What does Commencement of Business mean?

Commencement of Business

A private company or a company having no share capital can commence its business immediately after it has been incorpo­rated. However, other companies can commence their activities only after they have obtained Certificate of Commencement of Business. For this purpose, the following additional formalities have to be complied with: -

1. If a company has share capital and has issued a prospectus, then: -

a. Shares up to the amount of minimum subscription must be allotted.

b.Every director has paid to the company on each of the shares, which he has taken the same amount as the public has paid on such shares.

c.No money is or may become payable to the applicants of shares or debentures for failure to apply for or to obtain permission to deal in those shares or debentures in any recognized stock exchange.

d.A statutory declaration in Form 19 signed by one director or the employee - company secretary or a Company secretary in whole time practice that the above provisions have been complied with must be filed.

2. If a company has share capital but has not issued a prospectus, then: -

a.. It must file a statement in lieu of prospectus with the Registrar of Companies

b. Every director has paid to the company on each of the shares, which he has taken the same amount as the other members have paid on such shares

c. A statutory declaration in Form 20 signed by one director or the employee - company secretary or a Company secretary in whole time practice that the above provisions have been complied with must be filed. Once the above provisions have been complied with, the Registrar of Companies grants “Certificate of Commencement of Business” after which the company can commence its activities.

What is Articles of Association?

The Articles of Association (AA) contain the rules and regula­tions of the internal management of the company. The AA is nothing but a contract between the company and its members and also between the members themselves that they shall abide by the rules and regulations of internal management of the company specified in the AA. It specifies the rights and duties of the members and directors.

The provisions of the AA must not be in conflict with the provisions of the MA. In case such a conflict arises, the MA will prevail.

Normally, every company has its own AA. However, if a company does not have its own AA, the model AA specified in Schedule I - Table A will apply. A company may adopt any of the model forms of AA, with or without modifications. The articles of association should be in any of the one form specified in the tables B,C,D and E of Schedule 1 to the Companies Act, 1956. Form in Table B is applicable in case of companies limited by the shares , form in Table C is applicable to the companies limited by guarantee and not having share capital, form in Table D is applicable to company limited by guarantee and having a share capital whereas form in table E is applicable to unlimited companies. However, a private company must have its own AA.

Sequential Components of the statement of affairs

The preparation and the format of the statement of affairs have been cumbersome and confusing. Thus, a revised form is recommended in which the statement of affairs is split into two sections, one dealing with the assets and the other with the liabilities and the owners’ equity. 

Before the statement of affairs is prepared, however, the account balances should be adjusted fully, an income statement should be prepared, and owners’ equity should be adjusted to include the net profit or net loss to date.

The asset portion of the statement of affairs identifies the assets of the liquidating entity and their book value, estimated net realizable value, and estimated gain or loss upon liquidation. Available assets are identified as follows:

1. Assets pledged with fully secured creditors.
2. Assets pledged with partially secured creditors.
3. Free assets available to unsecured creditors.

For each asset, the net realizable value must be estimated, using whatever information is available. For example, receivables would exclude unrealizable amounts; marketable securities would be based on current market reports; and real estate would reflect current market appraisals. Some assets, such as goodwill, may have no realizable value. For each asset, the difference between realizable value and book value is entered as a gain or loss upon liquidation. The assets available to unsecured creditors also are identified on the asset section of the statement of affairs.

The liability and owners’ equity section on the statement of affairs identifies the following components:
1. Fully secured creditors.
2. Partially secured creditors.
3. Unsecured creditors with priority (Class 1 through 6 creditors).
4. Unsecured creditors without priority (Class 7 creditors).
5. Owners’ equity deficiency or surplus.

Difference between statement of realization and liquidation and statement of affairs

The statement of realization and liquidation differs from the statement of affairs in the following respects:
1. The statement of realization and liquidation reports the actual liquidation results. In contrast, the statement of affairs is of a pro forma nature and is based on estimated rather than actual results.

2. The statement of realization and liquidation provides an ongoing reporting of the trustee’s activities and is updated throughout the liquidation process. The statement of affairs is a summary of the estimated results of a completed liquidation.


Generally speaking, a court will require the trustee to provide an accounting regarding the following items pertaining to the insolvent company:

1. Unrealized assets assigned to the trustee including those subsequently discovered.
2. Assets that have been realized or liquidated.
3. Liabilities to be liquidated that have been assigned to the trustee.
4. Liabilities that have been liquidated.

Historically, the preceding information was presented in a report called the realization and liquidation account, which employed a rather cumbersome format. Currently, this information is most often presented in a worksheet format that identifies critical balances and relevant cash receipts and disbursements.

What are Services offered and provided by Modern Commercial Banks?

Modern commercial banks are doing lots of thing and creating new new products for its customers to satisfy their needs. The following services offered and provided by modern commercial banks to customers or public:

1. Accepting Deposit

Accepting deposit from savers or account holders is the primary function of bank. Banks accept deposit from those who can save money, but cannot utilize in profitable sectors. People prefer to deposit their savings in a bank because by doing so, they earn interest.

2. Giving Loans

Banks are profit oriented business organizations. So they have to advance loan to public and generate interest from them as profit. After keeping certain cash reserves, banks provide short-term, medium-term and long-term loans to needy borrowers. 

3. Bill Of Exchange Discounting

Bill of exchange is a negotiable instrument, which is accepted by the debtor, drawn upon him/her by the creditor and agrees to pay the amount mentioned on maturity. Discounting bill of exchange is another function of modern commercial bank. Under this, banks purchase bill of exchange from holder in discount after making some marginal deduction in the form of commission. The banks pay the deducted value to the holders when traders discount it into bank. 

4. Payment of Cheques

Banks provide cheque pads to the account holders. Account holders can draw cheque upon bank to pay money. Banks pay for cheques of customers after formal verification and official procedures. .

5. Remittance

Remittance is a system, through which cash fund is transferred from one place to another. Banks provide the facilities of remittance to the customers and earn some service charge.

6. Collection And Payment Of Credit Instruments

In modern business, different types of credit instruments such as bill of exchange, promissory notes, cheques etc. are used. Banks deal with such instruments. Modern banks collect and pay different types of credit instruments as the representative of the customers.

7. Foreign Currency Exchange

Banks deal with foreign currencies. As the requirement of customers, banks exchange foreign currencies with local currencies, which is essential to settle down the dues in the international trade.

8. Consultancy

Modern commercial banks are large organizations. They can expand their function to consultancy business. In this function, banks hire financial, legal and market experts, who provide advices to customers in regarding investment, industry, trade, income, tax etc.

9. Bank Guarantee

Customers are provided the facility of bank guarantee by modern commercial banks. When customers have to deposit certain fund in governmental offices or courts for specific purpose, bank can present itself as the guarantee for the customer, instead of depositing fund by customers.