Question

What is the effect of conclusiveness of the 'Certificates of Incorporation' and 'Commencement of Business'?

Answer 1

Effect of Certificates of Incorporation- A company becomes a legal entity with perpetual succession on the date printed on the Certificate of Incorporation. After conclusiveness of the certificate of incorporation, the company becomes entitled to enter into valid contracts.

The Certificate of Incorporation is a conclusive evidence of the regularity of the incorporation and legal existence of a company. Once a Certificate of Incorporation has been issued, the company has become a legal business entity irrespective of any flaw in its registration.

Thus, whatever be the deficiency in the formalities, the Certificate of Incorporation once issued, is a conclusive evidence of the existence of the company Even when a company gets registered with illegal objects, the birth of the company cannot be questioned. The only remedy available is to wind it up. On the issue of Certificate of Incorporation, a private company can immediately commence its business.

It can raise necessary funds from friends, relatives or through private arrangement and proceed to start business. A company, however has to undergo two more stages in its formation.

Effect of Certificate of Commencement of Business- The Registrar, after examining the required documents like memorandum of association, articles of association and consent of Directors, etc. issues a Certificate of commencement of Business if these documents are found satisfactory.

This certificate is conclusive evidence that the company is entitled to do business. With the grant of this certificate the formation of a public company is complete and the company can legally start doing business.