The Minimum Requirements for Company Registration in India

Overview: A Private Limited Company is a business that is registered under the Companies Act. This registration provides various essential features including transfer of ownership through shares, limited liability to shareholders, and perpetual existence for an indefinite period to a business. Since it is a distinct legal entity, the Companies Act makes private limited company registration mandatory by the Registrar of Companies (ROC) which can be done by fulfilling certain minimum requirements. Delving into the minimum requirements for pvt ltd company registration in India is necessary before undergoing the company registration process in India.

Minimum Requirements for Company Registration in India

The minimum requirements to initiate your private limited company registration in India are the prespecified conditions that must be fulfilled before starting a private limited company. These requirements for pvt ltd company registration covers all the necessary prerequisites of a company registration including its shareholders, directors, name, registered office, and capital. Moreover, the authorized director must possess a Class 3 DSC so that he/she can authenticate the application for private limited company registration and attest all the required forms and documents.

1. At Least 2 Shareholders

Shareholders are the co-owners of a Private Limited Company. The percentage of their ownership is decided by the ratio of their shareholding portion in the company. In order to register a Private Limited Company in India, it is required to have at least 2 Shareholders, that can be extended to a maximum number to 200. These shareholders can either be individuals or corporate entities, Indian or foreign in origin.

There is no requirement of nationality or residence restricted for the shareholders of a company. However, if the shareholder is a foreign citizen or a foreign corporate entity, then the FDI rules and regulations also need to be satisfied and appropriate FDI reporting needs to be made to RBI in form FC-GPR.

The first shareholders of a company are collectively known as its promoters. These promoters are free to make decisions regarding the shareholding ratio, and that becomes the basis on which the first shareholder subscribes to the number of equity shares.

2. At Least 2 Directors

Directors are the authorized individuals appointed by the shareholders to control the entire management of a company. The appointed directors are responsible to oversee and manage the day-to-day operations of the company, thereby ensuring its compliance with various regulatory laws. If you are going to register a Private Limited Company in India, make sure to have at least 2 directors. Those directors must be non-minors and individuals, whether Indian or foreign in origin. This number can be extended to 15 as specified under the Companies Act. However, the shareholders can also appoint more than 15 directors if need arises, only by passing a resolution to this effect in the General Board Meeting. Moreover, he must not be disqualified under Section 164 of the Companies Act.

Note here that the same individual can be appointed as the director as well as shareholder of the company. However, these are two separate designations in a company and it is crucial to know the difference between a shareholder and director.

3. An Indian Resident Director

As mentioned in the earlier paragraph, the maximum number of directors in a company can be extended to 15, and there is no restriction on their nationality; they can either be Indian or foreign citizens. However, the Companies Act puts a restriction on the resident status of at least one director in a Private Limited Company. It prescribes that at least one of the directors appointed in a Pvt Ltd Company must be an Indian Resident.

An Indian Resident Director is one who has stayed in India for more than 120 days in the previous financial year. These days need not be continuous and can be counted as the overall days of stay.

4. Valid Company Name

One of the other essential minimum requirements for pvt ltd company registration in India is an approved name by the ROC. For this, a valid and appropriate name must be chosen as per the guidelines prescribed by the MCA. It must not be similar, or identical to the name of an existing company or infringe an existing or applied trademark. Also, it must not contain words prohibited for use as per the Names & Emblems Act.

Upon choosing an appropriate name, the same needs to be proposed to the ROC for approval in the SPICe Plus application. The ROC, after examining the application either accepts or rejects the name. In case, the name is accepted, it shall be reserved in the name of the company for a period of 20 days, within which the company must get incorporated and gain a legal existence. On the other hand, if it gets rejected a fresh application for name approval will have to be filed.

5. Registered Office

One of the key requirements for pvt ltd company registration is that the companies need to maintain a Registered Office at all times as per section 12 of the Companies Act, 2013.

A Registered Office is the office address with which a company gets incorporated. This address is maintained by the ROC in all its public records and is accessed by all government authorities and other private stakeholders for official communication and correspondence.

A Registered Office is the company’s primary point of official contact where the company maintains all its official documents and accounts for inspection by tax and regulatory authorities as well. A company’s Registered Office must be fully constructed and also lockable. Moreover, the registered office must be situated on commercial / residential land. It may be rented or self-owned by the company owner. In either case, a No Objection Certificate needs to be obtained from the office property owner.

6. Capital

Capital is the fund that a company receives from its shareholders in exchange for its equity shares. There are no minimum requirements for Company Registration in India when it comes to capital, and shareholders are free to contribute as per their will. However, it is always advisable that the capital deposited by the shareholders should be adequate to conduct its day-to-day business operations smoothly.

7. Digital Signature Certificates (DSCs)

The application process for incorporation of a Company is completely digital. To complete it, a form is required to be filled and submitted online along with the prescribed set of documents authenticated and attested using the Class 3 Digital Signature Certificate of the authorized director or signatory.

Digital Signature is the electronic counterpart of a physical signature, encrypted for enhanced security which makes it a non-foregable and unique.

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Gaining insight into the minimum essential requirements for private limited company registration in India can be useful in meeting the basic requirement prior to going for company registration in India. This step will ensure a seamless and legally sound company incorporation process. We have listed all the necessary requirements to start a company in India. Adhering to such requisites not only ensures compliance with regulatory frameworks but also lays a foundation stone for a sustainable business journey by providing it a distinct legal identity and privileges it deserves as per the Indian Corporate landscape.

Conclusion

FAQs

Q1: Can a foreign individual or company be a shareholder in a Private Limited Company?

Yes, foreign individuals and entities can be shareholders in an Indian Private Limited Company in India. The Companies Act permits both; Indian and foreign shareholders, with no restrictions on nationality or residence to become a shareholder in a pvt ltd company in India. However, if a shareholder is a foreign national/entity, it is mandatory for him/her to adhere to the Foreign Direct Investment (FDI) regulations and reporting requirements as specified by the Reserve Bank of India (RBI).

Q2: Is it mandatory for each director of a Private Limited Company to be an Indian resident?

While the maximum number of directors can include both Indian and foreign nationals, it is necessary that at least one director of a Private Limited Company must be an Indian resident. When it comes to definition of an Indian director, an Indian resident director is defined as an individual who has spent more than 120 days in India during the preceding financial year.

Q3: What is the significance of a DSC in the company registration process?

A Digital Signature Certificate (DSC) plays a key role while undergoing the online application process for company registration. The digital signature acts as an electronic equivalent of a physical signature, ensuring the authenticity and security of documents submitted online.

The Class 3 DSC of an authorized director or signatory is also used to authenticate and attest the required forms and documents submitted during the process of private limited company registration in India.

Q4: Can a Private Limited Company have more than two shareholders and directors?

Yes, a Private Limited Company can have more than two shareholders and directors. It is the minimum requirement to register a company in India with at least two shareholders and directors, the Companies Act allows for up to 200 shareholders and a maximum of 15 directors.

However, the shareholders reserve the right to increase the number of shareholders and directors specified above. They can pass a resolution to increase the number of directors beyond 15 wherever it becomes necessary.

Q5: What happens if the proposed company name is rejected by the ROC?

If your proposed company name gets rejected by the ROC, a fresh application for the ‘Name Approval’ needs to be filed with a different name adhering to the guidelines set forth by the concerned department. Make sure to choose a company name that is unique, and also comply with the MCA guidelines, and does not infringe upon existing trademarks or company names.

Once your company name has been approved, it will be reserved for 20 days during which the applicant must complete its registration process.

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What Are The Minimum Requirements for Company Registration in India?