All about Private Limited Company

PRIVATE LIMITED COMPANY

A private limited company is a legal entity. It is a company which is held by a relatively small group of people known as the shareholders of the company. Minimum of 2 people are required to start a private limited company but the total number of shareholders shall not exceed 200 during the life of the company. The company cannot raise fund through general public by issuing shares i.e. general public cannot take part in private limited companies. A private limited company have a mandatory compliance that has to be done every year. The company cannot raise fund through general public by issuing shares i.e. general public cannot take part in private limited companies.

ADVANTAGES OF PRIVATE LIMITED COMPANY

  1. Maximum limit of shareholder is 200 and there is no interference of general public

  2. Liabilities of members is limited to the extent of their shareholding

  3. Separate Legal entity: the private limited company has a distinct identity from its member and directors.

  4. Control on the ownership of the company: Usually, the directors are the shareholders of the company, therefore, control and ownership remains in their own hand and no outsider interfere in the management of the company

  5. Easy to get borrowings and financial assistance from banks and financial institutions by issuing securities like debentures, deposits etc.

  6. Death and inability to continue as a member do not effect the legal status of the company. As the company will remain in existence even if the members or directors die.

HOW TO DO REGISTRATION OF PRIVATE LIMITED COMPANY

Nowadays, the whole registration process is done online. Now no more paper work and physical verification are required to register a Company. We can register a Company without visiting any government office or department. An online request submitted to the Registrar of Companies for registration of a private limited company in Form no. INC-32 (SPICE) at the time of incorporation along with required documents and fees as prescribed under Companies (Registration offices and fees) Rules, 2014 which depend upon the capital structure of the company.

STEPS TO REGISTER A PRIVATE LIMITED COMPANY:

Step 1:- Application for allotment of DSC & DIN of the Directors of the company

Step 2:- Application for name reservation

Step 3:- Preparation of documents which are required for registration of company

Step 4:- Drafting of Memorandum of Association (MOA) & Article of Association (AOA)

of the company

Step 5:- Filing of Forms INC-32 (Spice) along with INC-33(MOA) & INC-34(AOA) to the ROC

Step 6:- Payment of application fees and Stamp Duty to the ROC

Step 7:- ROC will check and make verification of documents & Forms

Step 8:- ROC will issue Certificate of Incorporation

MANDATORY REQUIREMENT FOR REGISTRATION:

  1. Minimum two directors

  2. DIN & DSC of the directors

  3. Minimum 2 shareholders are required

  4. ID proof of the Directors (PAN Card)

  5. Address proof of the Directors (Aadhaar Card/ Driving License/ Passport)

  6. Address proof of the proposed company for registered office of the company:

  • If property is owned then sale deed or municipal tax receipt

  • If property is rented then rent agreement

  1. Utility Bill not older than 2 months

  2. NOC from the owner of the Property

  3. Contact details of the Directors and of the proposed company

  4. Certificate from Professional like Company Secretary, Chartered Accountant, Cost Accountant etc.

As per Companies Act, 1956 the minimum capital required for incorporation of a company is Rs 100000/- but, as per Companies Act, 2013 there is no minimum capital required i.e. a person can start his business with less than Rs. 100000/-.

The whole procedure is completed within 10-12 days

WHERE TO GET REGISTER

Registrar of Companies (ROC) comes under the Ministry of Corporate Affairs that deals with the administration of the Companies. There is total 22 Registrar of Companies in India. Usually, one state has one ROC, but there are some states having more than one ROC e.g. Maharashtra and Tamil Nadu and there are few states where one ROC for all of them e.g. Delhi & Haryana both has only one ROC. ROC maintains records related to the incorporation of companies, their compliances and oversees government policies on relating matters. The company will get registered with the Registrar of Companies in whose jurisdiction the registered office of the proposed company will fall.

ROC FILING

Certain information is required to file with ROC. All companies are required to file certain documents every year. Failure in filing these information and documents can attract the penal provisions on company, directors and other officers of the company. Hence it is advisable for the management of the company to take proper care of all necessary compliances. There is two type of ROC Filing one is mandatory filing and another one is event-based filing.

MANDATORY FILING:

  1. Within 30 days of incorporation of a company shall file information for the appointment of Auditor in Form ADT-1;

  2. Annual Return in Form AOC-4 and MGT-7 at the end of every financial year; and

If any company fails to file Annual Return to the ROC then the company will be punishable by a fine of Rs. 50,000/- which may extend to Rs. 5,00,000/-.

EVENT BASED FILING:

  1. Alteration or changes made in MOA or AOA;

  2. Appointment or removal of directors or changes in their designation;

  3. Appointment or removal of Auditor;

  4. Increase in Authorized Capital of the Company;

  5. Change the name or address of the company; etc.

CHECKLIST FOR ANNUAL COMPLIANCE

  1. Annual General Meeting of the shareholders must be held by the company within 6 months at the end of every financial year

  2. Balance Sheet & Profit and Loss A/c of the company must be audited by the Chartered Accountant

  3. Audit Report from Chartered Accountant

  4. A copy of notice for AGM

  5. Director’s Report

  6. List of shareholders along with their shareholding

  7. Report must be signed by professionals like Company Secretary, Chartered Accountant, Cost Accountant

These are some of the important compliances a Private Limited Company has to take care of.

Author: Shivani Singh

Owning a Private Limited Company- beneficial or not?

Almost everyone knows about Private Limited Companies or may have heard about it. But what is the exact meaning of this term? Some of you may know while some not. So, why not we talk about Private Limited Companies today? The topic of our concern of this article will be the meaning, advantages as well. So, without wasting even a single minute, let’s just start discussing out topic.

Private Limited Companies, as the name suggests are small businesses that are operated privately and there shareholders are restricted to a number of 50, not more than that. These shareholders are restricted to trade any share privately. Unlike public companies, private companies do not require any audits, report results etc. and have completely different rules and regulations. You have to do the Private Limited Company registration in order to get it recognized. You can do the Pvt Ltd registration online. Moving further; I am going to talk about the advantages and disadvantages of Private Limited Companies.

Advantages:

  1. Distinct existence: One of the benefits of owing a Private Limited Company is that you have your own existence. The company has its own set of rules and regulations. They can own their properties and incur debts. The shareholders are at benefit as for any sort of debts they are not liable to the creditors of a company.
  2. Narrow liability: The term narrow here is describing itself as limited. Limited liability is the term which shows that these Private Limited companies are liable in a limited manner when it comes to talk about debts. As compared to partnerships, where the liability in terms of company’s debt is not limited, Private Limited Companies show limited or narrow liability. Shareholders are liable to the number of shares owned by them and not more than that.
  3. Transferability of shares: In case of Private Limited Companies, I can say that you’ll never face any sort of difficulty when it comes about share transferring. It is very easy as well as free. If you compare this with any business based on partnership then you’ll find it difficult which is not in the case of Private Limited Companies. In order to transfer the shares, all you have to do is filling and sign the share transfer form and hand it over to the buyer along with the share certificate.
  4. Borrowing funds: IF you want to borrow funds in any Private Limited Company, then you would be happy to know that the companies can issue debentures, secured as well as unsecured deposits etc. Not only have that but even banks preferred to give more financial assistance to these companies when compared to any partnership business.
  5. Undisturbed existence: These types of companies are not affected by the death or departure of any member as they have their own undisturbed existence and have a perpetual succession which is considered to be one of the most important parts of these types of companies.

Disadvantages:

  1. Registration: Private limited company registration is a time taking process. If we talk about price then Private Limited Company registration fees is high. Here the partnership businesses are benefited as they do not need to be registered. Although you can register any Private Limited Company online but may possess you problems.
  2. Profit sharing: Profit sharing is a big thing in Pvt limited companies as the profit is shared amongst a large number of people.
  3. Restriction in Capital markets: One of the biggest problems faced by Pvt Ltd companies is this restriction and because of that cannot attract or sell shares to any outside investors.

After knowing the two sides of owning a Pvt Ltd Company, one can own it and if want to register then there are many websites that may help you to know Pvt Ltd company registration steps and other information you require. The question that lies here is that whether you want to own a company or not. If you’re planning to start your own company then don’t waste time and register your company soon!