Private Limited Company Registration in India and Requirements

Narendra Kumar

20 Jan, 2021

Private Limited Company, is the best corporate structure to start your own business. Private Limited Company will be registered under the Companies Act, 2013. In this post, we will show you the Requirement for Private Limited Company Registration India.

What is a Legal Requirement for Private Limited Company Registration India?

Legal Requirement for Private Limited Company Registration in India:-

• Minimum members required: 2 members
• Maximum Member required: 200 members

Benefits of Private Limited Company Registration

• The private limited company has jurisdictional recognition.
• The liability of the members and the directors are limited to their shares.
• The life of the company is not affected by the status of the shareholders.
• Easy to expand the business and raise capital.
• It creates a brand value that enables the members and directors to enjoy limited liability as per the shares. i.e., if the company suffers from any loss or faces any financial crunch the personal assets of the members and directors will not face the risk of seizure by banks, creditors or government.
• More credibility than an LLP or a Partnership Firm. 

Documents required for Private Limited Company Registration India

• PAN Card or Passport or Election ID Card
• Latest Bank Statement/Telephone or Mobile Bill
• Voter’s ID/Passport/Driver’s License
• Passport-sized photograph
• Scan copy of Signature (signature should be same as on PAN Card)

FAQ’s on Private Limited Company Registration

Q.) Benefits to Startups?

Private Limited Company plays a significant role in any developing economy and the most popular form of business entity. As the introduction of the Companies Act, 2013 has made the incorporation easier. Let’s focus on the benefits of a private company as a startup:

1. Raising Fund: As finance is a core part to run a business. Only a private limited company can raise funds through Venture Capitalists, as LLPs would require investors to be partners and OPCs can have only one shareholder. With better options available for growing business many new  private limited companies are easily competing with the larger companies
2. Capital requirements: The requirement of Rs. 1 Lakh as a minimum subscription amount has been done away within the Companies Act 2013. Thus, there is no burden to infuse a huge amount, as previously required, into the company bank account and can be formed with no capital. Since capital is a major requirement to run a company, it can be increased in the future as per the need. A private company, unlike a public company, can allow new issues to other persons as well.
3. Shareholders and directors: shareholders are the owners of the company and possess many rights in the company. The shareholders of the company can also be the directors of the company.
4. Business Credibility: A private company is registered under The Ministry of Corporate Affairs, and the details are available on the website of the ministry to view. Therefore, one can know about the details of the company.
5. Healthy Workplace: Employees are the company’s best asset.  A private company aims to create a good work environment to improve their productivity, build a strong organizational culture, organize various training and development programs that support the employees, in turn, the company itself.
6. Exit Plan: Exit planning is a process by which all strategic options available to a business owner which includes succession planning and sales strategies are explored. Private limited companies can easily be sold or transferred, either partially or in full, to another individual or entity without any harassment.

Q.) What is a Private Limited Company?

1. It is a company that is privately managed by directors and shareholders.
2. It is not entitled to sell its shares to public investors. Hence they are not allowed to trade on the stock exchanges.

Q.) Types of Private Limited Company?

1. Company Limited by Shares: The shareholder’s liability is capped at the amount paid upon shares.
2. Company Limited by guarantee: The shareholder’s liability is capped at the amount agreed to be committed by the shareholders to the company.

Q.) What are Memorandum and its contents?

Memorandum of association is the document which states the objects for which the company is incorporated. It has the following clauses:

• Name Clause
• Registered Office Clause
• Object Clause
• Association Clause
• Capital Clause
• Liability Clause

Q.) What are the Articles of association?

Articles of association: The Articles of association provides a framework for how the company should be managed by the directors

Q.) What is the minimum paid-up capital for Private Limited companies?

Minimum Paid-up Capital is Rs.100000/-

Q.) What is the Director Identification Number (DIN)?

Any person intending to become a director in a company must apply for the director identification number, issued by the Ministry of Corporate Affairs.

Q.) What are the responsibilities of a director?

The director has been entrusted with the responsibility of managing the company in the best efficient manner. The responsibility of a director depends upon the kind of directorships he holds in the company. For instance, an executive director or a managing director has a greater responsibility than a non-executive director who might hold the directorship as an expert or consultant. A director is liable for misconduct or fraud or if found guilty of default.

Q.) What address to be given as a registered office of the Company?

A Registered Office is required to hold an annual general meeting, for keeping records and receiving correspondence from all the statutory/ government authorities. The registered office can be owned by the company or rented premises also. The registered office of the company determines its jurisdiction for registration.

Q.) Can a registered office can be changed from one state to another?

• The registered office of the company with the same state can be done by just giving the notice with 30 days
• Yes, the registered office of the company can be shifted from one state to another by following the specified procedure

Q.) Is it allowed to change the registered office of the company after its incorporation?

Yes, the company can change the registered address any time after following the specified procedure

Q.) Nature of Compliances?

Less administrative and annual compliance as compared to the public limited company.

Q.) Can Private Limited Company make Foreign Direct Investment?

Yes, a possible subject to FDI guidelines in any country using a wholly owned subsidiary, joint venture, etc.

Q.) Can a Foreign National/Company be a director/shareholder in any private limited company in India?

Yes. Any foreign national or company or an NRI (non-resident Indian) can become a director, or hold a share of a private limited company in India. But, at least one director on the Board of Directors of a private limited company in India must be a Resident of India. However, holding shares of a private limited company in India by foreign nationals/companies will be subject to the contemporary FDI Guidelines of India.

Q.) The tentative period for incorporating a private limited company?

It depends basically upon the documents required, the authenticity of documents submitted by the director/shareholder, the processing time required for filing forms, the time is taken by the concerned government authorities to may range from one to two weeks

Q.) Primary requirements for setting up a Private Limited Company?

• Minimum 2 directors and minimum 2 shareholders (The directors can also be shareholders)
• Maximum shareholders 200
• Minimum Paid-up Share Capital of Rs. 100000/-
• Xerox copies of the PAN Cards^[1] of the Directors/Shareholders (Indian National) or Copy of Passport (Foreign National)
• Director Identification Number and Digital Signature of all the Directors
• Xerox Copy of proof of identity and proof of address of all the directors
• Address Proof of registered office of the Company along with NOC owner

Q.) What document will be received after incorporating a Private Limited Company?

• Digital Signatures of all the directors (DSC)
• Director identification number of all the directors (DIN)
• Certificate of Incorporation
• Memorandum of Association
• Articles of Association

Q.) Qualification for becoming a director of a Private Limited Company?

Any individual can become a shareholder in a private limited company. For becoming a director in a company, no professional or educational qualification is required.

Q.) What are the other registration requirements of a Private Limited Company?

1. Registration under Shop & Establishment Act
2. GST Registration
3. Register for Professional Tax
4. Registration under Employees Provident Fund organization
5. ESIC Registration
6. Filing applications for various government approvals before RBI/FIPB

Q.) What is a Digital Signature?

The digital signature is the digital code created for the purpose of affixing them to digital documents and proving equal authority as the handwritten signature. DSC validates the authenticity of the signature.

Q.) Can a proprietorship business can be converted into a Private limited company?

Yes, a proprietorship business can be converted into a Private Limited Company.

Q.) Can an LLP be converted to a Private Limited Company?

Many businesses started as LLP may now want to convert to a private limited company due to growth in business or for infusion of equity capital. However, the conversion of LLP into Private Limited Company is currently not possible in India, as both LLP Act, 2008 and Companies Act, 2013 are silent about the matter.

Q.) Can one person can be converted into a Private Limited Company?

There are two ways of converting a One Person Company into a Private Limited Company as per the act. The conversion can be a voluntary one or by compulsion but cases a proper procedure is to be followed.

If an OPC fulfills any of the situations given below, then it must convert to a Private Limited Company.
1. If the paid-up capital of the OPC exceeds Rs. 50 lakh.
2. If the average turnover in any three consecutive financial years is more than Rs. 2 crores.

For more information about Company Registration in India, send us an email at info@enterslice.com. You can also call our customer support at +91 9069142028.