PRIVATE LIMITED COMPANY REGISTRATION
January 20, 2020
Private Limited Company is the most prevalent and popular type of corporate legal entity in India. The Ministry of Corporate Affairs governs private limited company registration in India. Companies are incorporated and regulated under the Companies Act, 2013 and the Companies Incorporation Rules, 2014.
ELIGIBILITY AND REQUIREMENTS
To register a private limited company, a minimum of two persons to act as Directors and shareholders are required. The shareholders of a private limited company can be a corporate entity or a natural person. Director can only be a living person with one Director being a resident and Indian Citizen. A person is designated as a resident if he/she spends over 186 days in India.
There are no restrictions on foreign companies or foreign nationals being Directors or shareholders of a private limited company. As, foreign nationals, foreign corporate entities or NRIs are allowed to be Directors and Shareholders of a Company with Foreign Direct Investment, incorporating a company is the preferred choice of entry to India for foreign promoters.
ADVANTAGES OF REGISTERING A PRIVATE LIMITED COMPANY
Registering a private limited company has various advantages compared to a partnership firm or LLP as under:
- Equity Raise: A company can raise equity capital from persons or entities interested in becoming a shareholder. Hence, a private limited company is a must for Entrepreneurs looking to raise money from angel investors, venture capital firms, private equity firms and hedge funds.
- Limited Liability Protection: A private limited company provides limited liability protection to its shareholders. In case of any unforeseen liabilities are created, it would be limited to the company and would not impact the shareholders.
- Separate Legal Entity: A private limited company is legally recognised as a separate entity. Hence, a company can have its PAN, bank accounts, licenses, approvals, contracts, assets and liabilities in its unique name.
- Perpetual Existence: A company has perpetual existence and never ends without reason. For a company to lose its existence, it has to be wound-up by the Promoters or be wound-up by the Government. Hence, a company can only be wound up for reasons like non-compliance or failure to comply with rules and regulations.
- Easy Transferability: As the owner of a company is represented by shares – the ownership of a company can be transferred to any other legal entity or person in India or abroad easily – in part or whole. Further, since the shareholders control the Board of Directors, the Directors can also be replaced easily by shareholders to ensure business continuity easily at all times.
DOCUMENTS REQUIRED FOR COMPANY REGISTRATION
The documents required for company registration can be grouped under three heads:
- Documents for Directors: Two identity proof documents like Aadhaar, PAN, Passport, Drivers License or any other Government-issued identity document would be required. Indian nationals are mandatorily required to provide PAN. Foreign nationals are mandatorily required to submit attested or apostille passport copy. In addition to the identity proof, the Directors must submit residence proof that is less than three months old. Proof of residence documents includes bank statements, electricity bill, water bill, gas bill and telephone bill.
- Documents for Registered Office: Companies registered in India must mandatorily maintain a registered office within India. In the case of leased property, the copy of lease deed for the registered office premises along with a NOC from Landlord and EB bill/property tax receipt/water bill copy of the registered office property. In case of own property, copy of sale deed along with the EB bill/property tax receipt/water bill copy of the registered office property.
- Documents for Corporate Entities: In case one of the shareholder or subscriber to the MOA and AOA is a Corporate Entity (Company, LLP, etc.,) then Certificate of Incorporation of the Body Corporate must be attached along with the resolution passed by the Body Corporate to subscribe to the shares of the company under incorporation.