Question

A Private company can commence business as soon as it receives

• A. Certification of incorporation
• B. Letter of intent
• C. Occupation certificate
• D. None of the above

Hint:

Remember the two key certificates in the life of a new company: 1. Certificate of Incorporation: This is the birth certificate of the company. A private company can start business right after this. 2. Certificate of Commencement of Business (under old law): This was an additional step for public companies only.

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
The question asks at which stage a private limited company is legally permitted to commence its business operations.

Step 2: Detailed Explanation:
Under the Companies Act, there is a distinction between the requirements for a private company and a public company to commence business.
- For a Private Company, the process is simpler. Once the company is registered with the Registrar of Companies (RoC) and the RoC issues the Certificate of Incorporation, the company comes into legal existence and is entitled to start its business activities immediately.
- Under the old Companies Act, 1956, a Public Company had an additional requirement. After receiving the Certificate of Incorporation, it had to obtain a 'Certificate of Commencement of Business' before it could start its operations. This required fulfilling further conditions, such as securing the minimum subscription. (Note: The Companies Act, 2013 has modified this, now requiring a declaration to be filed).
However, for a private company, the Certificate of Incorporation has always been the key document that allows it to commence business.

Step 3: Final Answer:
A Private company can commence its business as soon as it receives the Certificate of Incorporation.