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When can a company commence its business?

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posted Jul 18 by Adarsh

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1 Answer

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A private company can begin its business immediately after getting the certificate of incorporation. Whereas, a public company cannot start its business after incorporation unless it has obtained this certificate. The company may comply with the provision of section 149 of the companies Act. The method for obtaining the certificate varies with the fact whether the company has issued a prospectus or not.

If the company has share capital and the prospectus is issued the company cannot commence its business until:-

  1. Shares up to the amount of minimum subscription have been allotted by the company.
  2. Every director has paid up the application and allotment money on the shares taken
  3. No money is to be repaid to the application for failure to apply or obtain permission for the shares to be dealt in any recognised stock exchange
  4. A statutory declaration duly verified by one of the directors has been complied with[section 149(1)]

Where the company has not issued a prospectus: If the company has a share capital but has not issued a prospectus to the public, it shall not commence the business unless:-
1. Statement in lieu of prospectus has been filed with the registrar.
2. Every director has paid in cash the application and allotment money on the shares taken by him
3. A statutory declaration duly verified by one of the directors of the secretary or where the company has not appointed a secretary in whole time practice in the prescribed form, that are the above conditions have been complied with, has been filed with the registrar [section 149(2)]

answer Jul 19 by Chetan Hindu
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