This is the most popular form of business entity in India. In a Private limited company, business assets are separated from personal assets. Therefore, Each shareholder is only responsible for his share of the total capital. Compliance of a Private Limited Company includes maintenance of records of financial transactions, board meetings, and annual reports and so on. Also, total capital of the entity is made up of shares and these shares can be sold/transferred to another individual who becomes one of the owners of the company after such transfer or selling of shares. The shares of a Private limited company cannot be traded on stock exchange and neither can it go for IPO to public.
Formation of Company:
A company may be formed for any lawful purpose by—
- Seven or more persons, where the company to be formed is to be a Public Company;
- Two or more persons, where the company to be formed is to be a Private Company; or
- One person, where the company to be formed is to be One Person Company that is to say, a Private Company,
by subscribing their names or his name to a memorandum and complying with the requirements of this Act in respect of registration:
The Private limited company can be of three types:
- Company limited by shares – Liability of members is limited by the memorandum to the amount. If any, unpaid on the shares respectively held by them.
- Company limited by guarantee – Liability of its members is limited by the memorandum to such amount as the members respectively undertake to contribute to the assets of the company, in case the company is winding up.
- Unlimited Company – Here, there is no limit on the liability of its members.
Directors
A private limited company should have minimum of 2 Directors and Maximum of 15. Out of the proposed directors of the company, one must be a resident of India (should have stayed in India for 182 days or more in the running financial year).
Apply Digital Signature Certificate (DSC) and Director Identification Number (DIN) for the Directors.
Name Availability
The proposed business should choose a unique name related to their business and the availability of the name should be checked with MCA (Ministry pf Corporate Affairs) through RUN (Reserve Unique Name) service. The Name should not match with any other existing company or trademark in India.
Decide the Capital and Shareholders
Decide the capital required for your business and declare the subscribers (shareholders) and their percentage of holding. At present, the minimum authorized capital of the company should be Rs. 1 Lakh
File eMOA and eAOA along with the supporting documents with MCA to register the company.
Company Incorporation Application – Spice + Form
A company can be incorporated by filling the electronic application form – SPICEe (Simplified Proforma for Incorporating Company Electronically) with the following supporting documents:
- The memorandum and articles of the company duly signed by all the subscribers to the memorandum
- A declaration from (INC 9) each of the subscribers to the memorandum and from persons named as the first directors
- The address for correspondence till its registered office is established
- The particulars of subscriber’s name, including surname or family name, residential address, nationality and such other particulars of every subscriber to the memorandum along with proof of identity
- In the case of a subscriber being a body corporate, such particulars such as registration number of body corporate, name of the body corporate with registered office address and board resolution copy authorizing the specifying inter alia the authorization to subscribe to the memorandum of association of the proposed company and to make investment in the proposed company, the number of shares proposed to be subscribed by the body corporate, and the name, address and designation of the person authorized to subscribe to the Memorandum
- The particulars of the persons mentioned in the articles as the first directors of the company, their names, including surnames or family names, the Director Identification Number, residential address, nationality and such other particulars including proof of identity
On the successful payment of Incorporation fees and stamp duty and after the verification of documents by MCA (Ministry of Corporate Affairs), Certificate of Incorporation along with PAN and TAN are issued by RoC (Registrar of Companies)
Commencement of Business
- Open a Current Account with a Bank by providing the following documents
(a) Board Resolution copy specifying the intention of opening the current account and the details of the authorized signatories
(b) Supporting documents (ID proof, Address proof) of the signatories and the company - Infuse the share capital to the current account as declared in the memorandum
- File eForm INC-20A (Declaration of Commencement of Business) with the Registrar of Companies that ‘every subscriber to the MOA has paid the value of the shares agreed to be taken by him on the date of making of such declaration”
- As per section 10A of the companies Act 2013, a company incorporated on or after 02//11/2018, having share capital shall not commence its business or exercise any borrowing powers unless a declaration is filed by the directors within 180 days from date of incorporation of company in INC form 20A
Documents Required for Private Limited Company
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