Commencement of Business Certificate (COB): Significance for Companies
Commencement of Business Certificate (COB)
The Ministry of Corporate Affairs has reestablished this crucial concept within the framework of the Company Ordinance 2018. Acquiring a Commencement of Business Certificate (COB) is obligatory for all Indian companies with share capital during the Company Registration procedure. Grasping the significance of this certificate holds utmost importance for entrepreneurs aiming to initiate their business operations lawfully and transparently. This article will delve into the Commencement of Business Certificate (COB) details.
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Certificate of Commencement of Business (COB)
The Certificate of Commencement of Business is a declaration made by the directors of a company within 180 days of its incorporation. This declaration confirms that the subscribers to the Memorandum of Association (MOA) have paid the agreed-upon value of shares. Along with a Bank Statement as evidence of the subscription money received by the company, this declaration must be filed with the RoC using Form 20A.
The form is also subject to verification by Chartered Accountants, Company Secretaries, or Cost Accountants. If errors or discrepancies are found in the form after verification, these practicing professionals will be held responsible and may face undesirable consequences for inaccuracies.
Eligibility Criteria for Commencement of Business (COB) Certificate
Under the provisions of the Companies Act of 2013, specific companies are obligated to secure a Commencement of Business (COB) Certificate before commencing their business operations. This requirement applies to companies with a share capital structure, and it is essential to adhere to Section 10A (1)(a) of the Companies Act in conjunction with the Companies (Incorporation) Rules, 2014.
The COB Certificate is a requisite for the following types of companies:
- Companies Formed after November 2nd, 2018: Companies incorporated after this date must procure a COB Certificate within 180 days from their incorporation date.
- Companies with Share Capital: Irrespective of the nature of business, all companies operating with a share capital framework must apply for and obtain the COB Certificate.
Significance of the Commencement of Business Certificate
The Commencement of Business Certificate is significant, formally indicating a company’s operational initiation.
- Operational Readiness Confirmation: This certificate is concrete evidence that the company is fully prepared to engage in business activities and has met all necessary legal prerequisites.
- Legitimacy Assurance: The certificate assures stakeholders, investors, and governmental bodies that the company’s operations comply with regulations. It establishes the company’s legitimacy and responsibility for its conduct.
Exemptions from Form 20A Filing
Specific categories of companies are not required to submit Form 20A. These include:
- Companies Established Before November 2nd, 2018: This exemption applies to companies incorporated before the enactment of the Companies (Amendment) Ordinance, 2018, specifically before November 2nd, 2018.
- Companies Registered after November 2nd, 2018, Without Share Capital: This exemption encompasses companies that have been registered after November 2nd, 2018. However, it extends only to those companies that operate without a share capital structure, meaning they have not issued shares.
Due Date For Commencement of Business (COB)
For all companies operating with a share capital structure, securing the Commencement of Business Certificate (COB) is a requirement within the initial 180 days following incorporation. Strict adherence to this timeframe is crucial to prevent potential penalties and the risk of being struck off the Registrar of Companies records.
As part of the application process for the Commencement of Business Certificate, each company director must declare that every individual subscribing to the memorandum has fulfilled the payment obligations for the agreed-upon shares at the time of incorporation. This declaration serves to ensure transparency and accountability, thereby contributing to the establishment of a robust and responsible business ecosystem.
Consequences of Non-Compliance
Failure to submit the required form within the stipulated timeframe has significant consequences:
The company is prohibited from commencing business operations and cannot secure borrowing privileges.
Penalty Imposed on the Company:
In cases where a company fails to obtain the commencement of business certificate (COB) within 180 days of incorporation, the company will incur a penalty amounting to Rs. 50,000.
Penalty Imposed on Directors:
Directors in default will individually face a penalty of Rs. 1,000 per day of default, up to a maximum of Rs. 1 lakh.
Potential Company Strike-Off:
If no declaration is submitted to the ROC within 180 days of the company’s incorporation date under Clause (a) of Sub-section (1), and if the Registrar of Companies has reasonable grounds to believe that the company is not engaged in business or operations, action may be initiated to remove the company’s name from the register of companies (Company Strike-Off), without prejudice to the provisions of Sub-section (2).
The fee for obtaining the Commencement of Business Certificate varies depending on whether the company possesses share capital. A fee of Rs. 200 is applicable for companies without share capital.
Fee Structure for Companies with Share Capital
The fees to be charged based on the nominal share capital of the company are as follows:
|Sl.No||Nominal Share Capital (INR)||Fee Applicable (INR)|
|1||Less than 1,00,000||200|
|2||1,00,000 to 4,99,999||300|
|3||5,00,000 to 24,99,999||400|
|4||25,00,000 to 99,99,999||500|
|5||1,00,00,000 or more||600|
Additional Fees for Delayed Form Filing
In case of a delay in filing the form, the following additional fees are applicable based on the duration of the delay:
|Sl.No||Period of Delay||Additional Fee Applicable (INR)|
|1||Up to 30 days||2 times of regular fees|
|2||More than 30 days up to 60 days||4 times of normal fees|
|3||More than 60 days up to 90 days||6 times of normal fees|
|4||More than 90 days up to 180 days||10 times of normal fees|
|5||More than 180 days||12 times of normal fees|
Documentation Needed for Obtaining Commencement of Business Certificate in India
To obtain the Commencement of Business Certificate in India, the following documents are required:
- Digital Signature Certificate (DSC):
- Full Registered Company Address:
- Company Bank Statement for Proof of Payment:
- Reserve Bank of India (RBI) Registration Certificate (if applicable):
- Directors’ Consent and Board Resolution Details:
Application Process for Form No. INC-20A
The application process for Form No. INC-20A involves the following steps:
- Access the MCA homepage. Log in to the MCA portal using valid credentials.
- Choose “MCA services” and then select “E-Filing. Click on “Company Forms Download.”
- Find and access Form No. INC-20A (Declaration of commencement of business).
- Enter Company Information.
- Optionally, search for the Corporate Identification Number (CIN) using the provided search option.
- Optionally, select the CIN from the dropdown menu.
- Complete the application form.
- Optionally, save the webform as a draft.
- Submit the web form.
- Upon submission, a Service Request Number (SRN) is generated. This SRN can be used for future correspondence with MCA.
- Affix the Digital Signature Certificate (DSC).
- Upload the PDF document with the affixed DSC on the MCA portal.
Pay the required fees. Once the verification process is completed, an acknowledgment email will be generated.
Note: If the DSC-affixed PDF is not uploaded within 15 days of SRN generation and the payment is not completed within seven days of successful upload or by the due date of filing the webform plus two days (whichever is earlier), the SRN will be canceled.
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