A Private Limited Company is a business entity held by small group of people. It is registered for pre-defined objects and owned by a group of members called shareholders. Startups and businesses with higher growth aspiration popularly choose Private Company as suitable business structure.
The business entity gets recognised as a Company through its registration under Companies Act of 2013 in India. The governing body is Ministry of Corporate Affairs, widely known as MCA. The definition of Private Company under the Act is provided here to understand its basics. Section 2 (68) of the Act defines a Private Company as under:
From the basic reading, we understand that a Private Company’s share transfer is restricted with some of the conditions. Further, if its members exceed 200, it stops to be a Private Company. It further inherits the prohibition to invite the public at large to subscribe any securities. In absence of any of these conditions, the company loses its identity as a Private Company.
Minimum Requirement for Private Limited Company:
- A minimum number of two Directors who are adults.
- One of the Directors of a private limited company has to be an Indian Citizen and Indian Resident.
- The other director(s) can be a Foreign National.
- It is also required to have two shareholders of a company.
- The shareholders can be natural persons or an artificial legal entity
- There is a Limited risk to personal assets in Private Limited Company.
- Pvt. Ltd. Co. is a Separate Legal Entity.
- In the Private Limited Company there would Limited Liability for members.
- Shares of a company limited by shares are transferable by a shareholder to any other person. The transfer is easy as compared to the transfer of interest in business run as a proprietary concern or a partnership
- Just as one person can bring a legal action in his/her own name against another in that person’s name, a company being an independent legal entity can sue and be sued in its own name.
- A company has ‘perpetual succession’, that is continued or uninterrupted existence until it is legally dissolved.
- For a private company, the earlier minimum number of the share capital was Rs. 1,00,000, but now there is no such minimum capital compulsion. Therefore there is no pressure of fund requirements.
- It is easy to fetch funding in a private limited company by transferring of shares.
1. 3 names for company in order of preference
2. (a) Documents from Directors and Shareholders
Identity Proof:
1) Permanent Account Number (PAN) Card
2) Aadhaar Card / Passport / Driving License / Voter Identity Card
3) Place of Birth (District and State)
4) Educational Qualification
5) Email id of Subscriber
6) Phone no. of Subscriber
Address Proof:
1) Telephone Bill / Mobile Bill
2) Electricity Bill / Water Bill
3) Bank Statement /Bank Passbook with latest transaction (Any one of the Document not older than 2 months)
Passport size Photographs – 3 each
Notes:
- All the Copies of documents must be Self Attested by the applicant.
- Telephone Bill / Mobile Bill/Electricity Bill / Bank Account Statement must be in the name of applicant and should not be older than 2 months.
- If the documents are not in than English, it should be translated to English.
2. (b) Documents from Company / LLP / Trademark Owner, if any
1) No of Members Proposed and Capital Proposed.
2) Board Resolution / Formal authorisation for use of Name / Trademark
3) Authorisation for execution Documents from Company / LLP
Note:- These shall be signed by the concerned on their Letter head
3. Registered Office – Address
1) No-Objection letter from the Owner of Address to use the address of the registered office of the Company.
2) Address Proof – In the name of the Owner
- Electricity Bill, Telephone Bill (Fixed Line Only), Gas Bill or Water Bill (Not older than 2 months);- To be signed by the of the Owner of Premises
OR
- Tax Paid Receipt or Copy of Registered Sale Deed- To be signed by the Shared Office Service provider.
This form is segregated into two parts:
Part A: Name application
Your name can be reserved by just filling in Part A and submitting it online.
- The details that would be required are the type of the company whether is private limited company, Public limited etc, Company limited by shares or guarantee, object clause of the company, industrial activity of the Company.
- Once the details are filled in the web-based form, you can submit it online. You can give two names while filing the form. If you submit only Part A, then the fees for name approval are same like RUN Form which is Rs. 1000/-
Part B: Procedure for incorporation
√ User has the flexibility to apply for Part A & Part B together. He should do that only when he is sure of the name availability for which he has applied. If he is unsure, he must apply for Part A separately, get the name approval and then go ahead with the process of incorporation.
√ Once the name applied in Part A gets approved, the details automatically gets prefilled in Part B in all the linked forms
√ AGILE-PRO, SPICe+ MOA, SPICe+ AOA, URC-1 (applicable in the case of conversion) INC-9 (as per applicability).
√ Initially, where we used to get the signed copy of the directors and subscribers in Form INC-9, in the new process it is done away with. As per the details filled, INC-9 automatically gets generated and now the form has to be signed electronically with Digital signature.
√ All the above process happens on the web-based form only. You can edit the web-based Spice+ form only 5 times. Post that, you will have to prepare a new form only. So be careful.
Companies have to apply for the bank account also through this form only.
√ You also have to take mandatory registrations like EPFO, ESIC, Professional tax through this form only.
√ All the mandatory attachments like Companies address, Directors KYC like PAN Card and aadhar card are to be uploaded through this form only.
√ At the end after everything is done, pre scrutinise the form. Once it is successful, submit the form.
√ Post that, download the Spice+ Form, attach the DSC and all other forms linked to Spice.
What is a Digital Signature Certificate?
Digital Signature Certificates (DSC) are the digital equivalent (that is electronic format) of physical or paper certificates. Few Examples of physical certificates are drivers’ licenses, passports or membership cards. Certificates serve as proof of identity of an individual for a certain purpose; for example, a driver’s license identifies someone who can legally drive in a particular country. Likewise, a digital certificate can be presented electronically to prove one’s identity, to access information or services on the Internet or to sign certain documents digitally.
Why is Digital Signature Certificate (DSC) required?
Physical documents are signed manually, similarly, electronic documents, for example e-forms are required to be signed digitally using a Digital Signature Certificate.
What type of Digital Signature Certificate (DSC) is to be obtained for e-Filing on the MCA Portal?
DSC of either Class 2 and Class 3 signing certificate category issued by a licensed Certifying Authority (CA) needs to be obtained for e-Filing on the MCA Portal.
What are the Documents Required for Obtaining DSC?
Self Attested PAN Card of the Individual
Self Attested Adhaar Card of the Individual
What is the difference between SPICe and SPICe+?
While SPICe is an eform, SPICe+ is an integrated Web form offering 10 services by 3 Central Govt Ministries & Departments. (Ministry of Corporate Affairs, Ministry of Labour & Department of Revenue in the Ministry of Finance) and One State Government (Maharashtra), thereby saving as many procedures, time and cost for Starting a Business in India. SPICe+ is part of various initiatives and commitment of Government of India towards Ease of Doing Business (EODB).
For how many days is a reserved name valid?
An approved name is valid for a period of
(i) 20 days from the date of approval (in case name is being reserved for a new company) or
(ii) 60 days from the date of approval (in case of change of name of an existing company)
Difference between Partnership Firm and Company
- A partnership is an agreement between two or more persons who come together to carry out a business activity and share the outcome of this activity among themselves. A company is an artificial person having the separate identity, common seal and perpetual succession which is formed and governed by a law.
- The registration of the partnership firm is not compulsory whereas a Private Limited Company needs to get Compulsory Registration.
- For the Formation of a partnership, There must be at least two partners. For the Formation of a Private Limited Company, there must be at least 2 members and maximum of 50 in case of private companies.
- The Major difference between the Private Limited Company and Partnership there is no minimum capital requirement for starting a partnership firm and the minimum capital requirement for a private company it is 1 lakh.
- The Partnership Firm is regulated by the Registrar of Firms of the State Government and Private Limited Company is regulated by the Registrar of Companies of the Central Government.
- If a Dissolution of the partnership firm Takes place Then there are no legal formalities that need to be taken care. A Private Limited Company has many legal formalities for winding up that needs to be taken care of.
- A partnership firm can be dissolved by any one or all of the partners and The company cannot be wound up by any one or all of the members of the company.
- A Partnership Firm is not bound to use the word Limited or Pvt Ltd at the end of its name while A Private Limited Company has to add the word Pvt Ltd at the end of its name.
- In the Partnership Firm, a liability of the partners is unlimited whereas In case of Private Limited Company Liability is limited to the extent of shares held by every member.
Differences Between A Public Company Vs Private Company
There’re many differences between a Public Company vs Private Company. Let’s have a look at the top differences between the two –
| Points of Differences between Public Company and Private company | Public Company | Private Company |
| 1. Definition | A public company can sell its own registered shares to the general public. | A private company can sell its own, privately held shares to a few willing investors. |
| 2. Traded on | The stocks of a public company are traded on stock exchanges. | The stocks of a private company are owned and traded by only a few private investors. |
| 3. Regulations | A public company has to adhere to a lot of regulations & reporting standards as per the SEC. | Until the private companies reach $10 million and more than 500 shareholders, it doesn’t have to follow any regulations issued by SEC. |
| 4. Advantage | The primary advantage of a publicly-traded company is that it can tap into the market by selling more shares. | The primary advantage of a privately traded company is that it doesn’t need to answer to any stockholders & there’s no need for disclosures as well. |
| 5. Size | Publicly traded companies are big companies. | Privately traded companies can also be big companies. The idea that a privately held company is smaller is utterly false. |
| 6. Source of funds | For the publicly traded company, the source of funds is selling its shares and bonds. | For the privately traded company, the source of funds is few private investors or venture capitalists. |
What is Separate Legal Entity?
A legal entity, typically a business, that is defined as detached from another business or individual with respect to accountability. A separate legal entity may be set up in the case of a corporation or a limited liability company, to separate the actions of the entity from those of the individual or other company.
Compliances required for Companies Registered
Event Based Compliances :
Even based compliances are those which gets triggered upon happening of certain events like change in directors, change of registered office, change in authorized share capital etc. Hence, it is necessary that the happening of such events get tracked and compliances met with on time in order to avoid penalties or additional fees. Some of the Event based compliances are mentioned below along with the time limit:
| Events | Form No. | Time Limit |
| Change in registered office |
INC-22
|
Within fifteen days from the date of such change |
|
Change in Directors or KMP
|
DIR-12
|
Within 30 Days of such change |
|
Increase in Authorized Share capital
|
SH-7
|
Within 30 days of passing Ordinary Resolution |
|
Filing of resolution and agreements
|
MGT-14
|
Within 30 days from date of passing resolution |
| Increase in Paid up share capital (Issue of security) | PAS-3 | Within fifteen days from the date of the allotment |
| Change in secured borrowing (Creation, modification and satisfaction of charge) |
CHG-1
|
All types of Charges within 30 days of its creation |
|
Application for KYC of Directors
|
DIR-3 KYC
|
On or before 30th April of immediate next Financial Year (Annual Compliance) |
| Declaration of Commencement of Business |
INC-20A
|
Within a period of 180 days of the date of incorporation of the company. (Applicable to companies incorporated after 2nd November, 2018.) |
Mandatory Compliances :
| Filing of Annual Return (Form MGT-7) | Every Private Limited Company is required to file its Annual Return within 60 days of holding of Annual General Meeting. Annual Return will be for the period 1st April to 31st March. |
|
Filing of Financial Statements (Form AOC-4)
|
Every Private Limited Company is required to file its Balance Sheet along with statement of Profit and Loss Account and Director Report in this form within 30 days of holding of Annual General Meeting. |
|
Statutory Audit of Accounts
|
Every Company shall prepare its Accounts and get the same audited by a Chartered Accountant at the end of the Financial Year compulsorily. The Auditor shall provide an Audit Report and the Audited Financial Statements for the purpose of filing it with the Registrar. |