Q.Explain the provisions relating to Commencement of Business under the Companies Act, 2013.

Even a validly registered company must clear one further compliance hurdle before it is legally free to actually trade.

Being incorporated does not, by itself, entitle a company with a share capital to start trading or borrowing money. Section 10A of the Companies Act, 2013 lays down the conditions that must be met before such a company may lawfully commence its business:

1. Declaration of paid-up subscription. A director of the company must file a declaration with the Registrar of Companies stating that every subscriber to the Memorandum has actually paid the value of the shares he agreed to take at the time of subscribing.
2. Verification of registered office. The company must also have filed the verification of its registered office required under Section 12(2), confirming that the office genuinely exists at the address stated.
3. Time limit. This declaration must ordinarily be filed within 180 days from the date of incorporation.

Only once both conditions are satisfied is the company entitled to commence its business and to exercise its powers of borrowing.

Historical background. Under earlier company law, only a public company raising capital from the public needed a formal certificate before commencing business, while a private company could start operating the moment it was incorporated. The present provision closes that gap, extending the same basic discipline — proof that subscribed capital has genuinely been paid in — to every company with a share capital, public or private alike. …

A very common error is stating that only public companies need to satisfy a commencement-of-business requirement — under the current Section 10A, this applies …