What is a Private Limited Company?
Private company means a company having a minimum paid-up share capital as may be prescribed, and which by its articles
(i) restricts the right to transfer its shares;
(ii) except in case of One Person Company, limits the number of its members to two hundred:
Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member:
Provided further that—
(A) persons who are in the employment of the company; and
(B) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members; and
(iii) prohibits any invitation to the public to subscribe for any securities of the company;(69) ―promoter‖ means a person—
(a) who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92; or
(b) who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or
(c) in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act:
Types of Private Limited Company
Depending on the needs of the business, entrepreneurs can choose from the three types of Private Limited Companies:
Company limited by shares [Section 2(22)]
A company having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them;
The word ‘limited’ relates to the shareholders’ limited obligation. They are solely liable for any company responsibilities according to the value of their shares in that firm. No personal assets are at risk.
Company limited by guarantee [Section 2(21)]
ns a company having the liability of its members limited by the memorandum to such amount as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up.
Unlimited company [Section 2(92)]
Section 2(92) of the Companies Act of 2013 defines an unlimited company as one with unlimited shareholders’ liability.
Unlimited companies have no restrictions on their liabilities. As a result, the company can utilise all of its assets to pay down its obligations while dissolving.
Characteristics of a Private Limited Company
Membership: Requires a minimum of two members and allows up to 200 members, not counting employee-members.
Directors: Must have at least two directors, with a maximum of 15.
Share Capital: There is no prescribed minimum paid-up share capital for private companies.
Limited Liability: Shareholders’ liability is limited to the amount unpaid on their shares; personal assets are protected beyond this liability.
Name Requirement: The company’s name must end with “Private Limited” (e.g., “ABC Private Limited”).
Prospectus: Private companies are prohibited from issuing a prospectus to the public, as they cannot invite public subscriptions for their shares.
Transferability of Shares: The right to transfer shares is restricted, preventing public trading and maintaining control within a select group.
Statutory Compliance: While subject to regulatory requirements, private companies enjoy certain exemptions and lesser compliance burdens compared to public companies.
These provisions under the Companies Act, 2013, establish the framework within which private limited companies operate in India.
Steps to register pvt limited company in India:
Embarking on the journey to register a Private Limited Company (Pvt Ltd) in India is a significant milestone for any entrepreneur. Here’s a streamlined, step-by-step guide to navigate the registration process seamlessly:
Obtain Digital Signature Certificates (DSC):
- Since the registration process is online, all proposed directors must acquire a DSC to sign electronic documents.
- DSCs can be obtained from government-recognized certifying authorities.
Acquire Director Identification Numbers (DIN):
- DIN is a unique identification number for directors.
- It can be obtained by filing Form DIR-3 on the Ministry of Corporate Affairs (MCA) portal, accompanied by proof of identity and address.
Reserve Company Name:
- Propose up to two names for your company through the SPICe+ Part A form on the MCA portal.
- Ensure the names comply with naming guidelines and are not identical to existing companies.
Prepare Memorandum and Articles of Association (MOA & AOA):
- The MOA outlines the company’s objectives and scope of operations.
- The AOA details the internal rules and management guidelines.
- Both documents must be drafted and submitted electronically.
File Incorporation Application (SPICe+ Form):
- Complete the SPICe+ (INC-32) form, which integrates various services like name reservation, incorporation, and DIN allotment.
- Upload the required documents, including MOA, AOA, proof of registered office address, and identity/address proofs of directors.
Obtain Permanent Account Number (PAN) and Tax Account Number (TAN):
- Apply for PAN and TAN through the SPICe+ form.
- These are essential for tax-related matters and financial transactions.
Certificate of Incorporation:
Upon verification and approval of your application, the Registrar of Companies (ROC) will issue a Certificate of Incorporation, confirming the legal existence of your company.
Open a Bank Account:
With the Certificate of Incorporation, PAN, and other necessary documents, open a current account in the company’s name for financial transactions.
Comply with Post-Incorporation Requirements:
- Appoint an auditor within 30 days of incorporation.
- Ensure adherence to all statutory compliances, including Goods and Services Tax (GST) registration if applicable, Professional Tax registration, and Shops and Establishment Act registration, depending on your business activities and location.
It’s advisable to consult with a legal professional or a company secretary to navigate the registration process efficiently and ensure all legal requirements are met.
Mehul