PRIVATE LIMITED COMPANY

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Private Limited Company

A Private Limited Company is a company that belongs to a small group of people. Registered for predetermined objects and owned by a group of members called shareholders. Startups and companies seeking high growth often choose a private limited company as the appropriate business structure.
A private company defines under section 2 (68) of the Companies Act, 2013, a company having a minimum paid-up share capital as may be prescribed, and which by its articles,
i) restricts the right to transfer its shares;
ii) except in case of One Person Company, limits the number of its members to two hundred;
iii) prohibits any invitation to the public to subscribe to any securities of the company.
The Businesses get recognised as a Company through their registration under the Companies Act of 2013 in India, governed by the Ministry of Corporate Affairs, widely known as MCA.

Benefits of Private Limited Company

No Minimum Capital
In a Private Limited Company, there is no minimum capital required in the setup process and it can be registered with a number of only Rs. 10,000 as the total authorized share capital.
Separate Legal Entity:
A Private limited company has a different legal identity in the court. In other words, company assets and liabilities are not the same as directors' assets and liabilities. Both are calculated as different. Because the private limited company separates management and ownership, the manager is responsible for the success of the company and also for the loss of the company.
Liability is limited for the Directors
In partnership firms, the Partner's liability is unlimited and at- risk in case the business fails to repay its loans and liability. So, the partner's personal savings and property would be at risk. But in a private limited company, only its investment is made liable.
Better reputation in the Market
Corporate Customers. Vendors and authoritative Govt. Agencies prefer to transact with private limited instead of proprietorship or partnership firms.
Easy to raise funds and loans
Private Limited company enjoys wide options to raise funds through bank loans, Angel Investors, and Venture Capitalists, in comparison to LLPs and OPCs.
Easy to sell
OPC is pretty easy to sell, with less cost and the least documentation involved in selling.
Easy to attract Employees
It is a challenge for startups to build a team and keep it in the long term. Confidence in the limited structure of the individual makes it easier to hire and motivate employees through company meetings and stock options.
Investor's favourite business structure:
Angel Investors and Venture Capitalists will prefer private limited companies due to the transparency and the risk is limited.

Procedure of Private Limited Company

1
RUN Name Approval

An application for company name approval is first submitted to the Ministry of Corporate Affairs to reserve the company name. In the name approval application, 1 or 2 names with business objectives can be submitted. If a name approval is rejected, 1 or 2 more names can be resubmitted. Normally, the MCA approves all name approval applications in less than 5 working days.

2
Digital Signature for Directors

In India, the Ministry of Corporate Affairs does not allow wet signatures. All signatures for filings with the MCA must be completed with a digital signature that is issued by a Certification Authority in India. Hence, digital signatures are mandatorily required for the Directors before incorporation. Digital signature for the Directors will be obtained through an Authorized Certifying Authority by LegalGyane. To obtain Digital Signature, the Directors will have to submit a copy of their identity proof and complete a video KYC process. If the Director is a foreign national, the passport and other documents submitted must be apostilled by a local embassy.

3
Incorporation Application Submission

Once the digital signatures are obtained, the incorporation application can be filed in SPICe Form to the MCA with all relevant attachments. Along with the incorporation application, the Memorandum of Association (MOA) and Articles of Association (AOA) of the company are filed. If the MCA finds the incorporation application to be complete and acceptable, the Incorporation Certificate is granted along with the PAN of the company. The MCA normally accepts all incorporation applications in less than 5 working days.

Documents Required for Private Limited Company

As a proof of Identity:

  • PAN card and Aadhar copy of all the Directors and Shareholders.
  • Passport copy or Bank statement of the Directors and Shareholders of the Company.
  • Proof of registered office, Updated gas or electricity bill or Property tax receipt.
  • Photo ID proof of directors, Voter ID or Passport or License.
  • ProPassport size photograph.
  • Specimen signature or impression.
  • Copy of rental agreement and no objection certificate from the owner of the property.
  • In the case of NRI or Foreign National, documents of director (s) must be notarized or apostilled.

Eligibility Criteria of Private Limited Company

Two Shareholders
Minimum two shareholders
Indian Resident
One of the directors must be an Indian Resident
Digital Signature Certificate
Digital Signature Certificate (DSC) for the promoters
Two Directors
Minimum two directors
Same Person
The directors and shareholders can be the same person
Director Identification Number
Director Identification Number (DIN) for all the directors.

FAQs

Q. Do I need to be physically present during this process?
No, registering a new Private Limited Company is a completely online process. All documents are submitted electronically, so you do not need to be physically present. You will need to send us a scanned copy of all the required documents and forms.
Q. What are the rules for picking a name for a Private Limited Company?
The Registrar of Companies (ROC) across India expects applicants to follow certain naming guidelines. Some are subjective, meaning approval may depend on the request of the official responsible for your request. The more closely you follow the rules below, the better your chances of being approved. However, first, make sure your name is available.
Q. How much time is needed for setting up a Private Limited Company in India?
If you have all the documents in order, it will take no longer than 15 days. However, this is dependent on the workload of the registrar.
Q. Are two directors necessary for a Private Limited Company registration?
Yes, a minimum of two directors are needed for a private limited company. The maximum members can be 200. You can register as a One Person Company, if you are the sole owner of the company.
Q. Can NRIs/foreign nationals become directors in a Private Limited Company?
Yes, NRIs or foreigners can be directors of a Private Limited Company. He or she must obtain a DIN from RoC in India. They can also take control of the business. As long as at least one director of the council resides in India.

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