UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).
In last Blog Post, I discussed formation and incorporation of company and its effects. What next? Business, but comply certain legal provisions. Here, we will discuss provision related to present companies
Bill, 2012 Act, 2013.
COMMENCEMENT OF BUSINESS (SECTION 11):
[Update: Section 11 is no longer relevant after the Companies (Amendment) Act, 2015]
Before starting any business or borrow any money, every company having share capital, shall have to comply two requirements.
Firstly, A Director of company shall file a declaration with Registrar of companies, that:
(i) Every subscriber to the memorandum has paid the value of shares agreed to be taken by him,
(ii) The paid up capital of company is not less than one lakh in case of private company or five lakh in case of public company on date of declaration.
Any commencement of business or borrowing before complying above requirement, the company shall liable five thousand rupees (one time) and every officer who is in default shall be punishable with fine up to rupees one thousand for every day during which the default continues.
If no declaration has filed within one hundred and eighty day of the date of incorporation, the registrar may initiate action for removal of name of company from register of companies.
This simply means company should receive from their subscribers all the money value of shares subscribed by them before commencing the business. The company should take that money value into its book of accounts. After receiving all this money value from subscribers and other shareholders, the paid up capital of the company should be in conformity of minimum paid up share capital requirement. At this point, please, recall Section 10 (2), all monies payable by any member to the company under the memorandum or articles shall be a debt due from him to the company. That Section 10 (2) may not help company to commence its business but act against subscriber only. Effectively, all subscribers must pay their subscription money in total within one hundred and eighty days from the date of incorporation.
REGISTERED OFFICE OF COMPANY (SECTION 12):
The company shall have on and from fifteenth day of its incorporation and all time thereafter a registered office for all communication purpose. When we read all other provision under Companied Bill, 2012 the registered office is office of company is a hub connecting the company and outside world.
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