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Companies Act 2013 – Commencement of Business

Under the Companies Act, 1956 a private company could start its business immediately upon receiving certificate of incorporation. They were not required to obtained a certificate of commencement of business under section 149 of that Act.

Now under Section 11 of the Companies Act, 2013, ALL companies cannot commence business or exercise any borrowing powers, unless

– the subscribers to the memorandum have paid in their subscription monies and a declaration to that effect has been filed with the Registrar and the paid up share capital of the company on the date of declaration is at least Rs.1 lakh for a private company and Rs.5 lakhs for a public company, AND

– the company has filed with the Registrar a verification of its Registered office.

Section 11(3) further states that where no declaration has been filed within 180 days of the date of incorporation and the Registrar has reason to believe that the company is not carrying on its business or operations, he will initiate action for removal of the company name from the registrar of companies.

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