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Commencement of Business

A private company can commence business immediately after incorporation, but a public company, having share capital, has to company with some more formalities before it can commence business. First it must complete all formalities concerned with raising of capital. Second, it should allot shares and apply to the Registrar of Companies for the issue of Certificate of Commencement of Business. In this context, the following declarations have to be made:

(i)    A declaration that shares payable in cash have been subscribed for and allotted up to the minimum subscription mentioned in the prospectus.

(ii)    A declaration that every director has paid in cash, the application and allotment money on his shares in the same proportion as others.

(iii)    A declaration that no money is payable or liable to become payable to the applicants because of the failure of the company to either apply for or obtain permission to deal in its securities on a stock exchange.

(iv)    A statutory declaration that the above requirements have been compiled with. The declaration can be signed by a Director or Secretary of the company.

A  public company raising funds privately, which has earlier filed a Statement in lieu of prospectus, has to submit only documents (ii) and (iv) listed above.

The Registrar shall examine these documents. If these are found satisfactory, a Certificate of Commencement of Business’ will be issued. This certificate is conclusive evidence that the company is entitled to do business. With thereat of this certificate the formation of public company is complete and the company can legally start doing business.

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