Private Limited Company Registration in India: A
Comprehensive Guide

1.    Introduction to Private Limited Company

A Private Limited Company is a popular business structure in India, offering a blend of limited liability, separate legal entity status, and perpetual succession. This guide provides a detailed overview of private limited company registration, covering prerequisites, the registration process, compliance requirements, advantages, disadvantages, and frequently asked questions.

2.    What is a Private Limited Company?

A Private Limited Company is a privately held corporate entity with limited liability. It is one of the most favoured business structures in India due to its numerous advantages, including limited liability protection for shareholders, ease of formation and maintenance, and its status as a distinct legal entity. It requires a minimum of two members and two directors.

3.    Key Characteristics of a Private Limited Company

• Limited Liability Protection: Shareholders are liable only up to the amount they have invested in the company’s shares. Their personal assets are protected from business debts.
• Separate Legal Entity: The company is a separate legal person, distinct from its shareholders and directors. It can own property, enter into contracts, sue or be sued in its own name.
• Minimum Number of Shareholders: A private company must have at least two and can have a maximum of 200 shareholders.
• Minimum Number of Directors: A private limited company requires a minimum of two directors. At least one of these directors must be an Indian citizen and resident.
• Minimum Share Capital: While the Companies Act, 2013, removed the minimum paid-up capital requirement, it is common practice to have at least Rs. 1 lakh as authorized capital.
• Name of the Firm: The company’s name must end with “Private Limited.”
• Restrictions on Share Transfer: The right to transfer shares is restricted. Transfers usually require approval from the Board of Directors or adherence to the company’s Articles of Association.
• Prohibition on Public Invitation: Private limited companies cannot invite the public to subscribe to their shares or debentures.

4.    Types of Private Limited Companies

• Company Limited by Shares: Shareholders’ liability is limited to the nominal value of the shares they hold.
• Company Limited by Guarantee: Members’ liability is limited to the amount they guarantee to contribute in the event of the company’s winding up.
• Unlimited Companies: Members have unlimited personal liability for the company’s debts. This type is rare in India.

5.    Advantages of a Private Limited Company

• Limited Liability: Protects shareholders’ personal assets.
• Distinct Legal Identity: Enhances credibility and allows the company to own property and enter contracts in its own name.
• Continuous Existence (Perpetual Succession): The company continues to exist even if shareholders or directors change.
• Ease of Funding: Easier to raise capital from investors.
• Tax Benefits: May be eligible for certain tax benefits and exemptions.
• Credibility and Trust: The “Pvt. Ltd.” designation often increases trust with customers and suppliers.

6.    Disadvantages of a Private Limited Company

• Compliance Burden: More regulatory compliance requirements compared to simpler structures.
• Complex Setup: The registration process can be more complex.
• Share Limits: Restrictions on share transfers and a maximum number of shareholders.
• Public Disclosure: Financial information is publicly accessible.
• Exit Complexity: Exiting the company can be more complex than other structures.
• Slower Decisions: Decision-making may involve more stakeholders and can be slower.

7.    Requirements for Registering a Company in India

• Directors and Members: Minimum two directors and two members (can be the same individuals). Directors need a Director Identification Number (DIN). At least one director must be an Indian resident.
• Company Name: The name should be unique and reflect the business activity.
• Registered Office Address: A permanent address for the company’s registered office in India.

8.    Company Registration Process

• Step 1: Acquire a Digital Signature Certificate (DSC): All directors and shareholders need a DSC.
• Step 2: Obtain Director Identification Number (DIN): Apply for DIN for all proposed directors.
• Step 3: Name Reservation (SPICe+ Part A): Reserve a company name through the MCA portal.
• Step 4: Submission of Company Details (SPICe+ Part B): Provide details about capital, registered office, directors, subscribers, etc.
• Step 5: Preparation and Submission of Incorporation Forms (SPICe+ MOA and AOA): Draft the Memorandum of Association (MoA) and Articles of Association (AoA) and submit them along with SPICe+ Part B.
• Step 6: AGILE-PRO-S Form: File this form for GST, EPFO, ESIC, bank account, and shop and establishment license registration.
• Step 7: Certificate of Incorporation: The MCA issues the Certificate of Incorporation with the CIN, PAN, and TAN.

9.    Document Checklist

• Indian Nationals: PAN card copy, passport-sized photo, Aadhaar card, identity proof, address proof.
• Foreign Nationals: Notarized and apostilled documents, passport-sized photo, passport, address proof.
• Registered Office Documents: Proof of address, rent agreement (if applicable), NOC from landlord.

10.    Post-Registration Compliance

Adhering to post-registration compliances is crucial. This includes filing annual returns, conducting board meetings, maintaining financial records, and complying with tax regulations.

11.     Register Your Company through Return Filings

Return Filings offers comprehensive private limited company registration services. They assist with name selection, document preparation, DSC and DIN acquisition, and ensure compliance with MCA regulations. For professional assistance, reach out to us on email: info@returnfilings.com or on whatsapp: https://wa.me/919910123091.

12.     Documents Required for Company Registration (Detailed)

• PAN Card: Mandatory for Indian directors and shareholders.
• Passport (Foreign Nationals Only): Mandatory for foreign directors and shareholders.
• Aadhaar Card: Mandatory for Indian directors.
• Passport Size Photo: Of directors and individual shareholders.
• Identity Proof: PAN card for Indian nationals, passport for foreign nationals.
• Address Proof: Aadhaar card, voter ID, passport, driving license.
• Residential Proof: Recent utility bills or bank statements.
• Registered Office Proof: Rent agreement and NOC from the landlord (if rented), or ownership documents.
• Recent Utility Bill (Business Place): Utility bill for the registered office address.
• Name Significance Letter: Explanation of the chosen company name.

13.       Additional Resources

For further reading, explore:

·      Private Limited Annual Filing: Complete Compliance Checklist for Hassle-Free ROC Filing and various applicable statutory compliance.

·      Addition of Director: Step-by-Step Guide to Appoint a New Director Legally.

·      Removal or Resignation of Director: Legal Procedure & Compliance Checklist.

·      Closure of Company: Complete Guide to Wind Up Your Business.

Frequently Asked Questions (FAQs) related to registration of Private Limited Company in India

A. Registration Process

1. What is the registration process of a company?

The process involves obtaining DSC and DIN, reserving a name, preparing documents (MoA, AoA), filing forms with the MCA, and obtaining the Certificate of Incorporation.

2. How much does it cost to register a company?

While the MCA has waived off the registration fee, there are costs associated with DSC, stamp duty for MoA and AoA, PAN and TAN application, and professional fees.

3. What are the types of registration?

Private limited, public limited, LLP, OPC, etc. This guide focuses on private limited companies.

4. Can NRIs or foreign nationals or foreign entities register a company in India?

Yes, but certain regulations and documentation requirements apply.

5. How do I check the availability of names for my company?

You can check name availability on the MCA portal.

6. Is GST registration mandatory at this stage?

GST registration is not mandatory during incorporation but is required when the business commences and meets the turnover threshold.

B. Compliance and Governance

7. What are the compliances of a Private Limited Company?

Annual filing of returns, maintenance of records, conducting board meetings, complying with tax laws, etc.

8. Which Form is to be filed for the ITR filing of Private Limited Company?

ITR-6.

9. Which form is to be filed for filing the annual returns of a Company?

Form MGT-7 and AOC-4.

10. How many members are required to start a Private Limited Company?

Minimum two.

11. How can ownership be transferred?

Through share transfers, following the procedures outlined in the AoA.

12. How are the Companies taxed? What are the tax rates?

Companies are taxed on their profits. Contact us for current tax rates and regulations.

13. Who governs and controls the functioning of a Private Limited Company?

The Board of Directors, appointed by the shareholders.

14. What is authorized capital and paid-up capital?

Authorized capital is the maximum amount a company is authorized to raise by issuing shares. Paid-up capital is the portion of the authorized capital that has been issued to shareholders and paid for.

15. What is limited liability protection?

It means shareholders’ liability is limited to the amount they have invested in the company’s shares. Their personal assets are protected.

16. How do I open a current account?

After incorporation, you can approach a bank with the Certificate of Incorporation, PAN, and other required documents to open a current account.

17. When is the statutory auditor to be appointed?

The first auditor is usually appointed by the Board of Directors within 30 days of incorporation. Subsequent auditors are appointed in Annual General Meeting (AGM) of the company.

18. What is the difference between a director and a shareholder?

A shareholder owns shares in the company, while a director is responsible for managing the company’s affairs. A person can be both a shareholder and a director.

19. What are the different types of shares?

Common types include equity shares and preference shares, each with different rights and privileges.

20. What is a Memorandum of Association (MoA)?

The MoA defines the company’s objectives and scope of activities. It’s the company’s charter.

21. What is an Articles of Association (AoA)?

The AoA lays down the internal rules and regulations governing the company’s management and operations.

22. What is a board meeting?

A meeting of the Board of Directors to discuss and make decisions related to the company’s affairs.

23. What is an Annual General Meeting (AGM)?

A yearly meeting of shareholders to discuss the company’s performance, approve financial statements, and appoint directors and auditors.

24. What is a financial year?

The financial year is the period for which a company’s financial statements are prepared. In India, it usually runs from April 1st to March 31st.

25. What is a statutory audit?

An independent examination of the company’s financial records by a chartered accountant to ensure accuracy and compliance.

26. What are annual returns?

Forms filed annually with the MCA containing information about the company’s performance, financial position, and other details.

27. What is the process for changing the name of a company?

A special resolution needs to be passed, and an application filed with the MCA.

28. How can a company be wound up?

Winding up can be voluntary (by the company) or compulsory (by a court order).

29. What is the difference between a private limited company and a public limited company?

Private companies have restrictions on share transfers and a limited number of shareholders, while public companies can offer shares to the public and have no limit on the number of shareholders.

30. What is a subsidiary company?

A company that is controlled by another company (the parent company).

31. What is a holding company?

A company that owns and controls one or more subsidiary companies.

32. What is corporate social responsibility (CSR)?

A company’s commitment to operating in an ethical and responsible manner, considering its impact on society and the environment. Certain companies are required to spend a portion of their profits on CSR activities.

33. What is Foreign Direct Investment (FDI)?

Investment from a foreign entity into a company in India.

34. What is the Foreign Exchange Management Act (FEMA)?

A law regulating foreign exchange transactions in India.

35. What is the Reserve Bank of India (RBI)?

The central bank of India, regulating the banking system and monetary policy.

36. What is the Securities and Exchange Board of India (SEBI)?

The regulator for the securities market in India.

37. What is intellectual property?

Intangible assets like patents, trademarks, and copyrights.

38. What is a trademark?

A symbol, design, or phrase legally registered to represent a company or product.

39. What is a patent?

An exclusive right granted for an invention, allowing the patent holder to exclude others from making, using, or selling the invention.

40. What is a copyright?

Legal protection granted to the creator of original works of authorship, including literary, artistic, musical, and certain other intellectual works.

41. What is e-governance?

The use of technology by the government to provide services to citizens and businesses.

42. What is the MCA portal?

The website of the Ministry of Corporate Affairs, where companies can file forms and access information.

43. What is the role of the Registrar of Companies (RoC)?

The RoC is responsible for registering companies and maintaining records.

44. What is the difference between a registered office and a corporate office?

The registered office is the official address of the company for legal and communication purposes. The corporate office is where the company’s main business operations may be carried out.

45. What is a PAN card?

A Permanent Account Number, a unique identification number for taxpayers in India.

46. What is a TAN?

A Tax Deduction and Collection Account Number, required for deducting tax at source.

47. What is GST?

Goods and Services Tax, an indirect tax levied on the supply of goods and services.

48. What is EPFO?

Employees’ Provident Fund Organisation, a social security scheme.

49. What is ESIC?

Employees’ State Insurance Corporation, a social security scheme providing medical benefits to employees.

50. What is a shop and establishment license?

A license required for businesses to operate in a particular state.

51. What are the penalties for non-compliance?

Penalties vary depending on the specific non-compliance. It’s crucial to stay compliant to avoid penalties.

52. What are some common mistakes to avoid during company registration?

Incorrect documentation, choosing a non-compliant name, and not understanding the compliance requirements are common mistakes. Seeking professional help can minimize these risks.

53. How can I learn more about company law and regulations in India?       The MCA website, legal publications, and professional courses are good sources of information, contact us for company registration or compliance.