Private Limited Company is the most prevalent and popular type of corporate legal entity in India. The Ministry of Corporate Affairs governs private limited company registration in India. Companies are incorporated and regulated under the Companies Act, 2013 and the Companies Incorporation Rules, 2014.
Minimum 2 Shareholders: The shareholders of a private limited company can be a corporate entity or a natural person.
Two Directors: A private limited company must have at least two directors and at most, there can be 15. Of the directors in the business, at least one must be a resident of India.
Unique Name: The name of your business must be unique. The suggested name should not match with any existing companies or trademarks in India.
Minimum Capital Contribution: There is no minimum capital amount for a company. A company should have an authorized capital of at least Rs. 1 lakh.
Registered Office: The registered office of a company does not have to be a commercial space. Even a rented home can be the registered office, so long as an NOC is obtained from the landlord.
Equity Raise: A company can raise equity capital from persons or entities interested in becoming a shareholder. Hence, a private limited company is a must for Entrepreneurs looking to raise money from angel investors, venture capital firms, private equity firms and hedge funds.
Limited Liability Protection: A private limited company provides limited liability protection to its shareholders. In case of any unforeseen liabilities are created, it would be limited to the company and would not impact the shareholders.
Separate Legal Entity: A private limited company is legally recognised as a separate entity. Hence, a company can have its PAN, bank accounts, licenses, approvals, contracts, assets and liabilities in its unique name.
A company has perpetual existence and never ends without reason. For a company to lose its existence, it has to be wound-up by the Promoters or be wound-up by the Government. Hence, a company can only be wound up for reasons like non-compliance or failure to comply with rules and regulations.
Easy Transferability: As the ownership of a company is represented by shares - the ownership of a company can be transferred to any other legal entity or person in India or abroad easily - in part or whole. Further, since the shareholders control the Board of Directors, the Directors can also be replaced easily by shareholders to ensure business continuity easily at all times.
1. Application of DSC & DPIN:
First of all, the partners have to apply for Digital signature and DPIN. Digital signature is an online signature used for filing and DPIN refer to Directors PIN number issued by MCA. Director Identification Number (DIN) is a unique number assigned by Ministry of Corporate Affairs to the individual making an application for allotment of DIN. The number is allotted for lifetime by the Ministry unless it is surrendered or withdrawn. If the directors already have DSC and DPIN, then this step can be skipped. However this method has been changed now the directors can get DIN at the time of incorporation.
2. Reservation of Name:
Before making an application to incorporate and register Pvt Ltd Company in India, the name for the proposed company shall be reserved. An Application for Reservation of Name of Private Limited Company shall be made in SPICE + by making payment of requisite fees. In one application you may provide maximum 2 names in preferential order along with the significance for application for proposed name(s). The appointed professional shall make a search for availability of name before filling the application so that the applicant can make application of the names accordingly. The Registrar enjoys 100% discretion for approval of name application.
The person shall make an application for name approval considering the provisions laid down by the Act. Further, following general practise are adhered to choose and apply the name:
• The name should be easy to spell and remember;
• The name shall be able to provide a distinct identity to the company;
• It should be short & simple;
• The name should not contain any word as opposed to public policy or prohibited;
• It should not infringe any Trademark registered nor shall be similar or identical to any company/ LLP registered.As stated above, the application for name reservation can be made with maximum 2 names, out of which the registrar may approve any one name or may ask to provide additional names with remarks.
Once the application made is approved, the registrar shall reserve the same name for a period of 20 days. The promoters in guidance with the Professional shall make the application for incorporation of company within prescribed period of 20 days, failing to which the name reserved shall lapse and therefore fresh application shall be made for reservation of name for further period of 20 days.
Once name is approved, one needs to draft Memorandum of association and Articles of Associate. Both, MoA and AoA are charter document for a Private Limited Company. MoA stands for Memorandum of Association of company and AoA is abbreviated form of Articles of Association. Memorandum of Association of Company prescribes the scope of operations of company by enumerating the main object and activities of the company. Whereas the Articles of Association provides in what manner the operations and administration shall be carried on. Both documents having vital importance shall be drafted very carefully after consultation of Professional. The memorandum and Articles of the company shall also be filed in SPICe+ forms along with application for company formation and registration in India. The subscription to MoA and AoA shall be made by affixing DSCs of subscribers in electronic form.
After reservation of the name for proposed company by submitting form SPICE+ form, the application for issuance of Certificate of Incorporation shall be made. The application for online registration for company is also required to be made by online submission of Simplified Proforma for Incorporating Company Electronically i.e. SPICe+ forms. The application is submitted by paying the requisite Government Fess and Stamp Duty as applicable in case of concerned state on the portal. The application and allotment of PAN and TAN are also processed with the same application.
On review and verification of the application made for certificate of incorporation in SPICe forms, the Registrar on his satisfaction may issue the Certificate of Incorporation under his seal and signature in electronic form. The Certificate of Incorporation (CoI) issued will include the date of incorporation as well as the Permanent Account Number (PAN) of the company. It typically takes 15- 25 days to form a Private limited company and get the incorporation certificate. Incorporation certification is a proof that company has been created. It also includes your CIN number.
You can submit the Incorporation certificate, MOA, AOA and PAN with a bank to open your bank account.
The documents required for company registration can be grouped under three heads:
Documents for Directors:
• Two identity proof documents like Aadhaar, PAN, Passport, Driver’s License or any other Government-issued identity document would be required.
• Indian nationals are mandatorily required to provide PAN.
• Foreign nationals are mandatorily required to submit attested or apostille passport copy.
• In addition to the identity proof, the Directors must submit residence proof that is less than three months old.
• Proof of residence documents includes bank statements, electricity bill, water bill, gas bill and telephone bill.
• Companies registered in India must mandatorily maintain a registered office within India.
• Your registered office need not be a commercial space; it can be your residence too.
• In the case of leased property, the copy of lease deed for the registered office premises along with a NOC from Landlord and EB bill/property tax receipt/water bill copy of the registered office property.
• In case of own property, copy of sale deed along with the EB bill/property tax receipt/water bill copy of the registered office property.
Documents for Corporate Entities:
In case one of the shareholder or subscriber to the MOA and AOA is a Corporate Entity (Company, LLP, etc.,) then Certificate of Incorporation of the Body Corporate must be attached along with the resolution passed by the Body Corporate to subscribe to the shares of the company under incorporation.
Post-Incorporation Compliances:
All companies registered in India are required to maintain compliance under various regulations. Failure to maintain compliance can lead to penalty or disqualification of Directors. Some of the important compliances for companies registered in India include, but not limited to:
Appointment of Statutory Auditor: The Board of Directors must appoint a practicing Chartered Accountant within 30 days of incorporation.
Commencement of Business: Within 180 days of incorporation, the capital mentioned in the MOA [Memorandum of Association] must be deposited in a bank and commencement certificate must be obtained from MCA.
Income Tax Filing: Companies registered in India must file income tax return each year in Form ITR-6.
Annual Return: Companies registered in India must file MCA annual return each year in Form AOC-4 and MGT-7.
DIN KYC: DIN KYC procedure must be completed each year for the Directors of the company.
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