Private Limited Company
A private limited company is a company which is privately held for small businesses. The liability of the members of a Private Limited Company is limited to the amount of shares respectively held by them. Shares of Private Limited Company cannot be publicly traded. All the aspects of Private Limited Company are discussed in the article.
Who can set up a limited company?
The owners of private limited companies are known as shareholders and each holds a certain number of shares in the business. This means you can set up a limited company yourself – you’d own 100% of all the shares – or with others, dividing the available shares between the shareholders.
To become a shareholder, you must purchase one or more shares issued by the company and these are issued when you form the company with each share representing an equal percentage of the business. Additional shares can be created and issued after the business is incorporated and the more shares you hold, the larger the percentage of the business you own.
Who runs limited companies?
Directors – known as company officers – manage limited companies and they can be shareholders as well. A limited company must have at least one director and most company owners are directors – meaning you can own and manage a limited company yourself or with others.
Types of Private limited company
Private companies are of three types depending on their members’ liabilities:
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Limited by shares: The liability of the members is limited to the amount unpaid to the company with respect to the shares held by them.
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Limited by guarantee: Here the members’ liabilities are limited to the amount of money they guarantee to pay in case the company is wound-up.
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Unlimited liability: The liability of members is unlimited in this type of private companies. Personal assets of members can be attached and sold when the company is being wound-up.
In terms of the number of members, a private company can also be a One Person Company. These types of companies have just one member/shareholder as their promoter. The new Companies Act of 2013 introduced such types of companies.
Minimum Requirement for Private Limited Company
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A minimum number of two Directors who are adults.
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One of the Directors of a Private Limited Company has to be an Indian Citizen and Indian Resident.
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The other Director(s) can be a Foreign National.
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It is also required to have two Shareholders of a company.
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The Shareholders can be natural persons or an artificial legal entity.
Characteristics of Private Limited Company
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Members - To start a company, a minimum number of 2 members are required and a maximum number of 200 members as per the provisions of the Companies Act, 2013.
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Limited Liability– The liability of each member or shareholder is limited. It means that if a company faces loss under any circumstances, then its shareholders are liable to sell their own assets for payment. The personal, individual assets of the shareholders are not at risk.
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Perpetual succession– The company keeps on existing in the eyes of law even in the case of death, insolvency, the bankruptcy of any of its members. This leads to the perpetual succession of the company. The life of the company keeps on existing forever.
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Index of members– A private company has a privilege over the public company as it doesn’t have to keep an index of its members whereas the public company is required to maintain an index of its members.
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A number of directors– When it comes to directors a private company needs to have only two directors. With the existence of 2 directors, a private company can come into operations.
Advantages Of a Private Limited Company
Private companies do have the following advantages:
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Members are quite aware of each other but the total control is in the hands of the one who owns the capital.
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There is great flexibility in the management of affairs and the conduct of business.
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A statuary meeting is not needed along with submitting the statuary report.
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There should be two directors in a private limited company.
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The liability is limited because of which the members enjoy the facility.
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The company can be started immediately after getting the certification.
Disadvantages Of the Private Limited Company
Disadvantages of the private firm according to section 2(25) of company ordinance are as follows:
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Private firm restrict the transferability of shares by articles
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The number of members cannot exceed more than 50
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This cannot issue prospectus to the general public
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Their share cannot be quoted in the stock exchange.
Documents Required for Private Limited Company Registration
A complete and correct documentation plays a pivotal role in the process of Private Company registration. Let's have a look on the Documents requirement:
ID Proof
The following documents serve as ID proofs for the purpose of application:
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Pan Card (For Indian Nationals);
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Passport (For Foreign Nationals).
Address Proof
Below documents can be submitted as the proof of address:
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Voter ID;
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Driving License;
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Passport;
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Latest Bank Statement (Not older than two months)
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Latest Electricity Bill or Water Bill or Gas Bill.
Registered Office Address Proof
If the premises is owned by Director or Shareholder or any of the related entity, then following documents are must:
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Latest Electricity Bill in the name of Director or Shareholder or related entity;
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NOC (No-Objection Certificate).
If the premises is taken on rent:
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Rent Agreement;
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Latest Electricity Bill in the name of the owner;
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NOC (No-Objection Certificate).
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Scanned Passport size photograph of all the Directors and Shareholders;
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Specimen Signatures for all the Directors and Shareholders for the purpose of verification.
Procedure for company formation
1. Document Requirements:
Every Director must have PAN Card (if digital Signature is to be obtained for in the name of the said Director) issued by the Income Tax department as an Identity proof and one address proof in his/her name. Two passport size photographs of each Director are required. Clear Scanned copies of proofs and photos are preferred.
2. Name Availability Search:
It is advisable to conduct a Name Search for the proposed name of the Company to make sure that there is no identical or similar LLP/Company already registered in India or for which an application for registration has been submitted.
3. Payment of Fees (Part Payment):
Part payment is taken to initiate the Company Incorporation process. We provide you following payment options: 1. Cash, 2. Cheque and 3. Online Transfer. (Payment Gateway facility is under process)
4. (RUN) Name Application:
After approval of all the DIN, we shall draft the Main Object of the Company for the approval of the Promoters. On the approval of the Promoters, our team will forward Company name application with the Registrar of Companies.
5. Payment of Fees (Final Payment):
After the approval of the name, the remaining payment is taken.
6. Application of DIN & Digital Signature:
We shall prepare and send all the required documents for signature of the Promoters at one go.
7. Filing of Incorporation documents:
Our Team will prepare all the relevant documents along with eForms, Memorandum of Association (MOA) and Articles of Association (AOA) required for the company incorporation and will file the same with the authorities.
8. Final Process:
After completion of the process:
we provide you a file containing all documentation made for Company formation along with DIN papers and Digital Signatures.
9. Long-Term Relationship:
We look forward to a very long-term relationship with all our clients. We provide all kinds of recurring compliance services required by the Company in the form of Annual Return filing and various Event Based Compliance.
Annual Compliances for Private Limited Company
1.First Board Meeting
Holding of first Board Meeting of Directors within 30 days of incorporation of Company
2.Subsequent Board Meeting
Holding of minimum four Board meetings in a calendar year and not more than 120 days gap should be there between two meetings
For Small Company, minimum two meetings in each half of calendar year with minimum gap of 90 days
3.First Annual General Meeting
Within a period of Nine months from the date of closing of the first financial year of the Company
4.Subsequent Annual General Meeting
Within a period of six months from the date of closing of financial year
Not more than fifteen months shall elapse between the date of one annual general meeting of a company and that of the next;
5.Disclosures of Interest by Directors/Declaration
Every Director shall in the first Board meeting of the Board in every financial year disclosure his interest in form MBP-1 and declaration in form DIR-8
6.Appointment of First Auditor
Appointment of first auditor in Board meeting within 30 days of incorporation
7.Appointment of Subsequent Auditor
Will be appointed for 5 years in AGM
Within 15 days from the date of appointment in Annual General Meeting
8.Filing of form ADT-1
Within 15 days from the date of appointment of Auditor
9.Filing of Financial Statements i.e. form AOC-4
Within thirty days of Annual General Meeting
10.Filing of Annual Return i.e. form MGT-7
Within sixty days of Annual General Meeting
11.Statutory Audit of Accounts
By a Chartered Accountant
12.Filing of Income Tax Return of Company
30th of September every year
13.Maintenance of Statutory Registers, Minutes books and records
All the Companies are advised to maintain few statutory registers in the prescribed format such as register of members, register of charges, register of directors and KMP, register of loan and guarantee etc.
Minutes of Board meeting and general meeting, Attendance Register, Books of Accounts etc. are to be maintained
14.Proof of circulation of Notice, Draft and Signed Minutes
Should be maintained for a period of three years from the date of meeting
15.Directors KYC*
30th of September
16.E-Form MSME-I
Delay in Payment to MSME Vendor
Every Company having outstanding payments dues to micro and small enterprises and in case the payment of the same is pending beyond 45 days, then the Company has to furnish details as per the following timeline:
For April to September by 31st October
For October to March by 30th April
17.E-Form DPT-3*
All the Company having any outstanding loan/amount as on 31st March of every financial year has to furnish details and bifurcation of such outstanding amount irrespective of the fact whether such amount is falling under the definition of deposit or not by 30th June
18.Directors’ Report shall be prepared by mentioning all the information required for Company under Section 134 read with relevant rules and relevant provisions of other Act.
It should be signed by the “Chairperson” authorized by the Board, where he is not so authorized by at least 2 Directors one of them MD if there is any.
Company shall send to the Members of the Company approved Financial Statement, Directors’ Report and Auditors’ Report at least 21 clear days before the date of AGM.
19.Appointment of Company Secretary – Section 203
Private Company having paid up share capital of Rs. 5 crore more required to appoint whole time Company Secretary.
Within 30 days from resolution passed in meeting.
20.Report from Practicing Company Secretary – Form MGT-8 –Private Company having :-
paid up share capital of 10 Crore or more or turnover of Rs. 50 crore or more Shall be certified by a Company Secretary in Practice.
Need to file with Annual return – Form MGT -7
Filing requires with Annual Return MGT-7.
Certificate MGT – 8 With UDIN number.
Back dating is not possible.
DISCLAIMER-These materials are public information and have been prepared solely for educational purposes. These materials reflect only the personal views of the author and are not individual legal advice.
It is understood that each case is fact specific and that the appropriate solution in any case will vary. Finally, the owner will not be accountable for any loses injuries or damages from the exposures or usage of this information.