Restriction on commencement of business

A private company can commence business soon after its incorporation, but a public company has to obtain another certificate called certificate of commencement. The certificate of commencement is issued by the Registrar of Companies on filing the following documents:

(I) In case of a company having share capital and issuing prospectus:

(i) A copy of the prospectus.

(ii) A statutory declaration duly verified by one of the directors or the secretary of the company to the effect that:

(a) The directors have taken up and paid for their qualification shares in cash or                  amount equal to the amount payable by other subscribers on application and allotment.

(b)The shares payable in cash have been allotted at least to the extent of the minimum subscription.

(c) No money is liable to become refundable to applicants by reasons of failure to apply for or to obtain permission for the shares or debentures to be dealt on the recognised stock exchange.

(II) In case of company having a share capital but not issuing a prospectus:

(i) A statement in lieu of prospectus.

(ii) A statutory declaration duly verified by any of the director or secretary of the company that directors have taken up and paid for their qualification shares in cash an amount equal to the amount payable by other subscribers on application and  allotment.

When the above requirements are complied with, the registrar shall certify that the company is entitled to commence business. This certificate is the conclusive evidence that the company is so entitled.