COMMENCEMENT OF BUSINESS BY A PUBLIC COMPANY

Commencement of business by a public company Sec 19,20

➢ A public company shall not start its operations or exercise any borrowing powers unless
(a) shares held have been allotted to an amount not less in the whole than the minimum subscription and
the money has been received by the company;
(b) every director of the company has paid to the company full amount on each of the shares taken or
contracted to be taken by him and for which he is liable to pay in cash;
(c) no money is or may become liable to be repaid to applicants for any shares which have been offered
for public subscription;
(d) a duly verified declaration by the chief executive or one of the directors and the secretary in the
specified form that the aforesaid conditions have been complied with; and
(e) in the case of a company which has not issued a prospectus inviting the public to subscribe for its
shares, there has been filed with the registrar a statement in lieu of prospectus as per the Second
Schedule annexed to this Act.

minimum subscription means the amount, if any, fixed by the memorandum or articles of association as
minimum subscription upon which the directors may proceed to allotment or if no amount is so fixed and
specified, the whole amount of the share capital other than that issued or agreed to be issued as paid up
otherwise than in cash.
➢ The registrar shall, on filing of a duly verified declaration in accordance with the provisions of sub-
section (l) and after making such enquiries as he may deem fit to satisfy himself that all the
requirements of this Act have been complied with in respect of the commencement of business and
matters precedent and incidental thereto, accept and register all the relevant documents.
➢ The acceptance and registration of documents shall be a conclusive evidence that the company is
entitled to start its operations and exercise any borrowing powers.
➢ Nothing in this section shall apply
(a)to a company converted from private to a public;
(b) to a company limited by guarantee and not having a share capital.
➢ If any company starts its business operations or exercises borrowing powers in contravention of
section 19, every officer or other person who is responsible for contravention shall without prejudice
to other liabilities be liable to a penalty not exceeding level 2 on the standard scale.
➢ Any contract made by a company before the date at which it is entitled to commence business shall be
provisional only and shall not be binding on the company until that date and on that date it shall
become binding.