A private limited company is a privately held company mainly for small businesses. The liability of members of a Private Limited Company is limited to the number of shares they own. Also, Private Limited Company shares are not publicly traded or sold to the general public. Read the article below to learn more about the mandatory requirements for private limited company registration in India.
A private limited company is formed by declaring a corporate entity separate from its owners. It is a legal procedure and the second step in the formation of a corporation. Promotion is the first step in forming a company, followed by incorporation. It is the process of incorporating your company with the registrar of companies by filing various documents such as a memorandum of association, articles of association, and so on. Its main advantage is that it protects the owner’s interest in the company’s liabilities. For the registration, you are required to fulfill some requirements which are mentioned below.
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Requirements for Private Limited Company Registration
Number of Shareholders
The ownership of a Private Limited Company is held by individual and non-individual business entities that buy and possess its shares. The Companies Act, 2013 prescribes a minimum and maximum limit of shareholders for private limited companies as 2 and 200 respectively. These shares can be held by resident Indian, Non-Resident Indian, and foreign entities. The shares of a Private Limited Company can only be traded in a private manner with investors, that is to say, that the shares of a private limited company cannot be traded on public platforms like stock exchange markets and are not open for sale to the general public.
Number of Directors
A private limited company carries the feature of separation between ownership and management, which means that the shareholders of the company are only responsible for holding the ownership of the company, whereas the control of its management lies with the directors of the company. The Companies Act, 2013 prescribes a minimum of 2 directors for the registration of a private limited company.
The maximum limit of directors, however, is restricted to 15. Each director of a private limited company should have a DIN, i.e., Director Identification Number allotted by the Ministry of Corporate Affairs, without their appointment as directors is not possible. Additionally, before being appointed as a director, a consent from him to act as a director of the company must be taken and the same must be intimated to the ROC in Form DIR 2. Collectively, all directors of a Private Limited Company form the Board of Directors which is responsible for key managerial decisions of the company.
Directors of a private limited company must be individuals, whether foreign or resident to India. However, the Companies Act, 2013 mandates that out of all directors of the company, at least one should be resident in India. An individual is considered to be a Resident Director if he has resided in India collectively for more than 182 days in the previous calendar year. Note that no body corporates can be appointed as a director in a private limited company.
A Unique and valid name
A private limited company’s name is one of its most important components of its identity. The company’s name is made up of three parts: the name, the activity, and the phrase “private limited company”. All private companies must end with the phrase “private limited company”, according to Companies Act, 2013. Besides, the Companies Act and a few other laws lay down an elaborate and definitive set of guidelines for selecting a valid name for the company.
Read our article on Guidelines for Company name, for a complete overview of the subject. You can also avail our name search facility, where you have the option to propose 5 names per application, and we shall check its availability and eligibility for you. (link to name search application)
Registered Address of the Premises
When registering the company, the owner must provide the registered address of the principal place of business or the main office space of the company. A registered address is the address that is registered with the Central, State, or Local Government and is mentioned in any official document issued by the government. If the applicant lacks the registered address of the premises, he has the option to provide the temporary address of the company in the application for registration. The ROC will then incorporate the company with the temporary address itself, and will provide the applicant a window of 1 month after incorporation to obtain a registered address and intimate the same to the ROC in form INC 22.
Infuse some capital
Although, there is no prescribed minimum limit of capital for a Private Limited Company, the shareholders must infuse some amount of capital for the smooth running of the company. Moreover, the Companies Act provides that a private limited company cannot operate at zero paid up capital beyond 6 months from the date of its incorporation.
To start a Private Limited Company in India, you must fulfill all the criteria and conditions mentioned in the article. These conditions are related to the number of shareholders, number of directors, the name, address and capital of the company. A private limited company. To get more information about the prerequisites, the eligibility, and the procedure of private limited company registration, you can visit our website and contact our team of legal experts.