Incorporation of a Pvt. Ltd Company

Easy Accessible Method for the Incorporation of a Pvt. Ltd

Online Legal India LogoBy Online Legal India Published On 27 Sep 2022 Category Company Registration

The most common kind of corporate body in India is the private limited company. A Private Limited Organization is a form of company that provides its stockholders with limited liability while imposing specific ownership limitations. The stockholders of the Private Limited Company are likewise protected legally.

The Ministry of Affairs has simplified the procedure of forming a Private Limited Company, resulting in an improvement in the convenience of conducting business in India.

Definition of a Private Limited Company according to Section 2(68)

"Private Corporation" refers to a firm whose articles 

  • restrict the power to transfer its shares, 
  • limit the number of its members to 200,  
  • prohibit any request to the public to subscribe to any of the company's securities.

Privileges to a Pvt. Ltd Company

1. Private companies are not needed to appoint an independent director; 2. Private companies are not required to nominate a woman director; 

3. Rotation of directors provisions do not apply to private companies.

4. Private companies are not required to form an Audit Committee, Remuneration Committee, or Nomination Committee; 

5. Private companies are not required to have a maximum ceiling on managerial remuneration; 

6. Private companies are not required to appoint a Secretarial Auditor; and 

7. Private companies are not required to have their shares/security dematerialized.

Limitations of Pvt. Ltd Companies

1. Private company securities are not freely transferable; 

2. Private companies have a difficult time obtaining external financial assistance; 

3. Private company securities are not listed on stock exchanges, so a shareholder/security holder does not know the true value of his investment in a private company.

4. The public has little faith in a private business since its affairs are unknown and it is not subject to tight legal regulation; 

5. The number of shareholders in a Private Limited Company cannot exceed 200 in any event; 

6. Private Companies cannot distribute prospectuses to the public.

Difference Between Pvt. Ltd Company & Public Limited Company

 

SL. No

Basis of Difference

Pvt. Ltd Company

Public Limited Company

  1.  

The minimum number of members.

7

  1.  

The maximum number of members.

200

Unlimited

  1.  

The minimum number of directors.

2

3

  1.  

Suffix with the name.

Pvt. Ltd

Ltd

  1.  

Issue of Prospectus

Cannot issue a prospectus.

Can issue a prospectus.

  1.  

Public Subscription

Not permitted.

Permitted.

  1.  

Share Transferability

Restricted.

Freely transferable.

Difference Between a Pvt. Ltd Company & One-Person Company

 

SL. No

Basis of Differences

Pvt. Ltd

One-Person Company

  1.  

The minimum number of members.

2

1

  1.  

The maximum number of directors.

200

1

  1.  

The minimum number of directors.

2

1

  1.  

Holding of AGM

Compulsory

Not required to hold AGM.

  1.  

Form AOC-4 (Filing of Financial Statements)

30 days from the Annual General Meeting.

Three months from the end of the financial year.

  1.  

Form MGT-7 (Filing of Annual Return)

Two months from the Annual General Meeting.

Three months from the end of the financial year.

  1.  

Conversion into a Section 8 Company

Pvt. Ltd Companies can be converted into a Section 8 company.

An OPC cannot be transformed into a Section 8 company.

  1.  

Foreign Nations

Foreign countries may become members or shareholders in a private company.

Foreign nations are not permitted to become members or shareholders in the OPC.

Advantages & Features of a Pvt. Ltd Company Incorporation

Separate Statutory Body

An entity is something that has a separate existence and a true existence. Under the Act, a firm is a statutory body and a juristic person. A juristic person is someone who isn't a natural or human creature. As a result, a business has the broad legal power and can possess property as well as incur obligations. A company's members (Shareholders/Directors) have no accountability to the company's creditors for such debts. As a result, a pvt ltd company is a statutory body distinct from its members.

Existence without interruption

A Pvt. Ltd company has 'perpetual succession,' which means it will continue to exist until it is lawfully dissolved. A business, as a separate legal entity, is undisturbed by the demise or other exit of any member and continues to exist regardless of membership changes. One of the most significant qualities of a business is perpetual succession.

Liabilities are limited

The state of being legally accountable only for a certain amount of a company's obligations is referred to as limited liability. Unlike sole proprietorships and partnerships, the member's liability for the firm's obligations is restricted under a limited liability corporation. In other words, the responsibility of a company's members is limited to the face value of the shares they have purchased. As a result, if a firm is limited by shares, the members' liability on a winding-up is limited to the amount outstanding on their shares.

Shares are freely and easily transferable

A shareholder's shares in a corporation limited by shares are transferable to any other person. When compared to the transfer of an interest in a firm managed as a sole proprietorship or partnership, the transfer is simple. Transferring shares is as simple as filling out and signing a share transfer form & giving it over to the buyer of the shares together with the share certificate.

Property ownership

As a legal person, a corporation can acquire, hold, enjoy, and alienate property in its own name. So long as the corporation is a running concern, no shareholder may lay a claim on its property. The stockholders do not own the company's property. The ultimate owner is the corporation itself.

The ability to sue and also be sued

Suing means to initiate legal procedures against someone or to file a lawsuit in a court of justice. Just as one individual can sue in his or her own name against another in that person's name, a corporation, as an autonomous legal body, can sue and be sued in its own name.

Relationship with Two People

A corporation can create a legitimate & enforceable contract with any of its members under the company form of organisation. It is also conceivable for an individual to be in charge of a corporation while simultaneously working for it. As a result, an individual might be a shareholder, creditor, director, and employee of the firm all at the same time.

Borrowing Power

A Pvt. Ltd corporation has more alternatives for borrowing capital. It can issue both secured & unsecured debentures and take public deposits, among other things. Even banks & financial institutions prefer to lend huge sums of money to corporations rather than partnership enterprises or private concerns.

Minimum Requirements for the Incorporation of a Pvt. Ltd Company

The minimum requirements for the incorporation of a Pvt. Ltd company are-

1. Distinct Business Name: 

The suggested company name should be unique and should not be similar or identical to an existing company, LLP, or Registered Trademark.

2. Minimum 2 Members: 

A Private Limited Company can be established by at least two people who will function as the company's shareholders and directors, one of whom must be a resident of India.

3. Capital Requirements: 

There is no minimum paid-up capital needed to form a Private Limited Company. Investment might be made based on the needs of the business.

4. Major Objectives Of The Company: 

Before forming the firm, the main objectives of the company must be mentioned in order to characterise the company's commercial operations.

Steps for the Incorporation of a Pvt. Ltd Company

The steps that are needed to be completed for the incorporation of a Pvt. Ltd Company are as follows:-

Filing for the Reservation of Name

The promoters of the firm should choose one or more acceptable names for the pvt. ltd company in order of preference to provide the Registrar flexibility in determining the availability of the name. The company's name must conclude with the words "Private Limited." The name should not be offensive or similar to the name of an existing firm or LLP. Furthermore, the name must not be one that is outlawed by the 'Emblems and names Act, 1950.' Once the required names are sent to the Registrar using the specified form, the Registrar will evaluate and approve the submission. A Private Limited Company's name is normally approved within 3-5 working days.

Acquiring DIN & DSC

The second stage in registering a Private Limited Company is to secure a Director Identification Number or DIN for each prospective Director in the Private Limited Company, as well as a Digital Signature from one of the Directors. Once the persons who will be the Directors of the prospective Private Limited Company have received the above, an application for the name of the Private Limited Company must be submitted.

AOA & MOA Drafting

The Memorandum of Association or MOA & Articles of Association or AOA are essential papers for the incorporation of a Pvt. Ltd Company in India. The MOA & AOA are the documents that outline the scope of business and how the Company will be run. These documents are referred to as the Company's Constitution. These documents illustrate the Company's connection with its shareholders. These documents are now available in electronic form, as e-MOA and e-AOA. These papers can be submitted online using SPICe+ forms.

Filing for Incorporation of a Pvt. Ltd Company

Following the approval of the name, the following papers, along with the application & necessary fees, must be filed with the Registrar:

  • Association Memorandum
  • Articles of Association or AOA, if applicable
  • Directors' Declaration
  • The Directors' Affidavits
  • A statement that the provisions of the Act & the regulations enacted under it have been met. This declaration must be signed by a lawyer of the Supreme Court or High Court, an attorney or a pleader with the right to appear before the High Court, a secretary, or a Chartered Accountant in full-time practice in India who is involved in the formation of a company, or a person named in the Articles as a Director, Manager, or Secretary of the Company.

Registered Office

It is vital for the firm to declare the address of the registered office when filing the SPICE+ Part B or a company can create its registered office place within 15 days after the acceptance of the SPICE+ Form or should inform the address within 30 days using e-form INC-22.

Application for the incorporation of a Pvt. Ltd Company

Once all of the paperwork are finished, the application for the incorporation of a Pvt. Ltd Company is made using the SPICe+ Part B Form, which must be accompanied by SPICe MOA and AOA, AGILE-PRO, URC-1, and INC-9, as well as other required details such as director's, subscribers, and company's details, as well as the allocation of PAN and TAN. The Certificate of Incorporation for the Private Limited Company will be issued following the verification of the papers by the relevant Registrar of Companies.

The Issuance of the Certificate of Incorporation

The Registrar shall review the filed forms & their attachments, and if the filed forms are appropriate and comply with the requirements of Companies, 2013 & also the rules issued thereunder regulating company registration, he shall issue a Certificate of Incorporation.

Conclusion

The most common type of corporate entity for beginning a business is a Private Limited Company. We at Online Legal India have skilled and competent specialists to assist you in the procedure of incorporation of a Pvt. Ltd Company by carefully adhering to the Government's required method and Private Limited Company Incorporation requirements. Our pros will plan meticulously and guarantee that the procedure is completed successfully.


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