Procedure of Register a Private Limited Company in India

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Reading Time: 7 minutes| (Last Updated On: April 24, 2019)

Procedure of Register a Private Limited Company in India

A 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 company, however in many jurisdictions throughout word different suffix is used to identify a private limited company, for example in US  “LLC”, in Germany “GMBH”, In Belgium “SPRL” is used to represent similar kind of business.

Procedure of Register a Private Limited Company in India

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 which 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.

  • A company means a company which is incorporated under the companies act, 2013 or any previous company law.
  • 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 which restrict the transfer of shares in a way that the existing shareholders must have the first of refusal.
  • The maximum number of members/shareholders in a private limited company can be 200 and minimum two except a one-person company where it can have only one shareholder.
  • 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.
company act 2013

After reading 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 say private 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 in detail here as the topic of this article is the procedure of registration of a private limited company.

  1. The shareholders of a company are liable only to pay his part of subscribed capital and not the debts of the company as such
  2. A company has got perpetual succession, in other words, the life of  company is beyond the life of its promoters
  3. The company can sue any person to enforce its rights. Similarly, it can also be sued.
  4. The company and its promoters are considered as a separate legal persona.
  5. The company have borrowing powers and hence can borrow money in its own name.
  6. A company can own property in its own name.

Alright since we have understood the concept and features of a private limited company, the next logical step shall be to check the eligibility or say the minimum requirement to form a private limited company, these are as under:

  1. There must be at least two Persons to act as Director / Shareholder of Company. The maximum number of directors can be 15 at the time of incorporation which can further be increased with the approval of ROC. The highest number of the shareholder which 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 of the only shareholder of the OPC.
  2. Determine authorised capital of the company base on the assessment of funds required to achieve business forecast of the company in the medium term (say 3-5 years). Though thelaw has prescribed no minimum amount the promoters must decide on the amount of authorised capital as the government fee for registration of the company as well as the stamp duty levied by the respective state government depends on it. In 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 automatic route of FDI policy, however wherever it is restricted a prior approval can be obtained from the specificministry 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 the public policy.

Well as we have understood the meaning of a private limited company and 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 shareholder where as 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 plain background
  • Pan Card, (Name on pan card must match with the database of Income Tax Department)
  • 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
  • Proof of the registered address of company: Sale Deed, electricity bill, tax paid receipt or any other utility bill not older than 2 months.
  • No objection Certificate from the owner of the premises

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 the documents using the blue ink pen and affix the official seal.
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 step wise procedure to register a company in India. I am dealing with a situation where all the persons are Indian. My colleague has written very informative article on the incorporation of a company with the foreigner as 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 shareholder) 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

  1. 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 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 Form for issuance of DSC
  2. 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 new companies Act, 2013 no person can hold an office of the director unless he is issued a DIN. For allotment of DIN, an application to ROC is made with Photo, Attested ID and Address proof duly attested by CA, CS or CMA
  3. NAME APPROVAL OF COMPANY
    Name of each company or LLP must be unique, new and should not be 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 name. Our advisors shall be a help to you while deciding the name of the company or LLP.
  4. MOA & AOA OF COMPANY
    The Name, object, state in which company is registered, the maximum amount of capital which it can raise (Authorised Capital), & a declaration that the company is a limited company are 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.
  5. 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 the conclusive proof of the registration of the company.
  6. PAN, TAN & BANK ACCOUNT
    Income tax Department allots a unique 10 Digit alpha numeric number as a permanent account number, also known as PAN Number. To comply with TDS provisions every tax payer need 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 spice form for incorporation, the process of allotment of DIN, Name approval, the filing of MOA & AOC has merged into one However in following cases the spice route is not available, and the applicant shall be required to follow all steps as explained above.

  1. In 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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