PRIVATE LIMITED COMPANY
A stand alone entity. Its profits, losses, assets & liabilities are its own.
The most suitable form of entity for carrying out business in India with a long term objective would be to form a Private Limited Company, by making investment through the equity shares in the Company. Its purpose is to make a profit and distribute it to the shareholders. The main advantage of a Private Limited Company is to protect the personal assets of the owners (shareholders) as their liability is limited to the value of the shares issued by the company.
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A private limited company is a voluntary association of not less than two and not more than fifty members, whose liability is limited, the transfer of whose shares is limited to its members and who is not allowed to invite the general public to subscribe to its shares or debentures. Its main features are :
1. It has an independent legal existence. The Indian Companies Act,1956 contains the provisions regarding the legal formalities for setting up of a private limited company. Registrars of Companies (ROC) appointed under the Companies Act covering the various States and Union Territories are vested with the primary duty of registering companies floated in the respective states and the Union Territories.
2. It is relatively less cumbersome to organise and operate it as it has been exempted from many regulations and restrictions to which a public limited company is subjected to. Some of them are a.it need not file a prospectus with the Registrar. b. it need not obtain the Certificate for Commencement of business. c. restrictions placed on the directors of the public limited company do not apply to its directors.
3. The liability of its members is limited.
4. The shares allotted to it's members are also not freely transferable between them. These companies are not allowed to invite public to subscribe to its shares and debentures.
5. It enjoys continuity of existence i.e. it continues to exist even if all its members die or desert it.
Hence, a private company is preferred by those who wish to take the advantage of limited liability but at the same time desire to keep control over the business within a limited circle and maintain the privacy of their business.
Requirements for registration
Steps to be taken to get incorporated a Private limited company
Step - 1 Apply for Digital Signature Certificate
Digital Signature Certificate for Directors of a Public Limited Company, both Indian and foreigners, are also required to get Digital Signature Certificate - DSC - under the new requirements. Digital Signature Certificate (DSC) is required for all Directors who will require to sign ROC forms or documents. A DSC, like hand written signature, establishes the identity of the sender filing the documents through internet which sender cannot revoke or deny.
Step - 2 Apply for Directors Identification Number (DIN)
Directors of Company, must register and get and identification number under the new requirements. It is called Director Identification Number (DIN No.)
Step - 3 Apply for the availability of the name
The next step is to decide the name for the proposed Company to be incorporated. Anyone intending to incorporate an Company has to evaluate his proposed name under the prescribed parameters and make an application in eForm 1A for reservation of the desired name.
The name of the Company shall not be similar or identical with that of a Company or Company already registered in India. The details to be state in the eform 1A are as follows : 1. Six alternative names for the proposed Company. 2. Name, addresses and DIN of Directors 3. Description of proposed business activity.
Step - 4 Drafting the Memorandum and Articles of Association.
On receipt of the name approval letter from the ROC the MOA & AOA required to be drafted. Its Contents include: 1.Name 2.Name of Directors 3.Rights and Duties of Directors 4.Proposed Business 5. Rules governing the Company
Step - 5 File the documents for Registration:
Once, name is allotted ,company registration documents have to be prepared and filed with respective ROC for registration. The following documents and Form filed with After receiving the license / approval an application is to be made to the Registrar of Companies (ROC) along with following documents:1. Printed copy of the Memorandum and Articles of Association., 2.One copy of Form 1, 3.One copy of Form 18, 4.Two copies of Form 32 5.The requisite amount of fees.
After the Registrar is satisfied that all formalities are complied with, he issues a Certificate of Incorporation as to the formation of the Company within a 7 days of filing eForms and will issue a Certificate of Incorporation , which shall be conclusive evidence as to the formation of the Company.
Should you have any questions about Company Formations or registering please do not hesitate to contact us, we will be happy to help.