Commencement of business, etc
📚 Law Minded summary
A company with share capital cannot simply start trading the day it is registered.
Within 180 days of incorporation, a director must file a declaration that every subscriber has paid for the shares they agreed to take. The company must also have told the Registrar where its registered office is. Until both are done, it may not begin business or borrow money.
Miss it and there are penalties, and the Registrar may conclude the company is not carrying on business and move to strike its name off.
(1) A company incorporated after the commencement of the Companies (Amendment) Act, 2019 and having a share capit al shall not commence any business or exercise any borrowing powers unless—
(a) a declaration is filed by a director within a period of one hundred and eighty days of the date of incorporation of the company in such form and verified in such manner as may be prescribed, with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and (b) the company has filed with the Registrar a verification of its registere d office as provided in sub-section (2) of section 12.
(2) If any default is made in complying with the requirements of this section, the company shall be liable to a penalty of fifty thousand rupees and every officer who is in default shall be liable to a penalty of one thousand rupees for each day during which such default continues but not exceeding an amount of one lakh rupees.
(3) Where no declaration has been filed with the Registrar under clause (a) of sub-section (1) within a period of one hundred a nd eighty days of the date of incorporation of the company and the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he may, without prejudice to the provisions of sub -section (2), initiate action for the removal of the name of the company from the register of companies under Chapter XVIII.]
All sections in Chapter II — Incorporation of Company and Matters Incidental Thereto