PRIVATE LIMITED COMPANY REGISTRATION
A Private limited company can be formed under the Companies Act, 2013 with a minimum of 2 Directors & Shareholders.
PRIVATE LIMITED COMPANY REGISTRATION
Private limited company is any company that is registered under the Companies Act, 2013 with a minimum of 2 directors and maximum of 15 directors. However, the private limited company needs of have minimum of 2 shareholders and can have maximum of 200 members.
- In case the company wants to appoint directors more than 15 in number in that case company has to pass a special resolution in general meeting of shareholders of the company .
- In case of private limited companies the articles of the company restricts the transferability of shares and also private limited companies cannot issue their shares to public for subscription
- In case of criteria regarding the minimum paid up capital for incorporation of a private limited company , there has been no criteria for minimum paid up capital, now the company can be formed with any number of amount.
There is no such criteria listed under the companies act that makes the applicant to mandatory register a private limited company . However, the individuals or entities can go for incorporation of private limited company due to the reasons listed below:
- Limited Liability : In case of a private limited company , there is a benefit of limited liability . This means that in case of any default made by the directors of the company in that case the bank can only sell the property /assets of the company and they cannot sell the personal property of the directors.
- Legal entity : A Private Limited Company registered under the Companies Act, 2013 is considered as legal entity in the eyes of law . It is then considered as a separate legal entity . This means the action of the company and that of the individuals working in the company are separate.
- Seed Funding : Any startup that wants to go for any seed funding for their startup has to firstly get registered itself as a proper entity like Company or LLP . When going for funding, Companies are preferred over LLPs.. If going for company registration , private limited company registration is the best and the reasonable option a startup can opt for in the intial stage.
- Credibility : Getting registered as a company under the Ministry of Corporate Affairs offers credibility to the business in the eyes of banks , financial institutions , investors and other third parties . This makes it easier for the companies to get loans or credits or investment from the banks/ financial institutions/investors at the terms that is favorable to the company.
For proceeding with the registration of a private limited company following documents would be required:
- ID Proof of the directors : PAN Card/ Voter ID / Passport/ Adhar Card/ Driving License is used as an legible proof in this case
- In case of foreign nationals, passport of the foreign nationals is mandatory to be used as an ID Proof
- Address proof of the directors: Passport, Bank statement (not older than 2 months) , any utility bill or driving license is legible proof as per the options listed in the Form for incorporation.
- All the documents should be self-attested by the directors and in case of documents of the foreign nationals documents should be attested by the concerned authority or embassy as may be prescribed.
- Registered office address : Address of the registered office address of the company and proof for the same and in case of rented premises, copy of rent agreement duly notarized and stamped , NOC from the owner and latest utility bill in the name of owner and in case of owned premises signed NOC along with the latest electricity bill not older than 2 months.
- DSC Form : In case director do not have their digital signatures made then DSC Form needs to be physically signed by the director.
In case of foreign national all the documents attached along with the DSC Form needs to be complied with the following guidelines:
- Documents to be notarized (if residing in commonwealth countries)
- Documents to be notarized and apostilled (if residing in country which is signatory to Hague Convention)
- Documents to be notarized and consularised (If not covered in above categories)
For private limited company incorporation, Following information shall be required from the proposed company:
- DIN of the proposed directors ( If available , if not available DIN needs to be applied for the directors)
- Directors details such as Father’s Name, Latest passport size photograph which should be only in JPEG Format, Nationality, Occupation & Area of Occupation , Mobile Number & Email id , Place of birth
- Unique Names for the company
- Objects of the company / work that the company would be engaged in
- Amount of the capital contribution to be made by the directors
- Ratio of the contribution to be made by the members/ directors of the company
- Directors should not be disqualified under any law
PROCESS OF INCORPORATION
The incorporation of private limited company involves the following process:
DIN of Directors: In case directors are already acquiring DIN it has been to be checked that whether DIN of the director is not deactivated /disqualified, In case directors do not acquire any DIN , in that case DIN has to be applied for the respective directors.
SPICE+ : After all the above approvals have been made by the CRC, we shall proceed with the applying for the incorporation of the company through the SPICE+ facility available for the incorporation of the company . Once the application has been submitted for the incorporation and the same has been approved the CRC , certificate of incorporation shall be issued by the Department . PAN & TAN shall also be issued to the company along with the Certificate of Incorporation which is also an important document that would need to be submitted by the company in case of opening of bank account.
Certificate of Commencement: After the certificate of incorporation has been issued by department to the company , company has to apply for the certificate of commencement for carrying on the activities within 180 days from the date of incorporation of the company. This certificate has become mandatory after the Companies (Amendment) Act , 2019. Application for certificate of commencement has to be made in Form INC-20A with a proof of the receipt of the subscription amount.
ADVANTAGES OF REGISTERING A COMPANY
Various advantages of registering a company are:
- The life span of a company is not dependent on a particular individual working for the company. Company has a perpetual succession . Members of the company may come and go but still the company and the business continues.
- Private limited companies are easy to manage and run the business of the company as there are less complications as compared to in case of public limited company or any listed company
- As in case of listed company , various compliances has to be done that are too complicated and are governed by SEBI .
- Private limited can sale or purchase their own property as a separate individual does.
- Private limited company has the privilege of being sued and to sue . Company can take any legal action against any person and that other person can also take legal action against the company . However in this case company and its director and other members would be considered as separate
- There are various tax benefits also available to various companies registered as startups like benefits in case of statutory compliances, paying of tax.
Time involved in incorporating a company is about 10-15 days, depending upon the approval by the respective authorities.
FREQUENTLY ASKED QUESTIONS (FAQs)
Under this head we are covering some of the FAQs related to registration of companies:
Who can be a director of a Private Limited Company?
The person who wishes to become a director shall be a natural person and must have attained the age of 18 years. He may or may not Be a resident of India. Also he should not be disqualified or should not be ineligible to act in the capacity of the director as per the rules under the Companies Act,2013.
What is the minimum and maximum limit of Directors and Shareholders to Incorporate a Private Limited Company?
Minimum two directors are required to incorporate a private limited company and maximum number of directors can be 15 . In case of more than 15 directors required to be appointed, a special resolution has to be passed for the same.CIn case of shareholders, minimum 2 shareholders are required in case of a private limited company and maximum shareholders can be 200.
What is the Life span of the company?
The life span of the private limited company is on going concern basis and not dependent on the directors of the company or any other particular individual . As long as the company wants to continue it can continue depending upon the financial situation.
How much Capital is required?
There is no such minimum capital criteria for incorporation of a private limited company. However, the capital can be increased at anytime in near future depending upon the requirement.
Can a company go for voluntary Strike off even the Company is earning a good revenue?
Yes, a company can go for voluntary strike off provided that it has been inoperative since 2 years from the date of incorporation or has done no business in past one year. Also after the application has been made to the concerned department for striking of the company , the department shall take in consideration many factors like time for which the company has carried on its business, revenue of the company during the last years since incorporation , whether the bank account has been opened by the company or not, whether the company is a shell company or not, any liability which the company owes.
After considering the above mentioned points and in case of any clarification required the company shall provide clarification to the department and after that the company’s status shall be changed to “Under the process of striking off “ by the department.
What is the best option for an individual or businesses to be registered as in case it is going for Company Incorporation?
The best option for startups is to get a private limited company registered as investors find this as the best type of company in case they see for the purpose of investing . As companies are more recognized by the lending institutions rather than organizations that are not registered as companies.
Does a Private Limited Company needs to publish its board report online?
In case of private limited company it is not mandatory for them to publish their board reports online . However if they want to do that on voluntary basis they can publish it on their website. However in case of listed companies it is mandatory to be published online on also a copy of the same has to be send on to the stock exchange and should be circulated to members too.
Is there more than one type of Private Limited Company ?
Yes there are private companies limited by shares and private companies limited by guarantee.
Company limited by shares means the liability of the company is limited to the value of the shares of the company . The liability in case of bankruptcy cannot be extended to the personal liability of the directors or members of the company.
Company limited by guarantee is used mainly in case of non – profit organizations . In this case the parties involved are the guarantors and not the shareholders. In case the company ends up in any trouble the guarantors of the company agree to invest an amount that would be fixed earlier as per the capacity of the amount guaranteed by them to be contributed.
Keeping in mind the above points mentioned above for the private limited company registration our view point is that private limited company registration is the best option that any individual, business or entrepreneur could go for as compared to going for public limited company or one-person company registration.
EDITED BY KANIKA GUPTA
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