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FAQ On Private Company
Private Limited Company is mode of registration of business set up in India. It gives you a separate legal entity for operating your business with your desired unique name which also gets reserved during its registration. A body of central government of India known as Ministry of Corporate Affairs is is primarily concerned with administration of the Companies Act 2013, the Companies Act 1956, the Limited Liability Partnership Act, 2008 & other allied Acts and rules
& regulations framed there-under mainly for regulating the functioning of the corporate sector in accordance with law.
What is a Legal Requirement for Private Limited Company Registration?
Legal Requirement for Private Limited Company Registration –
- *Minimum 2 directors (One should be Resident of India) and
- minimum 2 shareholders (The directors can also be shareholders)
*“Every company shall have at least one director who has stayed in India for a total period of not less than one hundred and eighty-two days in the previous calendar year.”( Effective April 1, 2014)
Advantages of Private Limited Company Registration
A private limited company enjoys the following advantages:
Ease of formation:
A private company can be formed by two persons only. It can start its business immediately after incorporation and is not required to wait for the certificate of commencement of business.
Greater flexibility:
A private company is required to perform lesser legal formalities as compared to a public company. It enjoys special exemptions and privileges under the company law. Therefore, there is greater elasticity of operations in a private company.
Quick decisions:
In a private company there are a lesser number of people to be consulted. Family members, relatives and close friends form a private company. They can take prompt decisions.
Secrecy:
A private company is not required to publish its accounts or file several documents. Therefore, it is in a better position than a public company to maintain business secrets.
Continuity of policy:
The same persons continue to manage the affairs of a private company. Relations between them are close and continuity of policy can be maintained.
Limited liability:
The liability of members in a private company is limited.
Personal touch:
There is greater personal touch with employees and customers in a private company. There is also greater incentive to work hard and take initiative in the management of business due to little separation between ownership and management.
Documents required for Private Limited Company Registration
Pancard is compulsory for Directors/promoters
- Proof of identity (any one)
- Voters Identity Card/ Passport/ DrivingLicense
Residential Proof (any one)
- Bank / Electricity Bill/ Telephone bill/ Mobile bill.
For registered office address proof
- Conveyance or Maintenance Receipt or
- Lease deed/Rent Agreement etc. along with rent receipts) (if any) AND
- Copy of the utility bills (not older than two months Any one of below)
- NOC
FAQ’s on Private Limited Company Registration
What is a Private Limited Company?
- It is a company which is privately managed by directors and shareholders.
- It is not entitled to sell its shares to public investors. Hence they are not allowed to trade on the stock exchanges.
Types of Private Limited Company?
- Company Limited by Shares: The shareholder’s liability is limited to the amount paid up on shares.
- Company Limited by guarantee: The shareholder’s liability is limited at the amount agreed to be committed by the shareholders to the company.
What are Memorandum and its contents?
Memorandum of association is the document which states the objects for which the company is incorporated. It has following clauses:
- Name Clause
- Registered Office Clause
- Object Clause
- Association Clause
- Capital Clause
- Liability Clause
What are Articles of association?
The Articles of association provides a framework for how the company should be managed by the directors.
What is the difference between Authorized capital and paid up capital?
The authorized capital is the capital limit authorized by the Registrar of Companies up to which the shares can be issued to the members / public, as the case may be. The paid up share capital is the paid portion of the capital subscribed by the shareholders.
What is the minimum Authorised and paid-up capital for Private Limited companies?
Minimum Authorised Capital- Rs. 1,00,000/- Minimum Paid-up Capital is Rs.2/-
What is Director Identification Number (DIN)?
Any person intending to become a director in a proposed company will get a director identification number, issued by the Ministry of Corporate Affairs on Incorporation.
What is Digital Signature?
The digital signature is the digital code created for the purpose of affixing them to digital documents and proving equal authority as the handwritten signature. DSC validates the authenticity of the signature.
What are the duties of a director?
- Duty to act as per the articles of the company The director of a company shall act in accordance with the articles of the company.
- Duty to act in good faith. A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community and for the protection of environment.
- Duty to exercise due care A director of a company shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment.
- Duty to avoid conflict of interest A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company.
- Duty not to make any undue gain A director of a company shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners, or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain to the company.
- Duty not to assign his office A director of a company shall not assign his office and any assignment so made shall be void.
Punishment for contravention:
If a director of the company contravenes the provisions of this section such director shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.
What address to be given as a registered office of the Company?
Under Section 12, a company shall, on and from the 15th day of its incorporation and at all times thereafter, have a registered office capable of receiving and acknowledging all communications and notices as may be addressed to it. The company can furnish to the registrar verification of registered office with in 30 days of incorporation in the manner prescribed. As per rule 25(1) of Companies (Incorporation) Rules 2014, the verification of registered office shall be filed in Form no INC 22.
Where the location of the registered office is finalised prior to Incorporation of a company by the promoters, the promoters can also file along with the Memorandum and Articles, the verification of its registered office inEForm Spice.
Is it allowed to change the registered office of the company after its incorporation?
Yes, the company can change the registered address any time by complying with the provisions of Companies act 2013.
Nature of Compliances?
Less administrative and annual compliance is required to be followed by Private limited Company as compared to the public limited company.
Can a Foreign National/Company be a director/shareholder in any private limited company in India?
Yes. Any foreign national or company or an NRI (non-resident Indian) can become a director, or hold a share of a private limited company in India. But, at least one director on the Board of Directors of a private limited company in India must be a Resident of India. “Every company shall have at least one director who has stayed in India for a total period of not less than one hundred and eighty-two days in the previous calendar year.”( Effective April 1, 2014).However, holding shares of a private limited company in India by foreign nationals/companies will be subject to the contemporary FDI Guidelines of India.
The tentative period for incorporating a private limited company?
Name approval by filing Run form takes 2-3 working days subject to ROC approval and if called for resubmission then it will take more 3-4 working days after resubmitting other names and incorporation takes 6-7 working days after getting all Documents from the proposed Company.The ministry is working to make this a One day Process.
What document will be received after incorporating a Private Limited Company?
- Digital Signatures of all the directors (DSC)
- Director identification number of all the directors (DIN)
- Certificate of Incorporation
- Memorandum of Association
- Articles of Association
Qualification for becoming a director in Private Limited Company?
Any individual can become a Director in a private limited company. For becoming a director in a company, no professional or educational qualification is required.
No age limit need be prescribed as per law. There should be adequate disclosure of age in the company’s documents. It should be the duty of the Director to disclose his age correctly.
What are other registration requirements of a Private Limited Company?
- Shop & Establishment Act.
- GST Registration.
- Profession Tax.
- MSME
- Provident Fund
- Import Export Code
Can a proprietorship business can be converted into a Private limited company?
Yes, a proprietorship business can be converted into a Private Limited Company.
Can an LLP be converted to a Private Limited Company?
Several businesses started in India as Limited Liability Partnership (LLP), may now wish to convert into a private limited company for more growth in business or for infusing equity capital. An LLP can be converted into a Pvt. Ltd. company as per the provisions contained in Section 366 of the Companies Act, 2013 and Company (Authorised to Register) Rules,2014.
However, there are various requirements which need to be satisfied for converting an LLP into a Private Limited Company, for instance, an LLP must have at least 7 partners, approval from all the partners is required, advertisement in newspaper is to be done in a local and a national newspaper, a No Objection Certificate (NOC) is required from the ROC where such LLP is registered and then all the incorporation process has to be undertaken.
Can one person can be converted into a Private Limited Company?
There are two ways of converting a One Person Company into a Private Limited Company as per the act. The conversion can be a voluntary one or by compulsion. Voluntary conversion into a private limited company is not permitted unless two years is expired from the date of incorporation of the OPC. Though, if the paid-up share capital exceeds rupees 50 lakhs or if its average turnovers exceed INR 2 crores then within two months, the OPC could convert into a private limited company.
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