Commencement of Business

If the amount of minimum subscription is raised through the new issue of shares, a public company applies to the Registrar of Companies for the issue of Certificate of Commencement of Business. The following documents are required:

1. A declaration that shares payable in cash have been subscribed for and allotted.

2. A declaration that every director has paid in cash, the application, and allotment money on his shares.

3. A declaration that no money is payable or liable to become payable to the applicants.

4. A statutory declaration that the above requirements have been complied with.

Modern-day business requires a large amount of funds. The competition and change in the technological environment are also increasing day by day. As a result, the company form of organization is being preferred by more and more business firms. The formation of a company involves several steps, that are required from the time a business idea originates to the time a firm is legally ready to commence business, also referred to as stages in the formation of a company. Those who are taking these steps and the associated risks are promoting a company and are called its promoters.

To fully understand the process we will divide the formalities into four distinct stages, which are:

• Promotion
• Incorporation
• Subscription of the Capital
• Commencement of Business

However, it must be noted that these stages are appropriate from the point of view of the formation of Public Ltd. Company. As far as the Private Ltd. Companies are concerned only the first two stages mentioned above are appropriate. A Private Co. can start its business immediately after obtaining the certificate of incorporation as it is prohibited to raise funds from the public.