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Published on:

July 31, 2024

Udeetta Sarma

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‍Step-by-Step Guide to the Commencement of Business in India

The excitement of an Indian business launch is one of its kind, but it doesn't come with any guarantees of an easy ride. To do business legitimately and ethically, it is necessary to follow some critical and time-consuming steps. These are a list of stages that an entrepreneur has to go through. They largely deal with the more legal and bureaucratic side of setting up shop and ensuring the complex business of running a business in India.

These have been sorted into four parts: pre-incorporation, pre-launch, profit-making, and certification. These four steps are themselves extremely well explained and serve to make a complicated matter simple. This blog aims to simplify the process and provide a comprehensive step-by-step approach to starting a new business in India.

Understanding Commencement of Business

The official start of a company's operations is an exhilarating time, marking as it does a new milestone, a company coming out into the world and doing what it was set up to do. 'Starting up' as it's often referred to is much more than simply a necessary formality. It's also a critical turning point, legally authorising the new company to begin conducting the various activities associated with its commerce model. In numerous ways, starting up is when the value proposition of a new firm can begin to be the reality it was always intended to be.

When Can a Private Company Commence Business?

After a private company is incorporated in India, there are several must-take steps to join the firm in the world of business. The initial among these is obtaining from the Registrar of Companies the Certificate of Incorporation. This certificate gives a fresh private company a whole new legal entity, equivalent to its existence as a business form in the world of business.

However, there is more. Before the business is operational, it is mandatory to obtain the Certificate of Commencement of Business. This is because, under the Companies Act, the law that governs the formation, operation, and closure of a company, it is necessary to have a document that specifically states the company has started trading and conducting business. It is worth noting that this certificate is different from the certificate of incorporation as far as content is concerned.

For a company to be involved in any business activities, it must have both necessary essential certificates. Even if the company were to receive a grace period, it would still be prohibited from conducting any kind of business activity. That grace period does not allow it to go into action using the cleverly crafted sub-clauses within the relaxed law framework unless it has the required certifications.

You can also refer to our blog on Innovative Trading Business Ideas to Start in 2024

What is a Commencement Certificate?

For any new company in India, nothing is more important than the company's Commencement Certificate. The Registrar of Companies (RoC) issues this legal piece of paper to say that all of the company's necessary preparations have been satisfactorily seen to and to authorize it to commence operations. The Commencement Certificate is important for all of the reasons just stated, but it is especially important for those companies that have been formed after the Companies (Amendment) Ordinance, of 2018.

Steps to File for Commencement of Business

1. Incorporate your company

This requires filing the required documents with the Registrar of Companies (RoC) and receiving the Certificate of Incorporation in return.

2. Open a bank account for your company

This should be in the company's name and should receive the payment of share capital by all the subscribers to the memorandum.

3. Declaration of Paid-Up Share Capital:

Submit a document of the paid-up share capital. The company submits this document to the Registrar of Companies (RoC), using Form INC-20A. In this document, the company says that the subscribers to the shares have paid up the amount that they have agreed to. If the paid-up share capital is not as much as the subscribed share capital (the amount that the company said it would get from people as share capital), then the company specifies how much it has received. When someone says that a paid-up share capital is as much as the agreed-upon capital, they mean that they have received that much. A Chartered Accountant (CA) must certify this form.

4. Submit Necessary Documents:

Provide any other documents. The company supplies these along with Form INC-20A, which is the form it must turn in for the office to recognize its existence. The company must also supply a bank statement, illustrated with the chapters of a few dollars worth of deposits, that proves that it (the company) is in business. Finally, if the company's business requires licensure or is otherwise subject to regulation, the company must provide suitable certification of authority.

5. Obtain Commencement Certificate:

The Registrar of Companies (RoC) will grant the Certificate of Business Commencement once the document submission is verified.

How to Download the Certificate of Commencement of Business

In Pursuance of the above, download your Certificate of Commencement as follows.

1. Visit the MCA Website:

Go to the Ministry of Corporate Affairs (MCA) site.

2. Login:

You need the login details with which you incorporated a company.

3. Navigate to Certificates:

Browse to the ‘Services’ tab and choose ‘Certificates; from there on.

4. Enter Company Details:

Fill in your company's CIN and others, whatever is required.

5. Download Your Certificate:

Click the link to Download the Certificate of Commencement of Business.

That’s it! Your certification will be written in a while.

How to Find the Date of Commencement of Business

Wondering when your business can officially start? It all begins with a Certificate of Commencement of Business. This certificate gives your business the go-ahead from the Registrar of Companies (RoC) for you to start commercial operations. Indeed, this piece of paper is your official authorization to do business; it truly says that your business is recognized and ready to engage in commerce. The certificate carries the effective date, which is the point when you can start doing business.

Is the Certificate of Commencement of Business Mandatory?

All businesses formed after the Companies (Amendment) Ordinance, 2018, need to have this certificate. This is an important document because it gives a company the go-ahead to start commercial activities. Without this certificate, a company simply cannot do business. It’s a formal requirement of law, and for good reason.

Not going through this step can have serious consequences for a company. Certainly, serious non-compliance can incur major fines, but also the business can lose its Director Identification Number (DIN). That can be nearly a death blow, as it would shut the business down for a significant period until all necessary legal filings occur to get the other required number you need. On top of that, it can carry serious criminal penalties, both for the officers of the business and the business itself. So, to prevent any of that from happening, you need to make sure you get this certificate.

Ready to Launch Your Business in India?

Starting a business demands an efficient managerial approach, especially when it comes to finances. One needs to install a good way to charge goods and services and to handle the aftermath of that consistently for the business to maintain a good cash flow and to remain compliant with the government. In this context, Swipe offers a solution for GST billing, which is a way to ensure compliance with the Goods and Services Tax (GST). Swipe's system ensures that the app uses the right rates and meets the various criteria used in maintaining and managing cash flow with invoicing as the first manifestation of app-aided compliance.

Conclusion

To launch a business in India, you must navigate a series of legal and procedural hurdles. One of the most vital is the Certificate of Commencement of Business. Once you have this in hand, you're permitted to start operations. This guide will help you get through the crucial steps involved in obtaining the necessary clearances so that you can also hit this milestone.

To put it simply, the procedure consists of establishing the company, starting a corporate bank account, registering the share capital, filing the obligatory papers, and acquiring the document that permits the business to begin. It is crucial to keep in mind that the above-mentioned document is not just a requirement by the law but also a very important one. The document allows the firm to legitimately operate in India.

FAQ

1. What is the Certificate of Commencement of Business?

This Certificate, issued by the Registrar of Companies (RoC), permits companies incorporated post the effective date of The Companies (Amendment) Ordinance, 2018 to be insured to operate.

2. Why is this certificate important?

This certificate allows a company to legally begin activities for starting the business. Without a permit, the business cannot legally trade or operate and could toggle with penalties.

3. What are the steps to obtain this certificate?

Steps: incorporate your company, open a bank account, and submit paid-up share capital and other documents to the RoC. After verification, the RoC will issue the certificate.