Newly Incorporated Companies in India

Everything One Should Know About A Newly Incorporated Company

Online Legal India LogoBy Online Legal India Published On 27 Jul 2022 Updated On 17 Jan 2023 Category Private Limited Company

Startups and companies with larger growth objectives choose the private limited company option as their preferred way to establish a business in India. The Companies Act of 2013 provides for the incorporation of Private Limited Companies and is managed in India by the Ministry of Corporate Affairs. Since it is a registered corporation, the firm has a distinct legal personality from its owners.

A minimum of 2 directors and subscribers/shareholders are required for registration. A person may hold both the positions of shareholder and director in a private limited company. The quantity of unpaid shares they own limits their obligation as shareholders or members of a private limited company.

Privileges Enjoyed by a Private Limited Company

1. Appointing an Independent Director is not necessary for Private Companies; 

2. Appointing a Woman Director is not required for Private Companies

3. The provisions governing the rotation of Directors do not apply to Private Companies; 

4. The formation of an Audit Committee, Remuneration Committee, or Nomination Committee is optional for private companies;

5. Private firms are not required to dematerialize their shares or other securities,  

6. the maximum ceiling on managerial compensation does not apply to them. 

7. They are also not required to employ a secretarial auditor.

Limitations Imposed on a Private Limited Company

1. Private business securities are not readily transferable; 

2. they cannot easily access outside financing; 

3. they are not published on stock exchanges, making it impossible for security holders to know the true worth of their investment in a private firm; and they are not listed on stock exchanges.

A private company's affairs are unknown to the public & it is not subject to strict legal oversight. 

4. The public lacks confidence in a private company. 

5. The maximum number of shareholders in a private limited company cannot exceed 200. 

6. Private companies cannot release prospectuses to the public.

Benefits of Newly Incorporated Companies

Individual Legal Entity

From the viewpoint of the law, a private limited company has a distinct legal personality. This indicates that the assets & liabilities of the company are distinct from those of the shareholders and directors. Both are thought to be distinct.

Liability is Limited

Members' and shareholders' personal assets cannot be utilised to settle the company's debts if it is in financial trouble.

Funding

A Private Limited Firm may solicit equity share capital from individuals or organisations interested in becoming shareholders of the company, as well as preference shares. Banks, investment firms, investment groups, venture capital companies, private equity firms, and other sources of funding are readily available to Private Limited Companies.

Separation of Management & Ownership

Without sacrificing their ability to vote, the shareholders delegate management and operational duties to the company.

Requirements to Register under Private Limited Company

Distinct Name of the Company

The proposed company name must be original and distinct, not similar to or identical to the name of an already existing business, LLP, or registered trademark.

Minimum 2 Shareholders or Persons

A minimum of 2 individuals may create a private limited company, of whom at least one director must be a resident of India. These individuals will serve as the company's shareholders and directors.

Capital Required

A minimum amount of paid-up capital is not necessary to form a private limited company. Investments might be made based on business needs.

Main Purpose of the Company

Before a company is formed, its primary objectives must be established in order to explain its commercial operations.

Process of Incorporation of Private Limited Company

Application for Name Reservation Filing:

By paying a government fee of Rs. 1000/-, a Private Limited Company name reservation application must be submitted in RUN Form. In the RUN Form, a maximum of 2 names may be applied. If the names are unique and are not the same as or similar to any existing company names, LLP names, or trademarks, the MCA will reserve them for 20 days; otherwise, the RUN form will need to be submitted again.

However, one name can be sent directly in the SPICe-32 form. This option should only be used if the applicant is certain that the name being filed for is original and not similar to or identical with an existing company, limited liability partnership, or trademark.

Acquiring Digital Signature Certificate

The next stage is to collect DSC from each of the proposed first directors & subscribers after the proposed company's name has been approved.

Documentation for incorporation

Documents for the creation of a Private Limited Company are generated based on KYC documents and other information from prospective initial directors and subscribers.

Certificate of Incorporation Issue

The filed forms & their attachments must be verified by the Registrar. If the filed forms are accurate and fulfil the needs of Companies, 2013 and any regulations established thereunder relating to company registration, he or she will then issue a Certificate of Incorporation.

Conclusion

By contacting a practising professional, it is simple to register a Pvt Ltd Company. The Indian Companies Act of 2013 requires the shareholders and directors to file yearly reports and other paperwork in accordance with the company's requirements in order to preserve the company's active existence after online registration. The most reliable source in this area is Online Legal India. Numerous clients have been served by the professionals at Online Legal India up to this point, and the majority of those clients are pleased with the services they received from the company.


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