Q1. What is Private Limited Company?

Ans: Private Limited Company refers to the company that offers limited liability, or legal protection to its shareholders but places certain restrictions on its ownership as Private Limited Company. These restrictions are defined in the company’s regulations or laws. The laws help in avoiding any adverse takeover attempt. A private limited company can be formed with the number of members exceeding up to 200. On the other side, a minimum of two persons is required in order to start a private limited company. This kind of company is considered as a separate legal entity, having perpetual succession, with the liability of shareholders limited to the capital that has been contributed by them. Hence, a shareholder is not personally liable for the debts of the company.

Q2. For small businesses, what are the benefits of Private Limited Companies?

Ans: Private Limited Companies offer reliability or trustworthiness to businesses in financial institutions, suppliers, and potential clients. As it makes it easier for companies to receive loans at suitable terms from convincing potential clients or banks while making and finalizing deals, these companies are trusted more than other forms of business.

  1. Limited liability of shareholders to the extent of their contributed capital only.
  2. Limited liability of shareholders to the extent of their contributed capital only.
  3. A perpetual succession of a company

Q3. How to form a Private Limited Company?

Ans: Any two or more members/ persons can form a private limited company. A minimum of two individuals shall act as directors of the company. The shareholders (initial members/promoters) can themselves choose to become a director. It is practically seen that generally, shareholders are also directors of the same private limited company. Filing of required documents (Director Identification Number, Application for name approval, Incorporation documents such as MOA/AOA/, registered address) with the Registrar of Companies is obligatory. Apart from this, the minimum capital of Rs. One Lakh is significant. (it can be used for business whenever required and does not necessarily have to be kept in bank/company deposit all the time).

Q4. Is there any qualification required to become a director or shareholder in a Private Limited Company?

Ans: Any individual can be a shareholder in a private limited company. For becoming a director in a company, no professional or educational qualification is required.

Q5. What does Director Identification Number (DIN) imply?

Ans: If any individual intends to become a director in a company, he/she needs to apply for a director identification number, issued by the Ministry of Corporate Affairs. It is a proof of identity and address, this is required to be submitted along with the required fee while submitting the DIN Application. DIN can be approved within 3-4 days if the documents are in an orderly manner. The best part is that approved DIN is valid for life and can be used by the director, even if he/she has directorship in more than one company.

Q6. What are the responsibilities of a director?

Ans: Director of the Company is responsible for managing the company in an efficient way. The responsibility of a director also depends upon the kind of directorship he owns in that particular company. It is of great significance to know that the responsibility of an executive director or a managing director is greater than a non-executive director who holds the directorship as an expert or consultant.

Q7. What purpose does a registered office of the company serve?

Ans: Any company with a registered office in Delhi comes under the jurisdiction of the Registrar of Companies, Delhi. The registered office is required to hold Annual general meetings, to keep and maintain records, to receive correspondence from all the statutory/government authorities. It’s not important that the registered office should be owned by the company as it can be on rented premises also. The registered office of the company determines its jurisdiction for registration.

Q8. Can registered office be changed after the registration of the company?

Ans: Yes, registered office can be changed after the registration of the company anytime by ensuring that you follow a specified procedure. It has to be taken care that the changed address of the office needs to be situated within the same state or in a different state from the state in which it was originally registered.

Q9. Is the structure of Private Limited Company favorable for any type of business ?

Ans: Yes, the private limited company form of organization is suitable for any type of business. A private limited company is known to be reliable and more trustworthy as compared to other business structures.