Procedure of Register a Private Limited Company in India

Setindiabiz Team May 27, 2016 Company Registration

Procedure of Register a Private Limited Company in India

Procedure of Register a Private Limited Company in India
Private Limited company is considered as a separate legal entity from that of its founders. In India the word “Private Limited” is suffixed to the name of the company, however in many jurisdictions throughout word different suffix is used to identify a private limited company, for example in the US “LLC”, in Germany “GMBH”, In Belgium “SPRL” is used to represent similar kind of business.

Table of Contents

Though the private limited company has been defined under the companies act, 2013 in section 2(68) and a company under section 2(20) but it is a statutory definition that does not deal with its features which have evolved over a period through business practice and judicial rulings. If a person reads the companies act 2013, the following can be gathered to mean a private limited company.
  1. A company means a company that is incorporated under the companies act, 2013, or any previous company law.
  2. A company which through its article of association restricts the transfer of shares. In other words, the shares of a private limited company are not freely transferable, and to retain this characteristic the company must put a clause in its articles of association that restrict the transfer of shares in a way that the existing shareholders must have the first of refusal.
  3. The maximum number of members/shareholders in a private limited company can be 200 and a minimum of two except a one-person company where it can have only one shareholder.
  4. The private limited company is not allowed to invite deposits from the public. Hence a particular clause must be in the articles of association to this effect.
After reading the above four points, a comprehensive understanding cannot be arrived at as to what a private limited company is. In fact, it is just a legal definition, as said earlier over a period the concept of the company or says privately limited has matured through business practice (s) and legal ruling. Some of the features of the private limited company are being mentioned below in points. I am just briefly explaining the features and not describing them in detail here as the topic of this article is the procedure of registration of a private limited company.
  1. There must be at least two Persons to act as Director / Shareholder of the Company. The maximum number of directors can be 15 at the time of incorporation which can further be increased with the approval of the ROC. The highest number of shareholders that a private limited can have is capped at 200. However, for a one-person company, the only person can be a shareholder while OPC can have 15 directors. Another requirement is to have a nominee as the only shareholder of the OPC.
  2. Determine authorized capital of the company base on the assessment of funds required to achieve the business forecast of the company in the medium term (say 3-5 years). Though the law has prescribed no minimum amount the promoters must decide on the amount of authorized capital as the government fee for the registration of the company as well as the stamp duty levied by the respective state government depends on it. In the old act and at the beginning of the companies act 2013 there was a minimum requirement of Rs. 1 lac, which is subsequently removed.
  3. One director of the company must be resident in India. a person is said to be resident in the financial year if he or she stays for at least 182 days in that fiscal year
  4. In case the promoter is a foreign person or foreign corporation, most of the sectors are open for investment under the automatic route of FDI policy, however wherever it is restricted a prior approval can be obtained from the specific ministry of the central government
  5. At last, the business for which the company is being incorporated must be legal, and it should not be opposed to public policy.
Well as we have understood the meaning of a private limited company & minimum requirements or say eligibility, let’s understand what the documents required to begin the registration process. The documentation can be classified into two categories; the first one is documents of the proposed directors and shareholders whereas the second set is documents about the premises where the company shall have its registered address.
Documents of Directors / Shareholders Documents of premises, where registered office shall be situated
Colour Photographs – Two front-facing picture with a plain background
Proof of the registered address of the company: Sale Deed, electricity bill, tax paid receipt, or any other utility bill not older than 2 months.
Pan Card, (Name on pan card must match with the database of Income Tax Department)
No objection Certificate from the owner of the premises
Identity Proof (Any one among Aadhar Card, Passport, Driving License or Voter ID Card)
Address Proof; Bank Statement or Passbook with first and last bank entry page, electricity bill, telephone bill, or any utility bill
Attestation Requirements for the documents: All the documents of director/shareholder are required in two sets, One set must be self-attested while the other set must be attested by a Gazetted Officer or Postmaster or a Bank Manager. The attesting authority must attest to the documents using the blue ink pen and affix the official seal.

The Procedure of Registration of Private Limited Company:

Having understood the meaning and features of a private limited company in the first part. Thereafter examining the minimum requirements or say eligibility to form into a private limited company.  And then understanding the documents required from the directors /shareholders and that of the premises where the company shall have its registered address and the requirement of a NO Objection from the owner of the said premises. Let’s understand the stepwise procedure to register a company in India. I am dealing with a situation where all the people are Indian. My colleague has written a very informative article on the incorporation of a company with a foreigner as a director/shareholder, Click here to read it.
Well, the process of registration begins with the making of the digital signature of class-2 of all the persons involved (all directors and shareholders) as the application is filed electronically to the registrar of companies and concludes with the issuance of the certificate of incorporation. The step-wise procedure is as under

Digital Signature Of Director

DSC is the equivalent of physical or paper certificates in digital format. As the application for company registration is filed online with the Digital Signatures of the director, hence the process starts with the issuance of the digital signature for all the directors/promoters. Photo, ID, and Address proof is to be submitted along with the Form for issuance of DSC.

Director Identification Number

It is a permanent number issued by the registrar of companies, as a unique identification number to the director of a company or designated partner of the LLP. As per the new Companies Act, 2013 no person can hold the office of the director unless he is issued a DIN. For allotment of DIN, an application to ROC is made with a Photo, Attested ID, and Address proof duly attested by CA, CS, or CMA.

Name Approval Of Company

The name of each company or LLP must be unique, new, and should not be the same or similar to an already registered company, LLP, or a Trademark. After the DSC and DIN allotment, an application is made to the ROC for approval of name; the registrar is vested with discretionary powers concerning approval of the name. Our advisors shall be a help to you while deciding the name of the company or LLP.

Moa & Aoa Of Company

The Name, object, state in which the company is registered, the maximum amount of capital which it can raise (Authorised Capital), and a declaration that the company is a limited company is written as a document known as Memorandum of Association (MOA). The Internal rules are framed as articles of association. The promoters need to adopt and sign MOA & AOA, which is then filed with the ROC.

Company Incorporation

All the steps as described below finally culminates into the registration of the company with the issuance of the certificate of Incorporation. With spice e-form, DIN, Name Approval, and Incorporation related documents like affidavits; declarations are filed at once. However, only one name can be suggested in the spice form. The certificate of incorporation is conclusive proof of the registration of the company.

Pan, Tan & Bank Account

The income tax department allows a unique 10 Digit alphanumeric number as a permanent account number, also known as PAN Number. To comply with TDS provisions every taxpayer needs to obtain a Tax Deduction Account Number. These identification numbers are essential to operate and comply. The opening of a bank account is the last step in setting up a business
With the introduction of the spice form for incorporation, the process of allotment of DIN, Name Approval, the filing of MOA & AOC has merged into one However in the following cases the spice route is not available, and the applicant shall be required to follow all steps as explained above.
  1. In the case of public limited company registration
  2. Where subscribers to the MOA are more than 7
  3. Where the number of directors is 3 (there can be a way out in case the number of directors is beyond 3, DIN for additional directors can be made separately, and the spice may be filed with three fresh directors having no DIN and other already allotted DIN
  4. Producer Company Registration

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