of India, or others, such registration or approval must be sought and attached to the declaration.

The company must have filed with the Registrar a verification of its registered office as proof as provided in sub-section (2) of section 12.

The company shall furnish to the Registrar verification of its registered office in Form No. INC.22 with the following attachments within 30 days of its incorporation:

(a) Registered document of the title of the premises of the registered office in the name of the company; or

(b) Notarized copy of the lease or rental agreement in the name of the company along with a copy of rent paid receipt not older than one month;

(c) Authorization from the owner or authorized occupant of the premises along with proof validating the use the premises by the company as its registered office; and

(d) Proof of any utility service like telephone, gas, electricity, etc. being rendered at the address of the premises in the name of the owner or document, as the case may be, which should not be older than two months.

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