Private Limited Companies are those companies which are privately held by the people. They are mostly preferred as a common business organization in India. Shareholders may operate the business themselves, or hire directors to manage the company on their behalf. The main characteristics of a company are as follow:
- Minimum 2 and maximum of 200 members are required in Private Limited Company.
- The Companies Amendment Act, 2015 relaxed the minimum paid-up capital requirement, but it was not made zero paid-up capital.
- It shall have a minimum of two directors.
- Transfer of share can be restricted as per Articles of the company.
- It can take a loan from shareholders, directors and relatives of directors but not from the public. Shares cannot be issued to the public.
- Reduced compliance burden as per company law.
- The words ‘Private Limited’ should be suffix or must come after the name of the company. Many of the restrictive provisions of Companies Act are not applicable to Private Limited Company allowing flexibility and convenience, unlike Public Limited Company.
As the business entity grows, the necessity for funds grows too. Hence, businesses need to borrow funds. privately Ltd. , the extent of liability is restricted to the quantity invested in starting the business. they’re not personally susceptible to pay the debt.
Access to Funding:
Private limited companies easily accommodate equity funding through speculator , angel investors as they’re unlikely to take a position in the other structure.
A private Ltd. can take funds from Banks, debentures and convertible debentures.
They have greater credibility as they need to tell about the structure, directors, members, Article and Memorandum of Association and necessary changes to the Ministry of Corporate Affairs. Such information is out there on the web within the property right making the business entity more credible as compared to partnerships and proprietorships
Private limited companies are often sold or transferred, either partially or fully , to a different individual or entity with none disruption to the present business.
More capital are often raised as there’s no limit on the amount of a shareholder.
The minimum number of shareholders got to start the business are only2. More capital are often raised because the maximum number of shareholders allowed is 50.
Continuity of existence:
Business isn’t suffering from the status of the owner. It continues to stay alive .
Company’s brand value will get increased because people come to understand about the corporate alright .
Private limited companies enjoy tax advantages. These companies pay corporation tax on their taxable profits and have a tendency to be exempt from higher income tax rates. It opens the door to more tax-deductible costs and allowances redeemable against profits.
Managing Shareholder Affairs:
- Transfer of Shares: Shares in any sort of Company are normally freely transferable. However, during a Private Company, the articles can lay down certain restrictions and also the methodology during which they will be transferred.
- Convening General Meetings: A PLC necessarily has got to provides a notice of 21 clear days for conducting any general meeting, unless all the shareholder’s agreement for a shorter notice. However, just in case of a personal Company, the articles can determine the amount of notice, which is required for convening a general Notice, also because the percentage of shareholders to consent for a gathering to be convened at a shorter notice.
- The shares can’t be sold or transferred to anyone else without the agreement of other shareholders.
- In PLC nobody is allowed to ask public to subscribe its shares.
- The Growth could also be limited because maximum shareholders during a PLC are only 50.
PRIVATE Ltd. – INCORPORATION
Any Company Registration starts with identifying the pre-requisites for incorporation and processing required documents for filing with concerned Registrar of Companies. Pre-requisites for company registration area s follow:
Minimum Two Persons required.
Maximum members can exceed up to 200.
Member are often individual, LLP or any registered company
It shall have a minimum of Two Directors.
One of the administrators must be Resident in India, i.e., stayed in India not but 182 within the previous civil year .
Proposed Directors shall have a Director number (DIN) issued by the Ministry of Corporate Affairs.
It consists of three parts i.e.
The Name Activity (Signify the industry) Private Ltd. .
The Registrar of Companies shall approve the name of the corporate .
Minimum Share Capital- the corporate shall have Rs 100000.
Registered Office Address
At the time of registration of Company, temporary address along side the address of any of the administrators are often provided. Although, after registration, the corporate has got to file the permanent address with documentary proof of address, ownership etc.
Objects of the Private Ltd. ask proposed business activities. Private Ltd. objects shall be legal and shall not misuse or harm society. The name of the corporate shall also signify the most , prerequisite objects. If the name of the corporate isn’t describing a specific object, then the corporate can have multifaceted objects. The objects are described under a Clause in Memorandum of Association of the corporate .
Digital Signature Certificate (DSC)
All documents are filed online with Registrar of Companies. Digital Signature Certificate is that the ultimate thanks to verify the authenticity of the document. Hence, all the documents shall be authenticated by employing a Digital Signature Certificate of the Director.
Services of execs like Chartered Account, Company Secretary, accountant is required to form necessary Certifications and declarations for the incorporation of a personal Ltd.
A private Ltd. is that the commonest sort of business entity in India. it’s easy to take care of and lift funds, offers indebtedness to its members, offers flexibility, easy loan accessibility. Following are the steps involved within the incorporation of a personal Ltd.
1. OBTAINING DIRECTOR number (DIN) & DIGITAL SIGNATURE CERTIFICATE
Documents regarding an equivalent are:
- Identity proof,
- address proof,
- current occupation,
- education qualification,
- verification to be signed by the applicant.
2. APPLYING FOR THE NAME
The promoters should propose one or more suitable name for the corporate but registrar need to select the name just in case some names are identical or almost like registered business entities or trademark
- The name shouldn’t be similar or just like any registered company or trademark.
- The name shouldn’t be one prohibited under the ‘Emblems and names Act, 1950’.
- The name of the corporate must have suffix “Private Ltd. “.
After submission of name, the registrar will review and approve one among the names.It usually takes 3 to five working days to approve the name for the corporate .
3. DRAFTING OF MOA AND AOA
MOA is that the Memorandum of Association which covers the important provision of the company’s constitution. AOA contains rules and regulations governing the interior management of the corporate . it’s the binding contract between the members of the corporate .
For drafting these, subscribers specify the name, occupation, address and sign the subscription pages of the MOA and AOA.
4. FILING FOR INCORPORATION of personal Ltd.
- After the name approval, promoters should submit the appliance , prescribed fees and below said following documents to the registrar.
- Declaration from Directors
- Affidavits of the administrators
A declaration states that the wants of the Act and therefore the rules framed thereunder are compiled with. This declaration is required to be signed by an advocate of the or Supreme Court or an attorney or a pleader having the proper to seem before or a supreme court or a accountant in whole-time practice in India who is engaged within the formation of a corporation , or by an individual named within the Articles as a Director, Manager or Secretary of the corporate .
Besides the aforementioned documents, the corporate must provide relevant information regarding its registered office within 15 days of registration or during filing of incorporation documents.
5. SUBSCRIBING TO THE PRIVATE Ltd.
As per the businesses Act 2013, the subscriber must sign their names and must be subscribed to the shares of the corporate incorporated. It means each subscriber must have a minimum of one share of the corporate . Each subscriber should sign the memorandum within the presence of a minimum of one witness and must clearly state the following:
- Personal Description
- No of shares subscribed
- Nature of shares etc.
- Likewise, article of association should be signed. Both (Article and Memorandum of association) must be duly signed and stamped.
6. CERTIFICATE OF INCORPORATION of personal Ltd.
After filing the above-mentioned documents and payment of necessary fees, the certificate for incorporation would be issued by the Registrar of Companies. Upon Incorporation, the corporate becomes a legal person break away its incorporators.