A Private Limited Company is an entity registered under The Companies Act, 2013. The name itself suggests that the liability of the members is limited. The Ministry of Affairs (MoA) of Government of India mandates Private Limited Company Incorporation. The Private Limited Company Registration is necessary to enjoy the tax benefits incorporated by the Ministry of Affairs. In this article, we will discuss the procedure followed for Private Limited Company Incorporation in India.
What is a Private Limited Company and its Characteristics?
Private Limited Company is the most popular type of business entity in India. A Private Limited Company is a type of company which offers limited liability to its shareholders with certain restrictions imposed on the ownership. Legal Protection is also provided to the shareholders of the Private Limited Company.
The Ministry of Affairs has made the process of Private Limited Company Incorporation very simple now; hence leading an increase in the ease of doing business in India. The Characteristics of the Private Limited Company are as follows:-
- According to the provisions of the Companies Act, 2013 a minimum of 2 members and maximum of 200 required for a Private Limited Company.
- The Liability of each shareholder is limited. This means that if the Company faces loss, the shareholder is liable to sell their assets for payment.
- The Company keeps on existing in the eyes of the law in case of death, the bankruptcy of member or insolvency.
- No need to maintain an Index of Members
- Only 2 Directors are needed for a Private Limited Company Incorporation.
- No need to issue a prospectus of the Company.
- Minimum subscription is needed for carrying on the business.
What are the Steps followed for Private Limited Incorporation in India?
The Government for Ministry of Corporate Affairs[1] shall for the purpose of promoting the India’s Ease of Doing Business (EODB) initiatives, has notified and deployed a new Web Form called ‘SPICe+’. SPICe+ shall put forward 10 services by the three Central Govt Ministries & Departments that includes the Ministry of Labour, Ministry of Corporate Affairs & Department of Revenue in the Ministry of Finance and also one Maharashtra State Government. The incorporation of all the new companies’ from 15th February 2020 through SPICe+ would be compulsorily required to submit an application for opening company’s Bank account in the AGILE-PRO linked web form.
The purpose of introducing this web form is for saving the time, extra procedural requirement, and high costs for starting a business in India and this was applicable with effect from 15th February 2020 for all new company incorporations. The earlier RUN service would be applicable only for ‘change of name’ of an existing company.
The process followed for Private Limited Company Incorporation is as follows:
- SPICe+ shall be an integrated Web Form.
- SPICe+ shall be divided into two parts :
Part A- reservation of name for new companies and
Part B – offering a bunch of services with the procedural requirement given below:-
Name Approval Â
The first step to be followed in Private Limited Company Registration is Filing for Name Reservation through the incorporation form i.e. SPICE+ (Part A). There should be two names filed and the Registrar will choose between the two names and will approve one. The Registrar can reject both names and can ask the applicant for re-submission of New Names. The filing fee for the same is Rs.1000 only.
DSC and DIN
The Registration Process of the Company is online, so the Digital Signature Certificate (DSC) is required. The DSC can be obtained by the Authorized Agency recognized by the Government of India. DSC is mandatory for all the subscriber and witnesses mentioned in the Memorandum and Articles of Association.
DIN is allotted to an individual to act as director in a company.Any person (not having DIN) proposed to become a Director in a new Company can apply for Director Identification Certificate (DIN) through the SPICe+ Form. Only three directors without DIN can apply for DIN in SPICE+ part B.
MoA and AoA Drafting
The Memorandum of Association (MoA) and the Articles of Association (AoA) are vital documents for a Private Limited Company Incorporation in India. The MoA and AoA are the documents which clarify the scope of operation and define how the Company will be operated. Both documents are referred to as the Constitution of the Company. These documents explain the relationship of the Company with its shareholders. Now, these documents are in electronic form, i.e. eMoA and eAoA. These documents can be filed online through SPICe+ forms.
Registered Office
It is important for the company to mention the address of Registered office at the time of filing the SPICE+ Part B or a company can establish within 15 days of the approval of SPICE+ Form its registered office place or shall intimate the address within 30 days through e-form INC-22
Application for Company Incorporation
Once all the documents are completed, the application for Private Limited Company Incorporation is made through the SPICe+ Part B Form which should be accompanied by SPICe_MOA and AOA, AGILE-PRO, URC-1 and INC-9 and fill other required details like director’s, subscriber’s and company’s required details with the allotment of PAN and TAN. After the verification of the documents by the concerned Registrar of Companies, the Certificate of Incorporation will be granted for the Private Limited Company.
Read our article:Private Limited Company Registration Procedure in India
What Documents are Required for Private Limited Company Incorporation in India?
In case the Director is an Indian National
- Identity Proof of Proposed Directors, i.e. Permanent Account Number (PAN) Card.
- Address Proof of Proposed Directors, i.e. Adhaar Card, Ration Card, Driving License.
- Proof of Residence of Proposed Directors, i.e. Bank Statement, Electricity Bill, Phone Bill.
- Copy of utility bills not older than 2 months
- Board Resolution
- Digital Signature Certificate of Directors
- Director Identification Certificate of Directors
- Proof of appointment of Authorized Signatory for GSTN
In case if the Director is a Foreign National
- Identity Card of Proposed Director, i.e. Passport.
- Proof of Residence of Proposed Director, i.e. Residence Card, Drivers License, Passport.
- Proof of Residence of Proposed Directors, i.e. Bank Statement, Electricity Bill, Phone Bill.Â
What is the Benefits of Private Limited Company Incorporation in India?
The benefits associated with registering a private Limited Company Incorporation in India are as follow:-
Separate Legal Entity
The Company is a legal entity and a juristic person established under the Companies Act, 2013. The shareholders of the Company have no personal liability to the creditors for Company debts.
Perpetual Succession
In case of death or insolvency, the Company exists in the eyes of the law forever. Until it is legally dissolved there will be uninterrupted existence of the Company.
Owning Property
Being an artificial person, the Company can acquire, alienate, hold, and enjoy the property in its own name.
Foreign Investment
Through Foreign Direct Investment (FDI), foreign investments are accepted, which helps in the building of the economy of the country.
Conclusion
A Private Limited Company is the most popular type of corporate entity for starting a company. We at Corpbiz have experienced and expert professionals to help you in the process of incorporation of your Private Limited Company Incorporation by strictly following the mandated process of the Government and by adhering to the guidelines of Private Limited Company Incorporation. Our professionals will plan ideally and will ensure the successful completion of the process.
Read our article:Advantages of LLP (Limited Liability Partnership) over Private Limited Company
