PRIVATE LIMITED COMPANY
January 20, 2020
A private limited company is a type of privately held small business entity. This type of business entity limits owner liability to their shares limits the number of shareholders to 200 and restricts shareholders from publicly trading shares.
COMPANY LAW DEFINES A PRIVATE COMPANY AS ONE WHICH:
- the Companies Amendment Act, 2015 relaxed the minimum paid-up capital requirement, but it was not made zero paid-up capital
- by its Articles of Association restricts the right of transfer of its share
- limits the number of its members to 200 which will not include-
- members who are employees of the company and
- members who are ex-employees of the company and were members while in such employment and who have continued to be members after ceasing to be employees
- prohibits any invitation to the public to subscribe for any shares or debentures of the company and
- prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives.
In simple words, the private limited company is a company whose ownership is private usually by family members, friends and relatives.
- YOUR RISK IN THE BUSINESS MINIMIZES:
If the company experience financial distress because of normal business activity, the personal assets of shareholders will not be at risk of being seized by creditors because of the limited liability of shareholders.
- YOUR TAX BURDEN REDUCES:
There are many allowances and tax-deductible costs that can be offset against the profits of a company and the tax would be paid after deducting any costs incurred by you. In addition to that, the current level of Corporation Tax is lower than income tax rates.
- YOUR SOCIAL APPEAL AND REPUTATION ENHANCES:
With the formation of the company, you are declaring to the people that you are serious about the business and its continuity. Banks easily provide loans against the security of the company’s assets. The greatest advantage is that you can build the right team of people. A quality workforce is not hesitant to be part of the company, because of their sense of security.
- SCOPE OF EXPANSION IS HIGHER:
Scope for expanding the business becomes high, as the authorized capital can be increased over 1,00,000/- INR, which multiplies the borrowing capacity of the organization and also secures the deposits and loans from Banks and financial institutions as ‘big projects require big investments’.
- Two promoters (Shareholders)
- Two directors ( The directors & Promoters are the same people)
- Authorized capital of Rs.1,00,000
- DIN (Director Identification Number) for all the directors
- DSC (Digital Signature Certificate) for all the directors
- Getting DSC
- Getting DIN
- Name Search and application for Name Availability.
- Drafting of Bye-Laws (MOA & AOA)
- Filing of various form.
The Information Technology Act, 2000 provides for use of Digital Signatures on the documents submitted in electronic form in order to ensure the security and authenticity of the documents filed electronically. This is the only secure and authentic way that a document can be submitted electronically. As such, all filings done by the companies under MCA21 e-Governance program are required to be filed with the use of Digital Signatures by the person authorized to sign the documents.
Class of DSC:-
The Ministry of Corporate Affairs has stipulated a Class-II or above category signing certificate for e-filings under MCA21. A person who already has the specified DSC for any other application can use the same for filings under MCA21 and is not required to obtain a fresh DSC.
Required documents for getting DSC:-
- Specified Form filled as per given guidelines
- ID proof of the applicant (Copy of the PAN card should be attested by the Gazetted officer/Bank manager/Postmaster).
- Address proof (Passport/ Aadhar card/Driving License/Voter Id/ latest Utility Bill like Electricity bill, Telephone bill, Water bill, Gas bill, etc, Property Tax receipt). This needs to be attested by a Gazetted officer/ Bank manager/ Postmaster.
- Passport size photo(3.5 cm X 2.5 cm)
- Valid Email Id and Mobile No.
The concept of a Director Identification Number (DIN) has been introduced with the insertion of Sections 266A to 266G of Companies (Amendment) Act, 2006. As such, all the existing and intending directors have to obtain DIN within the prescribed time-frame as notified.
DIN is a unique identification number allotted to an individual who is an existing director of the company or intends to be appointed as director of a company. DIN is an 8 digit number. For example 02165789. This is allotted by Central Government (office of a regional director), Ministry of Corporate Affairs. A private company must have at least 2 directors.
- Self-attested copy of the PAN Card, the signature must be same as in PAN
- Self-attested identity proof of the proposed directors (Voter ID Card/ Valid Driving License/ Valid Passport/ Aadhar Card etc).
- Self-attested Address proof of the proposed directors (Latest Bank Statement within 2months Showing current transactions/ Latest Telephone or Mobile Bill/ Latest Electricity Bill etc).
- Passport size color & clear photograph (3.5 cm X 2.5 cm)
- A specified Affidavit by the individual (Declaration by the individual and self-attested)
- Educational Qualification
- Current Occupation
- Valid Email Id and Mobile No.
- Signature should be same as in PAN card.
NAME SEARCH AND APPLICATION FOR NAME AVAILABILITY:
Next step in the formation of a company is the approval of the name by the Registrar of Companies (ROC) in the State/ Union Territory in which the company will maintain its Registered Office. This approval is provided subject to certain conditions: for instance,
- There should not be an existing company by the same name.
- The first word contains a noun and the second word must relate to the main object of the proposed company.
- The last words in the name are required to be “Private Limited.”
- The application should mention at least two suitable names to maximum 6 names of the proposed company, in order of preference.
Once the company name is approved, it is valid for sixty days from the date of application, within which time Memorandum of Association (MOA) and Articles of Association (AOA) together with miscellaneous documents should be filed. If one is unable to do so, an application may be made for renewal of name by paying additional fees.
THE FOLLOWING INFORMATION IS REQUIRED FOR SEEKING NAME APPROVAL:-
- Proposed name of the company and Alternative names (2 to 6 names)
- Names of the proposed first promoter/ director – minimum 2
- Authorized Share Capital – minimum INR 100000
- Main objects of the company in brief. (In 200 alphabetic words)
- Address of Registered office of the proposed company
- Address of the nearest police station of the proposed registered address of the company.
- NOC if the promoter is carrying on any Partnership firm, sole proprietary or unregistered entity in the name as applied.
- NOC from the person if the proposed name(s) contain(s) name of any person other than promoter(s) or their close blood relatives.
- If the proposed name(s) include(s) the name of relatives then the proof of relationship is also required.
DRAFTING OF BYE LAWS (MOA & AOA)
The Memorandum of Association is a document that sets out the constitution of the company. It contains, amongst others, the main objectives, incidental or ancillary objectives for the attainment of the main objectives and the scope of activity of the company and also describes the relationship of the company with the outside world.
The Articles of Association contain the rules and regulations of the company for the management of its internal affairs. While the Memorandum specifies the objectives and purposes for which the Company has been formed, the Articles lay down the rules and regulations for achieving those objectives and purposes. It also states the authorized share capital of the proposed company and the names of its first/permanent directors.
- After getting the name approval, the MOA/ AOA have to be drafted.
- Get the subscription sheet of MOA and AOA signed by the subscriber/promoter in his handwriting with the following details as per the given order:-
- The name of the subscriber
- Father’s name of the subscriber
- Address of the Subscriber
- Occupation of the subscriber
The subscription sheets of MOA must be mentioned the number of shares subscribed by the promoters in numbers as well as words and the passport size photograph of the subscribers must be affixed. The subscription sheets of MOA/AOA must be witnessed by at least one person.
- FORM INC 7
The following information/documents required in INC 7:-
- Finalized MOA/ AOA containing subscription sheets
- Affidavit for non-acceptance of public deposit from all the promoters/ directors
- PAN card, address proof, identity proof of all the promoters
- INC 8,9 &10 in the specified format
- DIR 2 consent of director;
- duly digitally signed by promoter/ director
- FORM INC 22
This is a form to be filed by the company informing the ROC the address of registered office of the proposed company duly digitally signed by one of the directors along with a professional.
The following information/documents required in Form INC 22:-
- If the property is owned by the proposed director, then;
- Registered proof in the name of the director like latest Electricity Bill/Telephone bill/Gas bill
- NOC from the proposed director to use the premises
- If the property is owned by other than a proposed director, then;
- Rent agreement between the landlord and proposed company through its proposed director
- Registered address proof in the name of the landlord like latest Electricity Bill/ Telephone bill/ Gas bill.
- NOC from the landlord to use the premises
- Rent Receipt
- The name and address of the nearest police station of the premises where the company is going to be incorporated.
- FORM DIR 12
This form states the fact of appointment of the proposed directors on the board of directors from the date of incorporation of the proposed company and that it is digitally signed by one of the proposed directors along with the professional.
The following information/documents required in Form DIR 12:-
- Appointment Letter
- INC 9 and DIR 2 in specified format: Detail of appointment of the board of directors.
- Digitally signed by one of the proposed directors along with the professional
- After obtaining the details of Form INC7, INC22 and DIR12, these forms are uploaded on the MCA portal with the respective fees along with the stamp duty of the respective state.
- After this, incorporation certificate having CIN (corporate identification number) like U 72900 RJ 2012 PTC 039206 will be obtained.
- The certificate of incorporation will be required while opening the current bank account in the company name.
|1.||Form INC 1||Availability of Name for a New Company.|
|2.||Form INC 7||Application or declaration for incorporation of a company along with MOA & AOA, PAN card, Identity proof, address proof and affidavit for non-acceptance of deposit by all the promoters/directors.|
|3.||Form INC 22||This is a form to be filed by one of the directors of the company informing the ROC the address of the registered office of the proposed company.|
|4.||Form DIR 2||This is a consent obtained from all the proposed directors of the proposed company to act as directors of the proposed company.|
|5.||Form DIR 12||This is a form stating the fact of appointment of the proposed directors on the board of directors from the date of incorporation of the proposed company and is signed by one of the proposed directors.|
|6.||Form INC 10||Form for verification of the signature of subscribers.|
|7.||Form INC 9||Declaration by the subscribers for not been convicted of any offence in connection with the promotion, formation or management of any company during the preceding five years.|
|8.||Form INC 8||Declaration by the professional engaged in the incorporation process.|
DOCUMENTS REQUIRED AFTER INCORPORATION
|Form Name||Event for which form is required to submit||Due date of filing
|Whether the fixed rate of the additional fee is required as per Table 1b
|FORM INC22||Registered office Change Notice||Within 30 Days of event||Y|
|FORM DIR12||Changes In Director /Manager||Within 30 Days of event||Y|
|FORM SH7||Increase in Share Capital /Members||Within 30 days of the event||Y|
|FORM MGT14||Registration of Resolution / Agreement||Within 30 days of the event||Y|
|SCHEDULE V||Annual Return||Within 60 Days of AGM||Y|
|SCHEDULE VI||Balance Sheet and Profit & Loss Account||Within 30 Days of AGM||Y|
|FORM CHG1||Creation / Modification of Charges||Within 30 days of the event||Y|
|FORM CHG4||Particulars for the satisfaction of charge||Within 30 Days of event||N|
|FORM INC28||Notice of Court / CLB Order||NA|
|FORM PAS3||Return of Allotment||Within 30 days of the event||Y|
|FORM INC27||Conversion of Public to Private application vice versa||Within 30 days of the event||N|
|FORM CHG9||Particulars of Series of Debentures||Within 30 days from the event||Y|
|FORM INC18||Application to Regional Director for the conversion of section 8 company into any other kind of company||Within 30 days of the event||Y|
|FORM INC20||Intimation to Registrar of revocation or surrender of the license issued under section 8||Within 30 days of the event|
|FORM INC23||Application to Regional Director for approval to shift the registered office from one state to another state or from jurisdiction of one registrar to another within the state||Within 30 days of the event||Y|
|FORM INC 24||Application for approval of Central Government for change of name||Within 30 days of the event||Y|
|Form INC-28||Notice of order of the Court or other authority||Within 30 days of the event||Y|
|FORM PAS-3||Return of allotment|
|FORM SH-8||letter of offer|
|FORM SH-11||Return in respect of buyback of securities||Within 30 days of the event||Y|
|FORM CHG-6||Notice of appointment or cessation of receiver or manager||Within 30 days of the event||Y|
|FORM CHG-9||Application for registration of creation or modification of charge for debentures or rectification of particulars filed in respect of creation or modification of charge for debentures||Within 30 days of the event||Y|
|FORM MGT-6||Form of return to be filed with the Registrar||Within 30 days of the event||Y|
|FORM MGT-14||Filing of Resolutions and agreements to the Registrar under section 117||Within 30 days of the event||Y|
|FORM DIR-6||Intimation of change in particulars of Director to be given to the Central
|Within 30 days of the event||Y|
|FORM DIR-11||Notice of resignation of a director to the Registrar||Within 30 days of the event||Y|
|FORM MR-1||Return of appointment of managing director or whole-time director or manager||Within 30 days of the event||Y|
|FORM MR-2||Form of application to the Central Government for approval of appointment or reappointment and remuneration or increase in remuneration or waiver for excess or overpayment to managing director or whole-time director or manager and omission or remuneration to directors||Within 30 days of the event||Y|
|FORM URC-1||Application by a company for registration under section 366||Within 30 days of the event||Y|
|FORM FC-1||Information to be filed by a foreign company||Within 30 days of the event||Y|
|FORM FC-2||Return of alteration in the documents filed for registration by the foreign company||Within 30 days of the event||Y|
|FORM FC-3||List of all principal places of business in India established by the foreign company||Within 30 days of the event||Y|
|FORM FC -4||Annual Return||Within 30 days of the event||Y|
|FORM GNL-1||Form for filing an application with Registrar of Companies||Within 30 days of the event||Y|
|FORM GNL-2||Form for submission of documents with Registrar of Companies||Within 30 days of the event||Y|
|FORM GNL-3||Particulars of person(s) or director(s) or charged or specified for the purpose of
|Within 30 days of the event||Y|
|FORM RD-1||Form for filing application to Regional Director||Within 30 days of the event||Y|
|FORM RD-2||Form for filing petitions to Central Government (Regional Director)||Within 30 days of the event||Y|
|FORM CG-1||Form for filing application or documents with Central Government||Within 30 days of the event||Y|