Commencement of Business by a Public Company Essay Example
The restrictions for a public company to commence business include ensuring that certain conditions are met. These conditions are:
a) the minimum subscription amount has been allotted to shares in cash,
b) each director has paid the full amount for their shares in cash,
c) there are no outstanding repayment obligations for shares or debentures due to failure to obtain permission for trading on any stock exchange,
d) a verified declaration by the chief executive or a director and secretary has been filed with the registrar, confirming compliance with these conditions and obtaining the necessary certificate,
e) if a public prospectus has not been issued, then a statement should be filed instead.
To ensure compliance with these requirements, the registrar can conduct inquiries before allowing a company to commence business. Once satisfied, they will issue a certificate as e
...vidence of entitlement to commence business. However, if no public prospectus has been issued, the registrar will only grant the certificate upon filing a statement in lieu of prospectus.
Upon receiving a duly verified declaration from the company before its commencement date, any contracts made by the company will be considered provisional and non-binding. These contracts will only become binding on the commencement date.The regulations in this section do not apply to private companies or companies limited by guarantee without share capital. However, it does not prohibit the simultaneous offering of shares, debentures or receiving payments for debenture applications. If a company starts its operations or borrows money in violation of these regulations, individuals responsible will be fined up to one thousand rupees per day of continuous violation along with any other liabilities.
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