A Private Limited Company is a business entity held by small group of people. Section 2 (68) of the Companies Act, 2013 defines a private company as:
“A Company having a minimum paid-up share capital as may be prescribed, and which by its articles,— (i) restricts the right to transfer its shares; (ii) except in case of One Person Company, limits the number of its members to two hundred; (iii) prohibits any invitation to the public to subscribe for any securities of the company.”
To register a Private Limited Company in India, minimum two members are required. Here, an individual or even a body corporate can become a member of the company. Members and directors: As mentioned above, to get it legally registered, a private limited company must show a minimum number of two and a maximum number of 200 members. This is a statutory requirement as mandated by the Companies Act 2013.
Approval of Name
Memorandum and articles of association
Din and Digital signature
Filing documents with the Registrar and commencement of business
The primary step is getting approval of the name of the company, by filing and submitting the name application to the Registrar of companies (ROC). Within a period of 7 days, you will know if the name is available or taken already.
Memorandum of Association (MoA) and Articles of Association (AoA) are two very important documents for a company. They are the founding documents and dictate the powers of a company.
MOA means Memorandum of Article. It is commonly referred to as memorandum. Memorandum has been defined under Section 2(56) of the Companies Act, 2013; “memorandum” means the memorandum of association of a company as originally framed or as altered from time to time in pursuance of any previous company law or of this Act. It states what a company can do and that which lies outside of its domain. MOA defines the objective of the company, i.e., the reason it has been founded. This has to be filed electronically in FORM INC 33. Section 4 of the Companies Act, 2013 deals with MOA. Articles of Association(AOA) is the source document which governs the powers and rules and regulation of the director and shareholders and for startups, the interest of investors and other related parties are covered under this document. Drafting of MOA and AOA is need to be done with extra care and cautiousness, as it should be matching with the standards as laid down by the Companies act 2013.
Digital signature must be obtained for the proposed Directors of the Company. Digital signature is required for signing of the incorporation application. However, digital signature is not required for obtaining name approval. Hence, this process of obtaining Digital signature can run parallel to the name approval process. Digital signature can be obtained in 1-2 business days.
Getting the DIN or the Director Identification number is the next important step, without which an individual could not be appointed as a director or managing director of a company. One of the directors must be a resident of India, which means he/she should have stayed in India for not less than 182 days in the previous calendar year.
Next step is to file the MOA, AOA and other documents to the registrar of companies along with specified fees. A professional should witness the MOA and AOA. The fees payable to the ROC vary according to the Authorized capital of the company. After the completion of the incorporation procedures the ROC shall provide an incorporation certificate to the company. The private company can commence business on the day itself it gets the approval.
ID proof: PAN card and passport of Indian and foreign directors, respectively
Address proofs: Ration card or Aadhar card or driver’s license or voter ID
Residence proofs: Bank statement or electricity bill of the premise
Notarized rental agreement
NOC from the property owner
A copy of sale deed or property deed (for an owned property) Advantages of a Private Limited Company
Private Limited Company is preferred structure by startups because of stability and growth opportunities offered by this structure. Further, it assures separate legal existence from its members. So, it can involve contracts and legal proceedings in its own name. Moreover, a company’s status is unaffected from any change in members and management.
It also offers various funding options in form of private equity, ESOP and more. This makes it more suitable for external funding options. And thus, it is more preferred by VCs, Angel Investors, and other outside funding agencies compared to any other business structures. It also is rather preferred by banks and lending agencies because of the credibility that it holds as a corporate structure.
The business entity gets recognized as a Company through its registration under Companies Act of 2013 in India. The companies Act has laid down a certain set of rules and regulations to be abided while the incorporation of a company.