A Private Limited Company is a business entity that is owned by a relatively small number of shareholders or members, who may be non-governmental organizations, individuals or a combination of both. Unlike a public company, a private company's stocks are not listed on the stock exchange and are typically owned and exchanged by a limited group of people.
In India, the formation and functioning of Private Limited Companies are governed by Section 7 of the Companies Act, 2013, along with The Companies (Incorporation) Rules, 2014. According to the Companies Act, 2013, a Private Limited Company is defined as a company that has a minimum paid-up share capital as prescribed by law and whose articles:
(i) Restrict the right to transfer its shares;
(ii) Except in the case of One Person Company, limits the number of its members to two hundred;
(iii) Prohibits any invitation to the public to subscribe for any securities of the company.
However, for the purpose of calculating the total number of members in the company, two or more persons holding one or more shares in the company jointly are considered a single member. Additionally, employees and former employees who continue to be members after the termination of their employment are also excluded from the total number of members.
At Instabiz Filing, we provide private limited company registration services that ensure compliance with all the relevant legal requirements, allowing businesses to operate smoothly and efficiently. Our team of experienced professionals will guide you through the entire process, from name registration to obtaining the necessary licenses and permits. Contact us today to get started on forming your Private Limited Company.
Company Limited by Shares: The nominal share value specified in the Memorandum of Association serves as the members' liability cap in these corporations. A shareholder cannot be made accountable for more than the value of the shares they purchased from the corporation.
Company Limited by Guarantee: The amount of liability that each member assumes in the Memorandum of Association governs the members' liability in a private limited company limited by guarantee. As a result, a Private Limited Company Limited by Guarantee's members are only responsible for the amount of guarantee they provided in the Association Memorandum.
Additionally, in a corporation limited by guarantee, the shareholder's guarantee may only be requested in the event of a corporate wind-up. When a Company Limited by Guarantee is still operating, the members' guarantee cannot be revoked.
If you're considering private limited company registration, it's important to understand the necessary requirements to ensure a smooth and successful formation process. The following requirements should be taken note of in order to form a Private Limited Company:
• First and foremost, a minimum of two shareholders or members are required to establish a Private Limited Company. This ensures that the ownership of the company is not concentrated in the hands of a single individual, but rather shared between multiple parties.
• A minimum of two directors are required for a Private Limited Company. However, it's important to note that the same person can act as both a director and member of the company. It is also important to consider the qualifications and experience of the directors, as they play a critical role in managing and making strategic decisions for the company.
• In addition to the shareholders and directors, a registered office address is also a requirement for a Private Limited Company. This address is used for communication and registration purposes and must be a physical location within the country of incorporation. It's important to ensure that the registered office address is easily accessible and can be used for official communication with stakeholders, including regulatory bodies.
Overall, these requirements for private limited company registration are vital to ensuring a smooth and successful formation process. It's important to carefully consider these requirements and seek professional guidance to ensure compliance with all legal and regulatory obligations. With the right approach, you can establish a Private Limited Company that is well-positioned for long-term success and growth.
Capital Required to Start a Company
Starting a company in India can be an exciting and fulfilling journey, but it's important to keep in mind the financial aspects of the process. Fortunately, the capital required to start a company can be very flexible, with no fixed amount required. The shareholders of the company being incorporated have the freedom to determine the capital they wish to contribute, allowing for a variety of capital structures to be created.
Face Value: When setting up the capital structure of a company, there are a few key concepts to keep in mind. First, the face value of a share is the price per share with which the company is incorporated. This value is typically set at Rs. 1, Rs. 10, Rs. 100, Rs. 1000, or Rs. 10,000, but can be adjusted to suit the needs of the company.
Authorized Capital: Another important concept to consider is authorized capital, which refers to the total value of shares a company can issue to shareholders. Most companies are incorporated with an authorized capital of Rs. 1 lakh or Rs. 10 lakhs, but if a higher amount is required, the company may be required to pay additional fees to the Ministry of Corporate Affairs. It's worth noting that the authorized capital of a company can be increased at any time after incorporation, allowing for greater flexibility in the future.
Paid-up capital: Finally, the paid-up capital of a company is the number of shares issued to shareholders for which they have paid or deposited money to the company. This amount cannot be more than the authorized share capital of the company, but can be adjusted to suit the needs of the company and its shareholders.
The Company exists as a separate legal entity as from its members. The liability of the corporate is completely different from its members of a corporation. Liability for repayment of debts and lawsuits incurred by the corporate, lies on it and not the owner.
Easy Transferable Ownership
The shares and alternative interest of any member within the Company shall tend to be a movable property and may be transferable within the manner therefore provided by the Articles of such company. Therefore, it's easier to subscribe or leave the membership of the corporate, conjointly it's easier to transfer the possession.
Raising funds as a small business and a sole proprietorship or partnership can be difficult. But as per Companies Act 2013 a company can sell shares to the public or can accept deposits from the public and can therefore raise money easier than other business structure types. The modes of financing business carried on by the company are numerous. Moreover, since the companies are governed by particular law and have to comply with stringent disclosure norms, therefore they enjoy good credit worthiness with various financial institutions.
Disadvantages of Company:
Increased Legal Compliance & Administration Costs
Private limited companies must submit its annual returns, financial statements, Board reports etc to the Registrar of Companies annually. Every private limited must get its accounts audited by a practicing Chartered Accountant, which makes it mandatory to appoint a chartered accountant as auditor of the company; even there is no significant accounting transaction. Further there are many event based compliance requirements too. So in order to meet legal obligations casted on private limited companies by the Companies Act, 2013 and others statues, a company must have a competent professional by its side to advise and help in ensuring statutory compliances, which increases the general and administrative expenses of a business.
Restricted Access to Capital Markets
Private Limited Corporation cannot get its shares listed in any stock market through initial public offerings. With this restriction, private limited corporations might notice it troublesome to attract outside investors to buy the shares.
Public Disclosure of Company Information
A Private Limited Corporation should file its Annual Returns, financial Statements, Auditor’s reports, Board’s Report etc to the Registrar of Companies, that become a public document once filed with Registrar of companies and will be inspected by general public as well as competitors by paying some fees to the Registrar of Companies. Data revealing will create an entity competitively underprivileged. Competitors – especially those not required to disclose any documents – will access that data and use it to enhance their own business.
The process for registering a company in India involves the following steps:
Step 1: Approval of Company Name
An application for approval of the company name must be submitted to the Ministry of Corporate Affairs. The application can include 1 or 2 proposed names with business objectives. If the proposed name is rejected, 1 or 2 more names can be submitted. The MCA typically approves all name approval applications within 5 working days.
Step 2: Obtain Digital Signature for Directors
In India, wet signatures are not allowed for filings with the MCA. Hence, a digital signature is required for all filings. The Directors must obtain a digital signature that is issued by an authorized Certifying Authority in India. The process for obtaining a digital signature involves submitting a copy of the Director's identity proof and completing a video KYC process. For foreign nationals, the passport and other documents must be apostilled by a local embassy.
Step 3: Submit Incorporation Application
Once the digital signatures are obtained, the incorporation application can be filed in SPICe Form to the MCA with all necessary attachments. The Memorandum of Association (MOA) and Articles of Association (AOA) must also be filed. If the MCA finds the application to be complete and acceptable, the Incorporation Certificate is granted along with the PAN of the company. The MCA usually approves all incorporation applications within 5 working days.
At each stage of the process, our team of experts is ready to assist you and answer any questions you may have. With our support, your company formation journey will be smooth, stress-free, and a step towards realizing your vision.
To register a private limited company, proposed directors must provide identification and proof of address documents.
• For Indian nationals, a PAN card is mandatory, while foreign nationals must present a passport.
• A document with the director's address must also be submitted, which could be a passport, driver's license, election ID, ration card, or Aadhar ID for Indian nationals, and a driver's license, bank statement, or residence card for foreign nationals.
• Proof of residency must be established with a bank statement, electricity bill, or phone bill generated within the last two months for both Indian and foreign nationals.
• If a company based in India or abroad is a shareholder, a board resolution authorizing investment, incorporation certificate, and address proof of the company must be submitted.
• Meeting all these requirements will ensure a smooth and efficient company registration process.
Instabiz Filings appreciates your cooperation and looks forward to helping you establish a successful private limited company.
Note: The above pointers are applicable for pvt ltd company registration. For Limited Liability Partnership registration, the document requirements may vary.
Our firm has a skilled team of Chartered Accountants, Company Secretaries, and Lawyers, as well as on-call support to handle all your financial, legal, and company formation needs.
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A minimum of two directors are required, one of whom must be an Indian resident. Any person can be a director of the company including family members. Director Identification No. (DIN) and Digital Signature Certificate (DSC) are required to be a director of the Company.
Minimum no of shareholders required are Two (2) in number to form Private Limited Company.
Yes, there are no restriction in the laws which stops you from acting in both the capacity of Director as well as Shareholder of the Private Limited Company at the same time.
There is no such minimum capital requirement, hence a business can be founded with capital as little as INR 1.
Ministry of Corporate Affairs (MCA) is the registering authority in India.
Time taken for registration is considered on the basis of working hours of government officials which is 12 working hours on a single day. Therefore, the approx. time taken for formation of entity would be 4 days.