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Certificate of Commencement of Business (COB): Complete Guide

Certificate of Commencement of Business (COB): Complete Guide

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: Declaration for Business Commencement

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.

Difference Between Certificate of Incorporation and Certificate of Commencement of Business

The Certificate of Incorporation confirms the legal formation of a company, giving it a unique identity and registration number. It signifies that the company is recognised under law and can exist as a separate legal entity. Incorporation marks the official beginning of the company’s existence, but it does not allow the company to start commercial operations immediately.

The Certificate of Commencement of Business is issued to companies limited by shares and confirms that the company has commenced business, thereby enabling it to legally begin operations. Obtaining this certificate requires submitting the required documents, including a declaration of compliance and proof of minimum share capital. Without it, the company cannot engage in any business activities, even if it is incorporated.

Eligibility Criteria for Certificate of Commencement of Business

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.

Also,read: –  What is a Business Loan? 


Which Companies Are Exempt from Filing for a Certificate of Commencement of Business?

Here are the companies that do not need to file for a Certificate of Commencement of Business:

  • Companies Incorporated Before 2 November 2018 do not need to obtain the certificate because the requirement was introduced after that date.
  • Companies Registered After 2 November 2018 Without Share Capital are exempt as they do not have the paid-up capital requirement tied to business commenced meaning obligations. 
  • Non-profit Entities Without Share Capital such as Section 8 companies (limited by guarantee) also need not file for the certificate as they lack share capital.

Documents Required for Certificate of Commencement of Business

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 Certificate of Commencement of Business

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

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

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


Also,read: – what is a Business acquisition loans 

Fee Structure for Filing Certificate of Business Commencement

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

Nominal share capital of the companyFee
Less than 1,00,000₹200
1,00,000 to 4,99,999₹300
5,00,000 to 24,99,999₹400
25,00,000 to 99,99,999₹500
1,00,00,000 or more₹600

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:

Delay periodAdditional fee
Up to 30 days2 times of regular fees
More than 30 days but less than 60 days4 times of regular fees
More than 60 days but less than 90 days6 times of regular fees
More than 90 days but less than 180 days10 times of regular fees
More than 180 days12 times of regular fees

Consequences of Non-Compliance with Form INC 20A Filing

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.
  1. 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.
  1. 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.

Common Mistakes to Avoid When Applying for a Commencement of Business Certificate

Here are common mistakes to avoid when applying for a Certificate of Commencement of Business:

  • Deadline Oversight: Missing or late filing of forms can delay approval and prevent legal operations.
  • Documentation Errors: Incomplete or incorrect documentation including board resolutions or proof of paid-up capital often leads to rejection.
  • Capital Verification Lapses: Not verifying paid-up share capital before filing can halt the commencement of business process.
  • Director Data Mistakes: Errors in director details or form data cause unnecessary resubmissions and delays.
  • Professional Review Skipped: Skipping professional review increases the risk of mistakes and slows approval.

Conclusion

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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FAQs

How to get a certificate of business?

To get a certificate of business, you must obtain a Digital Signature Certificate (DSC) and apply for a Director Identification Number (DIN) from the Ministry of Corporate Affairs (MCA). Use your DSC and DIN to register as a new user on the MCA portal and submit the required forms, documents, and fees. Lastly, obtain a Certificate of Incorporation and establish your company legally.

What is a business proof certificate?

A business proof certificate is a legal document that legally establishes an organisation's identity and existence. It serves as proof that the company is registered with the Registrar of Companies (RoC).

How to apply for business proof?

To obtain business proof, you must apply and submit the required documents to the relevant government office or website based on the type and jurisdiction of your business. These documents include identification proof, business address, and the company's structure details. Once the authorities verify these documents, the government will issue the business proof certificate.

What is a Certificate of Commencement of Business (COB) and why is it required?

A Certificate of Commencement of Business confirms that a company is legally formed, allowing it to start commercial operations and conduct business activities officially.

Is the Certificate of Commencement of Business mandatory for all companies in India?

It is mandatory only for companies limited by shares. Other entities, such as Section 8 companies or companies without share capital, are exempt from filing.

What is the due date for filing Form INC 20A after company incorporation?

Form INC 20A must be submitted within 180 days from the date of incorporation to obtain the certificate and legally begin company operations.

How can I download my Certificate of Commencement of Business online?

The certificate can be downloaded from the Ministry of Corporate Affairs portal by logging in with the company’s registration number and necessary credentials.

What penalties apply if a company fails to obtain a Certificate of Commencement of Business?

Failure to obtain the certificate may result in fines, legal issues, and restrictions on entering contracts or carrying out any business activities.

What is the difference between a Certificate of Incorporation and a Certificate of Commencement of Business?

A Certificate of Incorporation confirms legal existence, while commencement of business authorises the company to start commercial operations and conduct official business activities.

What does 'COB' stand for in corporate terminology?

COB stands for Certificate of Commencement of Business, which officially allows a company to start operations and carry out its business activities legally.

What does 'COB' stand for in corporate terminology?

COB stands for Certificate of Commencement of Business, which officially allows a company to start operations and carry out its business activities legally.

Are there any companies exempt from filing for a Certificate of Commencement of Business?

Companies without share capital and Section 8 companies are exempt from filing a COB, as they do not require it to start operations.

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