Restricted rights to transfer of shares

Companies Act, 2013 expressly restricts the transfer of shares of a Pvt. Ltd. Company. Though restricted, the shares can be legally transferred by fulfilling a few legal compliances, as laid by the Companies Act, 2013.

Limited Liability

Private limited company protects your personal assets with the “Limited Liability” feature. Maximum Liability of the shareholders is limited to the extent of the shares they hold.

Independent / Separate Legal Entity

A Pvt. Ltd. Company is an artificial and Independent Legal Person, established under provisions of the Companies Act 2013. This means the company would be treated as a separate legal entity.

Minimum of two & Maximum of 200 shareholders / members

There must be a minimum of two members to incorporate or register a Pvt. Ltd. Company and the Maximum number cannot exceed 200.

Perpetual Succession

A Pvt. Ltd. company has perpetual existence. Which means, they continue to do business even if the partners / directors change.

No minimum paid-up capital requirement

There is no minimum Capital required to start a Private Limited Company. Earlier there was a minimum requirement of Rs. 1,00,000, but the new Companies (Amendment) Act, 2015 has removed that requirement.

External funding possibility

Private Limited Company is best for any startup or business that is looking for external investments. It is the only form of business entity (excepting a public limited company) which can raise funds from the Venture Capitalists or Angel investors or PE firms.

Minimum of two (2) Directors

As per the Companies Act of 2013, a Private Limited Company needs to have at least two (2) directors. However, they are not required to appoint any independent directors. (Generally, in most of the cases, the shareholders themselves act as directors).

Firstly, it is NOT at all mandatory to register a Private Limited Company for starting a business in India. There are many other ways to start a business. So, consider the below points before deciding to choose the Private Limited Company as your choice of entity to do business.

Opt for a Private Limited Company only: 

• If you are planning to get investments or funding from Angel, Seed or Venture Capital Investors
• If you want to Limit your Liability
• If you have or are considering expansion plans for your business
• If you are considering for Employee Stock Options or ESOPs
• When you need a separate “Legal Identity” for your business
• Where you don’t want to use your personal assets as collateral

Note: Do not get carried away by several online low-cost offers for registration of a company. Private Limited Company form is not a one-time-affair. There is a significant recurring costs involved and several Legal Compliances need to be fulfilled regularly (regular Board Meetings, AGM, Compulsory Audit, RoC filing, etc). Failing / delay to meet the legal compliances will attract additional penalty.

Also, understand that all those Legal Compliances are a bit complex for common people and hence you would need the help of a company registration consultant.

If you are unsure of choosing the right form of entity for your business, feel free to get in touch with us. Our Business Expert will guide you with the proper form of entity, suitable for your needs.

Recently, the Government has made the registration of a Private Limited Company an easy online process. A minimum of two directors and shareholders are required. A natural person can be a director as well as a shareholder. However, a body corporate can also become only a shareholder.

Steps for Registering / Incorporating a Private Limited Company

Step 1: Obtain Digital Signature Certificate or DSC

It is mandatory for all the Directors, Shareholders and witnesses of the Memorandum and Articles of Association to have a valid Digital Signature Certificate (DSC). The registration process is online and the forms need to be signed electronically with the digital signature.  The Digital Signature Certificates (DSC) must be obtained only from government recognized certifying agencies.

Step 2: Name Approval / Reservation

In order to register or incorporate a Private Limited Company in India, the name for the proposed company should be approved by the MCA Authorities. Hence, it is mandatory to apply for the Name Reservation before applying for incorporation. The proposed Company Name has to be unique and should not have been taken by any other business. Availability of the name can be searched on http://www.mca.gov.in/mcafoportal/showCheckCompanyName.do

Also, the proposed company name should not be already Trademarked by anyone else. You can check the Trademark availability here- https://ipindiaonline.gov.in/tmrpublicsearch/frmmain.aspx

Few General Guidelines for Name Approval / Reservation:

• The Proposed Name should be easy to spell and remember
• The proposed name should provide a distinct identity to the company
• To the extent possible, the proposed name should be short & simple
• The proposed name should not contain any word opposed to public policy or should not be Prohibited by Law
• Proposed Name should not infringe any Trademark registered and should not be similar or identical to any existing Company / LLP

Step 3: Application for issuance of Certificate of Incorporation

Once the name is reserved and approved, the same shall be valid for only next 20 days. Within the valid time, an application for obtaining the Certificate of Incorporation using SPICe forms has to be filed with the MCA.

Drafting Memorandum of Association (MoA)

Memorandum of Association is a legal document which showcases the Main Objectives of a private limited company. It also must contain the information on the Promoters Shareholding Pattern, etc.

Drafting Articles of Association (AoA)

Articles of Association is a legal document which has the rules and regulations for the general management of a private limited company. They define the rights, duties, powers of the management of a company and also provide the manner in which the operations and administration should be carried on.

SPICe Form (Simplified Proforma for Incorporating Company Electronically)

The Ministry of Corporate Affairs (MCA) has introduced the SPICe Form INC-32. Form INC-32 must be accompanied by supporting documents including Details of Directors & Subscribers,, Declarations, Identity Proof, Address Proof, MoA, and AoA etc.

Once the eForm is filed, it shall be processed by the MCA’s Central Processing Centre. If found complete, the company would be registered and Corporate Identification Number (CIN) would be allocated along with a Certificate of Incorporation.

AGILE PRO

Agile Pro stands for the Application for Goods and services tax Identification number, employees state insurance corporation registration plus Employees provident fund registration, Profession tax Registration, Opening of bank account and Shops and Establishment Registration Number.  (AGILE PRO S – since 2021).

Hence, as the name itself suggests, agile pro form facilitates ancillary business registrations that a company is subjected to, upon incorporation. This is a concept introduced by the government after considering the ease of doing business in India.

Directors/Shareholders Documents:

1. PAN Card of the Shareholders / Directors  
2. ID Proof – Voter’s ID / Passport / Driving License / Aadhaar
3. Address Proof –  Latest Bank statement with transactions / Telephone bill / Mobile Bill not older than 60 days
4. Passport Size Photograph

Registered Office Documents:

1. Address Proof of the Premises:
   • Rental agreement or Lease agreement if the premise is rented / leased
   • Latest tax paid receipt / Sale deed if the premise is owned by any of the Directors
2. Latest Electricity bill / Telephone bill / Gas bill
3. NOC from the owner of the premise

Timeline – How long does it take to register a Private Limited Company in India

Normally, if everything is in order, it may take anywhere between 8 to 12 business days for registering a private limited company. Below, breakup depicts the approximate timeline for registering a Private Limited Company in India:

• Getting a DSC (Digital Signature Certificate) – 1-2 Days
• Name Approval – 3 to 5 Days
• Getting Certificate of Incorporation – 3 to 5 Days

This timeline is further subject to Government processing, approval time, public holidays, etc.

The basic Government fee starts from as low as Rs.3151. Please note that the general fee includes the actual charges of all general formalities such as DSC, DIN, Form Filing, Name Approval, etc and stamp duty charges as well.

Also, keep in mind that Stamp Duty charges vary from one state to another. Eg: If you are registering your company in Bangalore, the Stamp Duty Charges levied by Karnataka State Govt are applicable. Therefore the government fee will change depending on the state you are in.

The Charges will also change as per the amount of share capital of your company and the number of Directors you wish to appoint. This is because you would need DIN and DSC for each director.

After incorporation / registration of a company, certain additional compliances needs to be performed. Though the requirements differ from company to company, we have listed a few important Post Incorporation Compliance which should be complied by a company in general.